In a continued effort to support and treat customers fairly, following the passing of the Hire-Purchase (Amendment) Bill at Dewan Negara yesterday, The Association of Banks in Malaysia (ABM), Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) and the Association of Development Finance Institutions of Malaysia (ADFIM) today announced a collective goodwill initiative for hire-purchase customers. Under this initiative, banks will offer goodwill discounts at the point of early settlement for existing fixed-rate hire-purchase agreements and/or which apply the Rule of 78 method, in anticipation of the implementation of the Hire-Purchase (Amendment) Act (HPAA).

Under the HPAA, the flat rate and the Rule of 78 method will be abolished for new customers, marking a major shift in how hire-purchase financing is calculated. To ensure fairness for customers who entered into agreements prior to the HPAA or during the permitted grace period, the banking industry will offer goodwill discounts for early settlement of these fixed-rate hire-purchase agreements.

Our priority is to ensure every customer feels supported and valued during this change. The goodwill discount is an industry-wide measure designed to provide affected customers with treatment comparable to that of new customers under the HPAA when they choose to settle their hire-purchase financing early.

We applaud the initiative by the Ministry of Domestic Trade and Cost of Living (KPDN) and Bank Negara Malaysia (BNM) in driving these important reforms to enhance fairness and transparency in hire-purchase financing. Their leadership and collaborative approach have paved the way for a more equitable framework that benefits consumers and strengthens trust in the financial system.

Key Points

• Who qualifies?
  Individuals and micro or small businesses with fixed-rate hire-purchase agreements and/or which apply the Rule of 78 method:

  • entered into before the HPAA takes effect; or
  • entered into during the 18-month grace period allowed under the amended Act; and
  • who choose to settle their hire-purchase financing early i.e. any time before loan or financing maturity.

• Eligibility criteria
  At the point of early settlement, accounts should:

  • not be in arrears exceeding 90 days;
  • not be under legal action or issued with repossession order; or
  • not be under an existing restructuring and rescheduling (R&R) or enrolled in a formal debt management programme.

• What’s the discount?

  • The goodwill discount will be calculated based on the features of the existing hire-purchase agreement (such as timing of early settlement and rate structure) and applied to the net balance due. The intention is to offer early settlement treatment that is broadly comparable to the approach under the amended Act.
  • The exact calculation and amount of goodwill discount may vary by bank and by product, and will be explained to customers at the point of application for early settlement.

• Effective date: The goodwill discount programme will be effective starting from the effective date of the HPAA, which is expected in the first quarter of 2026. The banking industry will notify the public once the HPAA has come into effect.

• Duration: The programme will remain available until all fixed rate hire-purchase agreements under Rule of 78 method have reached maturity or early settled (estimated 9 years, in line with the maximum vehicle financing tenure).

• What you need to do:: Customers who wish to settle their hire-purchase financing early will be provided comprehensive details upon application for early settlement.

Customers who continue making payments according to their agreed schedule until the end of the tenure will not be affected by the Rule of 78 method. As such, customers may continue to pay the same instalments as originally agreed and do not need to take any action.

Once the HPAA has come into effect, customers are encouraged to visit official bank websites or branches for more information, contact their respective banks for guidance on eligibility and application procedures for the goodwill discount, and stay informed through announcements from industry associations.