Sneak Peek Part 2: Malaysia’s Proposed Consumer Credit Act

The Consumer Credit Oversight Board Task Force, supported by the Ministry of Finance, Bank Negara Malaysia (‘BNM’) and the Securities Commission Malaysia (‘SC’), issued Public Consultation Paper (Part 2) (‘CP2’) on 5 April 2023 to seek feedback and comments from the public on the proposed Consumer Credit Act (‘CCA’).
CP2 is the second part of a two-part consultation and follows on from Public Consultation Paper (Part 1) (‘CP1’) on the CCA which was issued on 12 August 2022. Our write-up on the key points of CP1 can be read here
CP2 is divided into two sections:
  • Section 1 sets out, inter alia, the proposed regulatory requirements applicable to credit providers and credit service providers including authorisation, governance and conduct requirements; and
  • Section 2 sets out the proposed enhancements to the existing framework on hire purchase financing. 
This article provides an outline of the main proposals under CP2.
Section 1 of CP2 comprises four parts, namely:
  • Part A – Overview
  • Part B – Authorisation, Reporting and Governance Obligations
  • Part C – Business Conduct and Credit Consumer Protection
  • Part D – Surveillance, Supervision and Enforcement 
Section 1 – Part A
The CCA seeks to strengthen protection for credit consumers in Malaysia by providing a comprehensive framework for regulating credit businesses and credit service businesses, ensuring proper conduct of entities carrying on such businesses, and promoting a fair, efficient and transparent credit industry. To achieve these objectives, the Consumer Credit Oversight Board (‘CCOB’) will be established as the competent authority under the CCA.
The CCA will be an overarching legislation for all credit providers and credit service providers. It adopts a principle-based and outcome-focused approach. The CCA will be supplemented by an Authorisation Handbook and a Conduct Handbook that set out detailed operational requirements and guidance towards achieving the regulatory principles in the CCA.
According to CP2, the CCA will be implemented in two phases.1
Phase 1 (2024 - 2025) will require non-bank credit providers and service providers that are currently not subject to direct regulation by any authority in Malaysia to apply for authorisation and bring these entities under the regulatory framework of the CCA. Such credit providers and credit service providers include non-bank leasing and factoring companies and entities offering new forms of credit such as ‘Buy Now Pay Later’ (‘BNPL’).
During Phase 1, non-bank credit providers which are currently regulated by a Regulatory and Supervisory Authority (‘RSA’), such as moneylenders, pawnbrokers and hire purchase companies, will not be required to seek authorisation under the CCA.2 The respective RSAs are empowered to issue regulations, standards or guidelines to credit providers and credit service providers under their respective purview.
Phase 2 (2025 onwards) will involve the transfer of regulatory powers over credit providers and credit service providers that are under the purview of the Ministry of Local Government Development (‘KPKT’) and the Ministry of Domestic Trade and Cost of Living (‘KPDN’) to the CCOB.
Key definitions
For the purposes of CP2, the key definitions include:
credit’ - an arrangement, agreement or facility, in whatever form or by whatever name called, which (a) results in a person being in debt or incurring a financial obligation; or (b) allows the payment for goods or services sold to a person to be made in instalments;
credit agreement’ - an agreement entered into between a credit provider and a credit consumer under which credit is provided;
credit consumer - (a) an individual who obtains, has obtained or intends to obtain credit wholly or predominantly for personal, domestic or household purposes; (b) a person who is a micro or small enterprise3 who obtains, has obtained or intends to obtain credit, where such credit does not exceed RM300,0004; (c) any other person or class, category or description of a person as may be specified by the CCOB; or (d) an individual who acts as a guarantor, not for the purpose of making a profit, to a credit consumer under paragraph (a), (b) or (c) in respect of a credit agreement to which the CCA applies;
credit business’ - (a) moneylending; (b) pawnbroking; (c) hire purchase; (d) credit sale; (e) BNPL scheme; (f) leasing; or (g) factoring; and includes such business carried on in accordance with Shariah principles;
credit service business’ – (a) impaired loan or financing acquisition activity; (b) debt collection services; (c) debt counselling and management services; (d) online crowdlending services; or (e) repossession activity;
credit provider’ - a person who carries on a credit business;
credit service provider’ - a person who carries on a credit service business; and
controller’ - in relation to a licensed credit provider or registered credit service provider, means a person who (a) is entitled to exercise or control the exercise of, not less 33% of the votes attached to the voting shares in the licensed credit provider5; (b) has the power to appoint or cause to be appointed a majority of the directors of the licensed credit provider or registered credit service provider; or (c) has the power to make or cause to be made, decisions in respect of the business or administration of the licensed credit provider or registered credit service provider and to give effect to such decisions or cause them to be given to.
