Nowadays, I believe that everyone of you who have your own job and have your own salary slip, will buy a car, brand new or second-hand car. The trend is that you apply for loan from a financial institution to finance the car. Do you know that by signing the loan agreement with the financial institution, you are under hire purchase contract governed by the Hire Purchase Act 1967 (HPA 1967)?
According to Section 2 of the HPA 1967, hire purchase means a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments.
The First Schedule of the Hire-Purchase Act 1967 lists down several types of goods that come within the meaning of goods under the Act, as follows:
- All consumer goods; and
- Motor vehicles including invalid carriages, motorcycles, motor cars (for example taxi cabs and hire cars), goods vehicles (the maximum permissible laden weight does not exceed 2540 kilograms) and buses (including stage buses).
Under hire purchase agreement, you have to know that you are the hirer, and the owner is the financial institution that gives you the loan.
Once you become the hirer under the HPA 1967, you are entitled the following statutory rights:
- Right to copy of agreement and statement of your current position
You may request the owner to provide a copy of hire purchase agreement and a written statement showing the amount paid, unpaid and payable under the hire purchase agreement and the amount derived from interest or overdue installments.
- Right to the appropriation of payment when you have more than one agreement with the same owner
You have the right to appropriate payment (divide the payment) where you have more than one agreement, and the payment is insufficient to discharge the total amount due. For example, you have two hire purchase agreement where the total amount of monthly installment is RM1,000. For May 2015, you have only RM800. You have the right to discuss with the owner to appropriate the payment.
- Right to apply for an order for goods to be removed
It is compulsory for you to keep the goods in a place stated in the agreement, but you can ask the owner for permission to move the goods to another place. If the owner refuses, you can apply to the Magistrate court.
- Rights to assign your right under the agreement
The law allows you to give your right, title and interest under a hire purchase agreement to another person with the consent of the owner
- Passing of rights by operation of law
On the hirer’s death, all his property and rights under the hire purchase agreement will be passed to his personal representative who must comply with the provisions of the agreement.
- Right to early completion of the agreement
If you think that you want to complete the agreement earlier than the agreed period, you must give notice in writing to the owner of your intention and pay all necessary payments under the agreement.
- Right to terminate the contract
If you cannot afford to proceed with the installment payment, you may terminate the hire purchase agreement by returning the goods to the owner.
- Right of hirer on repossession by owner
Do you know that during repossession (i.e where the owner takes possession of the goods because you are unable to pay the installments), you may introduce a cash buyer to the owner. You are entitled for any difference between the amount which have been paid by the cash buyer with the value of the goods.
- Right of hirer in respect of term charges exceeding the prescribed rate.
The term charges should not be higher than the prescribed rate (i.e 10% per annum). If the charge is higher, you have the option either to treat the hire purchase agreement as void or to have your liability reduced accordingly.
After reading this simple article, now you should know your rights.