Handling Fee For Hire Purchase Loans

Bank Negara Malaysia wishes to announce that beginning 13 July 2000, finance companies are allowed to pay a handling fee of up to but not exceeding RM600 to car dealers for each hire purchase financing case forwarded by the car dealer to the finance company as payment for certain services provided by the car dealer as follows:

• Explaining to customers the terms of the hire purchase loan as stipulated in the Hire Purchase Act 1967 (HP Act). The car dealer will also explain to the customer the interest rate offered by the finance company and other details with regard to financing such as the monthly repayment amount;

• Assisting customers in filling up the hire purchase loan application forms of finance companies and ensuring that the forms are filled up properly including copy of supporting documents required before forwarding the forms to finance companies;

• Car insurance coverage is a compulsory requirement under the HP Act. Car dealers will explain to customers the prescribed car insurance terms and arrange for insurance coverage for the cars sold;

• Assisting finance companies in endorsing ownership claims over cars that are financed by hire purchase. Car dealers will deal with matters involving the Jabatan Pengangkutan Jalan relating to the registration of the car under the name of the finance company; and

• Assisting finance companies in ensuring that vehicles that require inspection by the Puspakom (for Commercial Vehicles and Re-Con Vehicles) have duly fulfilled such requirement.

The handling fee which is paid upfront to the car dealers will be borne fully by the finance companies without burdening the car buyers. Finance companies have also given their assurance that the payment will not affect the prevailing interest rates which have been reduced recently following the abolishment of hire purchase commission.

With the introduction of the handling fee, the respective parties involved must abide with the following requirements:

• Finance companies are not allowed to make any other form of payments to the car dealers other than the prescribed handling fees;

• Car buyers who wish to finance the car purchase by hire purchase financing must be given a choice as to whether the buyer wishes to use the services of the car dealers to obtain hire purchase financing or to deal directly with the finance companies;

• Car dealers must not discriminate against car buyers who are paying in cash or those who are obtaining financing from their employer;

• Car dealers must not impose hidden charges on any other services and must not impose any other form of additional payments without consent from the car buyer.

The above handling fee for hire purchase loans which is based on the services provided is more transparent and fair to all parties that is, the consumer, car dealers / representatives and the finance companies as compared to the payment of hire purchase commission as practiced previously which is based on the amount and tenure of the hire purchase loan and burdened the consumers.

Sources: http://www.bnm.gov.my

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