Section 1 - Part B
The authorisation regime
There will be two forms of authorisation, namely licensing of credit providers and registration of credit service providers, under the CCA. Authorisation will be given to an entity for a specific type of business or activity that an entity conducts or intends to conduct.
The primary focus of the authorisation process will be to assess whether an entity intending to carry
on credit business or credit service business is able to uphold professional standards of conduct and that its business activities will not be detrimental to consumers. This will include assessing whether the entity’s representatives are fit and proper. The risks of harm to the consumer posed by the entity’s business model will also be considered.
The CCOB will also consider an applicant’s organisational structure, shareholding composition, financial resources and the qualification and competencies of its key personnel when assessing whether an applicant will be able to uphold fair and professional standards of conduct on an ongoing basis. The information required for the submission is set out in Appendix 2 of CP2. Further, details of the aforesaid factors will be set out in the Authorisation Handbook.
The authorisation is a one-off process that will include engagement with the CCOB. The CCOB will strive to inform an applicant of its decision within one to three months from submission of a complete application. Subject to the payment of an annual licence or registration fee, a licence or registration will remain in force unless revoked or suspended or the licensee or registrant ceases to carry on a credit business or credit service business. A licence or registration under the CCA may not be transferred, sold or leased to any other person. Any proposed amalgamation or merger of the business of a licensee or registrant with any other person will require the prior approval from the CCOB or the relevant RSAs.
All existing non-bank credit providers and credit service providers covered under Phase 1 will be given a grace period of six months following the enactment of the CCA to secure authorisation.
The sub-section on governance is divided into two parts, each of which will be considered below.
(i) Organisational requirements
Credit providers and credit service providers must be locally incorporated and must, among others, have:
  1. an organisation structure with clear lines of responsibility and authority;
  2. sufficient human resources with the right experience and skillset;
  3. appropriate operational procedures and internal controls that commensurate with the nature, scale and complexity of its business;
  4. appropriate risk management policies and procedures, including a business continuity plan;
  5. policies and procedures on conflict management, anti-corruption, whistleblowing, complaints management and monitoring of unethical conduct; and
  6. policies and procedures to ensure compliance with applicable laws and regulations. 
Credit providers and credit service providers are expected to leverage on and invest in digital technology, platforms and infrastructure to serve their customers better and achieve business efficiency and effectiveness. They will also be required to put in place appropriate policies and procedures for information technology audit and cybersecurity.
(ii) Board
The board is to be responsible for overseeing the strategic direction of the business and is to include individuals with the appropriate mix of skills, knowledge, experience and independence that fit the objectives and strategic goals of the organisation and its responsibility towards consumers. Among others, the board:
  1. is required to establish and instil an organisational culture that is consistent with expectations of consumers for fair and professional conduct;
  2. is expected to review the adequacy of compliance, controls and risk management;
  3. must ensure that the company has policies and processes to mitigate, manage and address actual and potential conflict of interest situations;
  4. must establish an internal audit function6 to evaluate the effectiveness of the different aspects of the company’s operations; and
  5. must ensure that all compliance functions, including Shariah, are overseen and monitored by a senior key personnel with the necessary competencies; such personnel is to advise and guide the board and senior management on compliance-related laws, rules and standards and keep the board informed of ongoing developments. 
Minimum financial requirements
Credit providers and credit service providers must have sufficient financial resources that commensurate with the nature, complexity and scale of their business. Credit providers and credit service providers must, at the minimum:
  1. have access to sufficient capital and financial resources to meet all their debts when they become due;
  2. adopt sound financial management practices to meet their operational and regulatory requirements as a licensee or registered person; and
  3. keep proper records of their financial condition and business activities. 
The proposed minimum financial requirements to be maintained at all times are as follows:
  1. BNPL, factoring, leasing, impaired loan buyer – shareholders’ fund of RM2 million; and
  2. debt collection agency and debt management agency – shareholders’ fund of RM500,000 or shareholders’ fund of RM250,000 and professional indemnity coverage of RM250,000. 
