01/06/2026

MONDAY | JUNE 1, 2026

4

Hire purchase reform aims to create fairer system

Ű BY HARITH KAMAL newdesk@thesundaily.com

PETALING JAYA: Eleven financial institutions and hire purchase providers will begin operating under Malaysia’s revamped consumer credit framework today, in a major reform aimed at scrapping long-criticised interest calculation methods and tightening protections for borrowers. The rollout marks the enforcement of the Hire Purchase (Amendment) Act 2026, alongside the Hire Purchase (Charges and Terms) Regulations 2026, which together reshape how hire purchase agreements are structured, priced and administered in Malaysia. Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali said the reform is designed to make the system fairer, clearer and more transparent for consumers, particularly those entering long-term financing agreements. The Act, passed by Parliament last year, replaces key provisions of the Hire Purchase Act 1967, which has long been criticised for allowing practices that could disadvantage borrowers, particularly those who settle their loans early.

o Charges now more closely reflect remaining balance, improving clarity and accuracy in settlement calculations One of the most significant changes is the abolition of the flat interest rate method and the Rule of 78, two mechanisms widely used in the industry for decades. “Under these methods, a large portion of early instalment payments is used to pay interest while only a small portion is allocated to reducing

Commodities Minister Datuk Seri Dr Noraini Ahmad, palm oil usage for B15 implementation is estimated at around 0.8 million tonnes annually, significantly lower than the domestic supply surplus of about four million tonnes per year. She emphasised that the implementation will not affect the country’s palm oil exports, which stands at around 16 million tonnes per year. Meanwhile, Universiti Putra Malaysia Biorefinery Complex head Prof Dr Hidayah Ariffin said higher biodiesel usage could extend the country’s diesel stockpiling period and help ensure supply stability if the global energy crisis linked to the West Asia conflict involving the United States, Israel and Iran persists. Concerns over the suitability of biodiesel for vehicles are also being addressed by the government, with Economy Minister Akmal Nasrullah Mohd Nasir saying there are no issues with engine specifications as Malaysia’s vehicle standards have provided for biodiesel blends of up to B20 since 2020. Akmal Nasrullah said the use of B20 has been introduced in several areas, including Langkawi, Labuan and Sarawak, without any major issues that could be cited in relation to alleged engine damage. The National Biodiesel Programme began with B5 in 2011 before being expanded to B7 in 2014, followed by B10 and B20 in stages between 2019 and 2020. Malaysia has 19 licensed biodiesel plants capable of supporting the implementation of B15 and the government’s long-term plans to raise the blend rate to B20, B30 and potentially B50, in line with the national green agenda. In addition, the use of biodiesel produced from renewable sources is expected to reduce greenhouse gas emissions and support Malaysia’s commitment to low-carbon development and a more sustainable energy transition. comply with the new framework. A second phase will follow in September as more industry players come on board. Institutions still upgrading systems have been given a transition period until March 31, 2027, although they are encouraged to adopt the new framework earlier. “This legal reform reflects the government’s commitment to creating a more transparent and integrity-driven credit ecosystem, improving industry governance, and protecting the rights and interests of consumers nationwide.” Consumers have been advised to carefully review loan terms before signing any hire purchase agreement under the new regime, particularly as calculation methods have changed significantly.

