Hire-Purchase Act (Chapter 125) and Hire-Purchase (Amendment) Act 2004 AA

The Hire-Purchase Act was first enacted in 1969 and except for some minor amendments since then, remained largely similar to when it was first enacted in 1969.

Our financial market has since evolved. As part of our efforts to promote a more pro-enterprise business environment, we are now moving away from prescribing rigid rules that could stifle innovation, towards promoting greater disclosure and transparency.

Further, as the general public is better educated and more sophisticated, more emphasis is now placed on consumer education so that they can make informed choices. There is therefore a need to update the Hire-Purchase Act to align with these developments.

Any consumer goods the value of which does not exceed $20,000* (inclusive of any Goods and Services Tax)

Any motor vehicle the value of which does not exceed $55,000 but shall exclude the cost of a certificate of entitlement for the vehicle

*The value of consumer goods covered under the Hire-Purchase Act is increased from $5,000 to $20,000 with the enactment of the Hire-Purchase (Amendment) Act.

The use of the "Rule of 78" formula is now no longer mandatory with the passing of the Hire-Purchase (Amendment) Act.

Given that the market is competitive and there are other financing alternatives, there should be no need to specify any particular approach to calculate the loan balance payable by hirers upon early settlement of their loan.

Consumer interest is better safeguarded through enhancing disclosure and transparency requirements so that hirers know and understand upfront (i.e. at the time of entering into the hire-purchase agreements) the method for calculating the loan balance upon early settlement.

As part of the disclosure requirements introduced by the Hire-Purchase (Amendment) Act, the owner will be required to provide the method of calculating the loan balance upon early settlement to prospective hirers in the written statement of financial obligations as provided under the new Second Schedule (inserted by the Hire-Purchase (Amendment) Act). Prospective hirers will then be able to compare across financing packages and make an informed choice.

The new Second Schedule (inserted by the Hire-Purchase (Amendment) Act) lists the minimum information that owners should provide to prospective hirers, in a written form, so that prospective hirers can be clear of the financial obligations arising, in particular:

• the method of calculating the loan balance upon early settlement;

• effective interest rate charged by owners;

• interest rate for overdue installments; and administrative charges, if any.

Further, to enable the hirer to know upfront whether the hire-purchase agreement falls under the ambit of the Hire-Purchase Act, the price of the motor vehicle (excluding the Certificate of Entitlement) should also be clearly indicated.

While the Ministry administers the Hire-Purchase Act, it is not appropriate for the Ministry to give legal advice on this Act or on individual cases.

Parties who have questions on this Act or disputes should seek their own legal counsel and/or pursue civil remedies in the Magistrate's Court or the District Court, depending on their situations. Consumers may also wish to approach the

Consumer Mediation Unit, Consumers Association of Singapore (www.case.org.sg)

or

Singapore Mediation Centre (www.mediation.com.sg)

for assistance in resolving hire-purchase agreement disputes.

No. The Hire-Purchase (Amendment) Act applies to hire-purchase agreements that are concluded on or after the date the Amendment Act came into effect, i.e. 1 November 2004.

The full text of the Hire-Purchase Act can be accessed at the Attorney-General Chambers's website at https://sso.agc.gov.sg.

Copies of both Acts may be purchased from the SNP Legal Publications.

The Hire-Purchase (Amendment) Act came into effect on 1 November 2004.