Notwithstanding the above, credit providers and credit service providers are expected to maintain adequate financial resources to carry on the business as a going concern. They are also expected to submit a written undertaking or confirmation that their credit business or credit service business has adequate financial resources for the next 12 months when submitting their annual audited financial statements to the CCOB or the relevant RSA.
Fitness and probity
A person who intends to carry on business as a credit provider or credit service provider must satisfy the CCOB that its controllers, directors and senior management are able to carry out their roles and responsibilities effectively, honestly and with integrity. These individuals must comply with the requirements in paragraphs 2.2 to 2.5 of Appendix 2.
Due to the significant role played by the controller and chief executive officer in steering the business, any change in the controller or the appointment or re-appointment of the chief executive officer would require the prior written approval from the CCOB or the relevant RSA.
The CCOB must be informed of the appointment and reappointment of the directors and senior management. Credit providers and credit service providers are expected to conduct personal vetting prior to the appointment or re-appointment of such individuals to ensure that the candidate is fit and proper and suitably qualified to assume the position.
In addition to the requirement to submit their audited financial statements to the CCOB or the relevant RSA within three months after the close of their financial year, credit providers and credit service providers are expected to provide information which includes but is not limited to: (a) their total assets, total loans and total impaired loans; (b) the number of borrowers/customers; (c) the number of loan accounts and impaired loan accounts; and (d) the number of complaints lodged and resolved.
Credit providers and credit service providers are also expected to update the CCOB within a month of any material changes to their operations, e.g. change in business address, business model, director composition and new product offerings.
Shariah Governance
The business of Islamic credit providers, specifically Islamic BNPL, Islamic leasing, Islamic factoring, Islamic financing facility and Islamic pawnbroking under the CCOB and KPKT in Phase 1, must be structured based on appropriate underlying Shariah contracts that properly reflect their business activities.
A licensed credit provider carrying on Islamic credit business is expected to appoint a Shariah adviser or establish a Shariah committee, which may be internal or outsourced. Such entity must have in place internal policies and procedures on Shariah governance that are consistent with the regulations, standards or guidelines issued.7
An Islamic credit provider must seek the advice of BNM’s Shariah Advisory Council (‘SAC’) on matters which require the ascertainment of Islamic law and compliance. Such advice may be sought through the CCOB’s Shariah Unit, which will undertake a first round of review to ensure completeness of information before submitting the matter to BNM’s SAC. An Islamic credit provider under the purview of the relevant ministries or agencies may seek advice on Shariah-related matters through the respective RSAs.
Section 1 - Part C
Prohibited business conduct
Conduct that will be prohibited under the CCA will include the following:
  1. engaging in practice or conduct that is deceptive or providing information which could mislead the credit consumer;
  2. attempting to induce a credit consumer by various means, including (i) making or recklessly making a statement, illustration or promise, which is misleading, false or deceptive; or (ii) dishonestly concealing or providing material facts in a manner which is ambiguous;
  3. exerting undue pressure, harassing or threatening to use physical force in relation to a credit consumer when credit products or services are being offered, granted or recovered; and
  4. demanding payments from a credit consumer in any manner for unsolicited products/ services including threatening to commence legal proceedings. 
Promotion of credit business or credit service business
Credit providers and credit service providers must ensure that:
  1. their advertisements and promotional materials on credit or credit services are clear and not misleading or deceptive; and
  2. any warnings or disclaimers in relation to an advertised credit product or service are not obscured or disguised by the content or design of the advertisement. 
In addition, credit providers must prominently display important information that is likely to affect credit consumers’ borrowing decisions, such as key product features, risks and applicable fees and charges.
Credit providers and credit service providers engaging with a credit consumer to promote or offer credit or credit service must not:
  1. adopt aggressive tactics or inappropriately entice the credit consumer to sign up for credit products or credit services;
  2. make false commitments or representations to the credit consumer which the credit providers are aware that they would not be able to reasonably fulfil; or
  3. provide false, misleading or deceptive information to the credit consumer. 
Transparency and disclosure of information

Credit providers must ensure that clear, unambiguous, accurate and sufficient information is provided so that credit consumers are adequately informed of key information relating to a credit product or service at the pre-contractual stage, at the point of entry into a credit agreement and during the term of the credit agreement, to enable credit consumers to make informed decisions whether the product or service meets their needs.
Credit providers and credit service providers must also ensure that information is disclosed effectively in a balanced and fair manner, and in plain language.
Credit providers must obtain the credit consumers’ acknowledgement that they understand the key terms and conditions prior to entering into the credit agreement.
