Malaysia’s Hire Purchase (Amendment) Act 2026 will come into force on June 1, introducing major reforms aimed at strengthening consumer credit fairness and modernising hire purchase agreements.
Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali said the law will take effect four months after being gazetted on Jan 30, though a transition period may be granted to providers that need time to align their systems, documentation and processes with the new requirements.
Armizan said the amendments abolish the flat interest rate structure and the Rule of 78, a method where early loan instalments are largely used to pay interest rather than the principal. The system has long been criticised for leaving borrowers who settle loans early with disproportionately high outstanding balances.
The reform also supports digital transformation in the hire purchase industry by allowing electronic signatures and digital document submission, streamlining the agreement process and improving operational efficiency.
Armizan said the amendment forms part of broader consumer protection reforms under the 2026 consumer movement agenda, alongside the Consumer Credit Act 2025, which came into effect on March 1, 2026, under the supervision of the Finance Ministry.
“These legal reforms demonstrate the government’s commitment to building a more transparent and accountable consumer credit ecosystem while safeguarding the rights and interests of Malaysians,” he said.
