The Hire-Purchase (Amendment) Act 2026, aimed at strengthening consumer credit fairness and modernising hire-purchase agreements, will come into force on June 1, four months after being gazetted on January 30.
Minister of Domestic Trade and Cost of Living Datuk Armizan Mohd Ali said transitional periods may be granted to hire-purchase providers requiring time to align their systems, documentation, and processes with the new requirements.
“Providers who are ready can start offering hire-purchase agreements under the new amendments as soon as the law takes effect on June 1, 2026,” he said during a press conference at the National Consumer Day 2026 event, officiated by Prime Minister Anwar Ibrahim.
Flat Rate Interest And Rule of 78 Abolished
Armizan explained that the amendments eliminate the use of flat rate interest and the Rule of 78, which previously resulted in most early-stage instalment payments going towards interest rather than principal. This often left borrowers with a disproportionately high balance if they sought to settle loans early.
“The amendments also support digital transformation by allowing technology to be used in hire-purchase agreements, including electronic signatures and digital submission of documents, enhancing efficiency and effectiveness,” he said.
Part Of Broader Consumer Reform Agenda
The minister noted that the Hire-Purchase Act amendments are part of the government’s 2026 consumer agenda, focusing on legal reforms that protect consumer rights and interests, including implementation, amendment, and creation of related legislative frameworks.
He highlighted previous efforts to strengthen consumer credit regulations, including the enactment of the Consumer Credit Act 2025 (Act 873), which was passed by the Dewan Rakyat on July 21, 2025, and Dewan Negara on September 4, 2025. Act 873, under the supervision of the Ministry of Finance, took effect on March 1, 2026.
“These legal reforms demonstrate the government’s commitment to creating a more transparent and credible consumer credit ecosystem, improving industry governance, and protecting the rights and interests of Malaysians nationwide,” he said.