Credit providers and credit service providers (if applicable) must provide the credit consumer with statements of account to enable the credit consumer to be continuously aware of his credit obligations under the credit agreement. Such statement must be given as soon as practicable.
Fairness of terms
Credit providers and credit service providers must ensure that the terms of the credit or credit service agreement are fair to credit consumers. This would require credit providers and credit service providers (if applicable) to ensure that the terms of the credit agreement provide a fair balance between the rights and obligations of the parties involved. A term would be regarded as unfair if it favours a credit provider or credit service provider to the detriment of the credit consumer, taking into consideration the relevant factors including the relative bargaining power of the contracting parties and the effect of such terms on the parties’ liabilities for the performance of contractual obligations. A non-exhaustive list of terms that are likely to be regarded as unfair is set out in Appendix 3 of CP2.
Credit providers and credit service providers must not have terms in their credit or credit service agreement that make it difficult for credit consumers to switch to another credit product or service or another credit provider or credit service provider before the end of the tenure of the agreement.
Any early termination fee must not penalise or act as a barrier to prevent a credit consumer from switching or closing a credit account. The quantum of the early termination fee must not be excessive and should only be based on the actual costs which the credit provider needs to recover arising from the early repayment of a credit agreement and should exclude any consideration of the marketing and other costs associated with obtaining new credit consumers.
Credit providers must not prohibit or make it difficult for a credit consumer to make an early repayment of a credit agreement either in full or in part. Where a credit consumer opts for early repayment of a credit agreement, the credit provider is expected to disclose in writing the following information:
  1. the credit consumer’s obligations under the credit agreement;
  2. the amount required for early repayment in full or in part, as applicable, at a specified date and how that amount is calculated; and
  3. the amount of the applicable interest or profit rate, fees and charges payable and how the amount is calculated. 
Imposition of fees and charges
Credit providers and credit service providers must ensure that:
  1. any interest or profit chargeable under a credit agreement or credit service agreement is not excessive; and
  2. the fees for providing the credit or credit services are not excessive or unreasonable8
A late payment charge (‘LPC’) is intended to serve as an incentive for credit consumers to make prompt repayments under the credit agreement and is not to be relied on as an additional source of income for the credit provider or credit service provider.
Credit providers and credit service providers shall observe the following principles and requirements to ensure that the LPC is fair and reasonable to credit consumers:
  1. the quantum of the LPC must not be excessive;
  2. the LPC only covers the actual costs incurred for recovering overdue instalments i.e. costs that are directly related to the recovery of missed payments; and
  3. any unpaid LPC must not be compounded when computing the LPC for the next repayment cycle. 
Credit providers offering Shariah-compliant credit must ensure that the structure or methodology in calculating the actual costs of the LPC adheres to Shariah principles.
Affordability assessment
A credit provider must, among others:
  1. conduct an affordability assessment on a credit consumer in accordance with paragraph 14.2 of CP2 prior to entering into a credit agreement with a credit consumer, or increasing the amount of credit provided to a credit consumer under a credit agreement;
  2. take reasonable steps to verify any information obtained from the credit consumer if it has reason to believe that such information is false, misleading or incomplete; and
  3. refrain from providing credit where the credit provider: (i) has not obtained all the information under paragraph 14.2 of CP2; or (ii) has come to a reasonable conclusion after conducting the affordability assessment that the credit consumer will not be able to meet, or will have substantial difficulty in meeting, the financial obligations under the credit agreement. 
A credit provider should apply the debt service ratio (‘DSR’) computation set out in paragraph 14.6 of CP2 to assess the ability of a credit consumer to meet the repayment obligations under a credit agreement. The credit provider should ensure that the DSR applied in its lending policies and decisions allows sufficient buffers for the credit consumer’s expenditures and contingencies, to reduce the consumer’s vulnerability to unexpected adverse events and income shocks.
CP2 permits a credit provider to use alternative datapoints for the affordability assessment subject to the credit provider providing a detailed alternative model and demonstrating the effectiveness of such mechanism in accurately ascertaining a credit consumer’s ability to meet the financial obligations to be incurred under the credit agreement without resulting in undue financial difficulty. In addition, flexibilities or appropriate exceptions to the conduct of affordability assessments may be accorded to a credit provider carrying on pawnbroking/ Islamic pawnbroking or factoring/ Islamic factoring; or where the credit provided is below a maximum affordability threshold set by the RSAs, or where the credit is provided to micro or small enterprises. Presumably, further details of the exceptions mentioned above will be provided in the Authorisation Handbook or the Conduct Handbook.