KUALA LUMPUR: Malaysia is set to enter a new phase in its energy transition amid a global supply crisis, with the biodiesel blend rate in Peninsular Malaysia to be gradually raised from B10 to B15 starting today. The move by the Madani government in the face of global energy market volatility is aimed not only at reducing reliance on imported fossil diesel, but is also seen as a two-pronged strategy to enhance energy security and increase demand for locally produced palm oil. The implementation will see B15 biodiesel comprising 15% palm oil-based biodiesel, known as palm methyl ester, and 85% petroleum diesel, compared with the existing B10 blend of 10% palm methyl ester, without requiring engine modifications for most diesel vehicles. Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi previously said the government was targeting biodiesel production in stages as an initial step before the blend rate is increased according to market suitability and industry capabilities. He said byproducts from the palm oil industry, including sludge from crude palm oil production, have the potential to be used in biodiesel and aviation fuel production, creating a new value chain in the country’s commodity sector. He also views biodiesel as a new catalyst for the rural economy through the involvement of agencies such as the Federal Land Consolidation and Rehabilitation Authority, the Central Terengganu Development Authority and the South Kelantan Development Authority, Bernama reported. The government has said the implementation will be carried out in a planned manner, taking into account the country’s palm oil supply capacity, industrial preparedness and existing infrastructure. According to Plantation and “Before the amendment, among the issues frequently raised by the public were concerns over hire purchase transactions, particularly hidden interest charges and high outstanding balances even when borrowers opted for early settlement,” he noted. The reform also introduces wider digitalisation measures, including recognition of electronic signatures and online document submissions, aimed at improving efficiency and reducing paperwork. At the same time, financial institutions will be required to implement enhanced due diligence procedures to verify borrower identity and reduce fraud risks. For the first phase starting today, all 11 financial institutions and hire purchase providers are ready to

the principal loan amount. “The new provisions introduce the reducing balance method and the effective interest rate for fixed-rate hire purchase loans. Under this approach, interest is calculated based on the outstanding loan balance, making early settlement more transparent and fair to consumers.” In simple terms, borrowers previously paid more interest upfront, meaning early settlement often did not result in significant savings. Under the new system, charges more closely reflect the remaining balance, improving clarity and accuracy in settlement calculations. Armizan said the changes address long-standing public concerns over hire purchase financing practices.

Malaysia begins B15 biodiesel rollout today

Anwar said wisdom, moderation, compassion and kindness are not only celebrated within religious traditions, but also remain relevant in building a society founded on mutual understanding and respect. – AMIRUL SYAFIQ/THESUN

PM extends Wesak greetings, highlights unity KUALA LUMPUR: Prime Minister Datuk Seri Anwar Ibrahim has called on all Malaysians to reflect on the noble values that form the foundation of harmonious community life in conjunction with the Wesak Day celebration yesterday. the foundations of national harmony and unity.”

essential in keeping the country strong, resilient and prosperous.” Communications Minister Datuk Fahmi Fadzil said kindness, wisdom and compassion should continue to be nurtured to preserve the country’s long-standing harmony. “We should remind one another of the importance of living with respect, doing good to others, and strengthening unity and a sense of togetherness in society.” Education Minister Fadhlina Sidek expressed hope that this year’s Wesak Day celebrations would bring peace and happiness to all who observe them. “Let us continue to strengthen unity, harmony, tolerance and mutual respect among Malaysia’s multi-ethnic and multi-faith society.” Natural Resources and Environmental Sustainability Minister Datuk Seri Joseph Arthur Kurup said the value of moderation often associated with Wesak Day is in line with efforts to preserve the environment. – Bernama

Meanwhile, Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi said Malaysia’s diversity of religions, cultures and traditions, which forms part of everyday life, continues to reflect the country’s long-standing spirit of harmony and mutual respect. “This uniqueness shapes our national identity and is one of Malaysia’s strengths and attractions in the eyes of the world. May this year’s Wesak Day celebrations bring happiness and joy to all those observing it.” Deputy Prime Minister Datuk Seri Fadillah Yusof has called on Malaysians to strengthen further unity in diversity, which he said is central to the country’s identity and a key driver of national progress. “With strong unity, we are better able to face any challenge, including the current global energy crisis and supply disruptions affecting countries around the world. A spirit of togetherness and tolerance will be

He said these values, particularly wisdom, moderation, compassion and kindness towards fellow human beings are not only celebrated within religious traditions, but also remain highly relevant in building a society founded on mutual understanding and respect. He said in a nation characterised by diverse cultures, religions and backgrounds, the values of love, compassion and kindness highlighted during Wesak carry profound significance, especially at a time when certain groups seek to sow discord among different races and faiths. “I believe the spread of love and compassion will drown out the incitements for hatred, dispel prejudice, and strengthen mutual respect and understanding, which are