Hire purchase moratorium interest rate cannot be higher than original contract - BNM

Any additional interest that some banks may charge on the deferred payment cannot be higher than the original hire-purchase contract signed, Bank Negara Malaysia (BNM) said.

BNM reiterated that, as a regulator, it has from the very beginning indicated that there will be accrued interest or profit with regard to the six-month moratorium.

"Most important is the additional interest rate that some banks may charge, we have clearly stated that it cannot be higher than the original hire-purchase contract (signed with the borrower)," BNM prudential financial policy director Cindy Siah Hooi Hoon said today.

So, they cannot go beyond that, she said, adding that BNM has already informed the banking institutions about it.

BNM's LINK and regional offices director Arlina Ariff said the announcement yesterday was to streamline the process and ensure everyone is getting a clear picture of the deferment according to the Hire-Purchase Act 1967 (HP Act) and Syariah.

"As a regulator, BNM must make the announcement first followed by banks that would then ensure the procedures, and follow the requirements outlined in the HP Act, as well as the Syariah requirement," she said.

Asked whether those who have skipped their April and May payments need to pay, Arlina said: “It depends on what the borrowers want to do. If they want to continue with the deferment they can continue to do (so).

"There shouldn't be any penalty," she asserted.

Meanwhile, BNM's deputy governor Jessica Chew said the central bank's objective was to ensure that people are well informed of the moratorium and the changes that come with the deferment.

"It was an effort to ensure that banks are more systematic about the process," she said.

Acknowledging the communication could have been made much clearer, she said under the Hire Purchase (HP) Act, any deferment would require all the steps that were being spelt out now.

"Ultimately, when you add all the interest in, (it) comes to the same thing. It is more punitive if you pay early under the HP Act. So, that is the only difference.

"Under the HP Act, just the act of differing the repayment schedule even in a scenario when nothing changes would require all the additional steps that we are talking about now," she said. - Bernama