For the purposes of assisting credit providers in conducting affordability assessment on credit consumers, a credit provider is required to submit the credit information of its credit consumers, which includes information on credit limits, repayment history and outstanding balances to a registered credit reporting institution under the Credit Reporting Agencies Act 2010, a credit bureau or a centralised credit database established by the relevant RSA, as the case may be.
Fair debt collection
Credit providers and credit service providers must at all times be ethical, professional and reasonable in their conduct or manner of collecting any payment due from a credit consumer under a credit agreement. Credit providers and credit service providers may appoint a debt collection agency that is registered with the CCOB to collect their debts. However, the credit provider is accountable for any complaints against its debt collectors and is required to properly investigate all complaints and take appropriate remedial actions for any misconduct or unacceptable practices.9
Relief from financial hardship
Credit providers and credit service providers must provide assistance and give due consideration to a credit consumer to vary his credit agreement if the credit consumer:
  1. is unable to meet his credit obligation due to specific circumstances of financial hardship; and
  2. reasonably expects to be able to meet his financial obligations if a variation is made to his credit agreement. 
For the foregoing purposes, ‘financial hardship’ refers to the inability or potential inability of a credit consumer to meet repayment obligations during the tenure of his credit agreement due to the following circumstances affecting the credit consumer: (a) critical illness; (b) critical injury; (c) involuntary loss of employment; (d) natural disaster; or (e) death of a breadwinner/ wage earner who may be any person within the immediate family of the credit consumer.
Credit providers and credit service providers must provide a response in writing to an application from an affected credit consumer for relief from financial hardship and should make reasonable efforts to offer an alternative repayment plan that is appropriate to the credit consumer’s changed circumstances and financial situation with the aim of resolving the credit consumer’s genuine repayment difficulties. An alternative repayment plan shall not unreasonably increase the payment obligation and financial difficulty faced by the credit consumer.
Pending their decision on the application for relief from financial hardship, credit providers and credit service providers must not commence any legal proceedings against the credit consumer.
Credit consumer data protection
The obligations imposed on credit providers and credit service providers to maintain at all times the confidentiality of information disclosed by credit consumers are set out in paragraphs 17.1 to 17.3 of CP2.
Handling of complaints
In relation to the handling of complaints from credit consumers, credit providers and credit service providers must:
  1. establish and implement an internal complaint-handling process that is simple, effective and efficient to handle such complaints, including having an easily accessible dedicated avenue or point of contact for this purpose;
  2. examine the circumstances and underlying causes of individual cases in an equitable, objective and timely manner and must make reasonable efforts to understand the credit consumer’s issue and investigate the complaint thoroughly and expediently; and
  3. ensure timely and effective communication with the credit consumer. 
Credit providers and credit service providers will be required to submit data on complaints to the CCOB through a one-stop digital portal which will be interoperable with the credit providers’ and credit service providers’ complaints handling systems or made available to credit providers and credit service providers that do not have their own internal complaints handling system. The portal will also enable credit consumers to lodge complaints with credit providers or credit service providers and facilitate sharing of information, engagement and coordination between the CCOB and the respective RSAs on complaints involving multiple regulatory agencies.
Section 1 - Part D
Part D of Section 1 of CP2 provides an outline of the surveillance, supervision and enforcement powers of the CCOB and the RSAs under the CCA. The key objectives underlying these powers are to: (a) ensure that credit providers and credit service providers comply with the CCA and refrain from carrying out unlawful and unfair business practices; and (b) protect credit consumers from harm and unfair practices.
The CCA will have four categories of enforcement actions, namely: (a) advisory and cautionary; (b) administrative action; (c) civil action; and (d) criminal action. Enforcement actions taken by the CCOB will be published as part of the measures to deter unethical conduct.
This section of CP2 sets out details of the proposals for enhancing the framework on hire purchase financing.
After a comprehensive review, the CCOB proposes the following key proposals to be made to the existing hire purchase financing framework:
  1. hire purchase providers will only be allowed to offer hire purchase loans at fixed rate or variable rate of interest, and the use of flat rate10 interest will no longer be allowed for such loans;
  2. the ‘Rule of 78’ method of calculating interest or term charges will be replaced by a new formula using the reducing balance method for calculating term charges for fixed rate and variable rate loans;11
  3. hire purchase providers will be given the option to use digital signatures to execute hire purchase agreements, and electronic signature for variation of agreements as well as to serve notices on hirers using electronic channels;
  4. the effective interest rate for both fixed rate and variable rate loans will be fixed at 17% per annum, using the reducing balance method;12 and
  5. to ease comparison and assist credit consumers in making informed decisions when shopping for hire purchase loans, hire purchase providers will be required to disclose the effective interest rate of hire purchase loans offered to credit consumers at the pre-contractual stage, in all hire purchase-related advertisements and on their website. 
Deadline for feedback
Feedback on CP2 must be submitted to the Consumer Credit Oversight Board Task Force by email or using the feedback form on the CCOB’s website by 15 May 2023.
CP2 provides an outline of the requirements and principles that will apply across the entire spectrum of activities that credit providers and credit service providers will carry out in the course of their business. These activities range from governance, reporting and financial requirements as well as its dealings and interaction with credit consumers.
It is to be noted that a large number of the requirements set out in CP2 are principles-based and the detailed requirements arising from these principles will only be known when the Authorisation Handbook and the Conduct Handbook are issued by the CCOB.
While the CCOB has stated that the CCA is expected to come into effect in the 4th quarter of 2023, it remains to be seen whether the enforcement of the CCA at that juncture will be restricted to the implementation of the authorisation process for credit providers and credit service providers. As the drafts of the CCA, the Authorisation Handbook and the Conduct Handbook have yet to be issued at this juncture, it is likely that credit providers and credit service providers will require a longer time frame to align their business practices and legal documentation with the requirements of the new consumer credit framework given the magnitude of the tasks involved.
It will not be surprising if small operators carrying on credit business or credit service business may leave the industry due to difficulties and costs in complying with the more sophisticated and wide-ranging requirements that will be imposed on them under the new framework.
As a separate point, it should be noted that online crowdlending services, i.e. operators of peer-to-peer financing platforms under the SC’s Guidelines on Recognized Markets, will also be subject to the new consumer credit framework.
Article by Tan Wei Liang (Senior Associate), Francine Ariel Paul (Senior Associate) and  Faith Chan (Associate) of the Corporate Practice of Skrine

1 CP1 suggested a three phased implementation, with a Phase 3 to be implemented after 2030 where further enhancements to existing structures for the conduct regulation of all financial firms in Malaysia will be considered.
2 Notwithstanding this, towards ensuring a seamless process, the non-bank credit providers and credit service providers currently regulated by KPKT and KPDN are strongly encouraged to understand the CCOB’s regulatory model and expectations as set out in CP2.
3 Based on the Guideline issued by SME Corporation Malaysia (updated: April 2020): (a) a micro enterprise (all sectors) has a sales turnover of less than RM300,000 or less than 5 full-time employees; a small enterprise (manufacturing sector) has a sales turnover from RM300,000 to less than RM15 million or from 5 to less than 75 full-time employees; a small enterprise (services or other sectors) has a sales turnover from RM300,000 to less than RM3 million or from five to less than 30 full-time employees.
4 The RM300,000 threshold was reduced from RM500,000 in CP1.
5 The reference to registered credit service provider may have been inadvertently omitted from paragraph (a) of the definition.
6 Paragraph 4.9 of CP2 states that (i) the internal audit function may be outsourced to the company’s group auditor or an external auditor; and (ii) the internal auditors must have a direct reporting line to the Board Audit Committee or the board.
7 Refer to paragraph 8.6 of CP2 for qualifications of a Shariah adviser and a Shariah Committee member.
8 Refer to paragraph 13.3 of CP2 for guidance as to when a fee may be deemed to be excessive or unreasonable.
9 Refer to paragraphs 15.3 to 15.9 of CP2 for further requirements relating to debt collection.
10 Footnote 15 to paragraph 20.2 of CP2 explains that a ‘flat rate’ is where the rate of interest is fixed and charged on the fixed loan amount.
11 CP2 states that the Rule of 78 method of calculating interest or term charges which frontloads interest payments is perceived as unfair as a hirer who opts for early settlement of his hire purchase loan will be required to repay a higher principal amount as the initial instalments paid would comprise largely of interest due to the frontloading of the interest.
12 Presently, the maximum rate of interest of 17% per annum only applies to variable rate agreements (Regulation 3 of the Hire Purchase (Term Charges) Regulations 2005).

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact