Hire Purchase Agreement for Vehicle and Motorcycle is Now Regulated

On 12 October 2022, the Committee on Contract (“Committee”) set up by virtue of the Consumer Protection Act B.E. 2522 (1979) (“Act”) issued an announcement regarding updated rules, conditions and particulars of vehicle and motorcycle hire purchase agreement (“Announcement”), which is a contract-controlled business under the Act, in order to protect consumers’ rights from being taken advantage by business operators. This Announcement will become effective after 90 days from the date of publication, which will be on 10 January 2023.

This Announcement only applies to a hire purchase agreement for a vehicle or motorcycle (“vehicle”) between a business operator and a consumer. The vehicle must be used solely for personal purposes, not for transportation or commercial purposes. The following are examples of requirements that must be specified in the agreement which have changed from the previous announcement issued in 2018.

1. The hire purchase interest will be charged in the effective interest rate method of no more than 10% per year for a new car, no more than 15% per year for a used car and up to 20% per year for a motorcycle.
2. When the hire purchase provider terminates the agreement because of the hirer’s failure to pay debts in three consecutive installments or by any legitimate reason and hire purchase provider proceeds to sell the vehicle at private or public auction, the hire purchase provider must notify the hirer and the guarantor (if any) in writing at least thirty days in advance so that the hirer can exercise the right to purchase such vehicle within twenty days at the price of outstanding debt under the agreement. If the hirer wishes to do so and pay off all debts at once, the hire purchase provider must provide the hirer with the discount. However, if the hirer ignores or fails to exercise such rights, the guarantor may do so instead. The hirer and guarantor have the right to assign this right to any third party.
3. The debt as mentioned above shall refer to and include the default payment, the installment that has not yet been due and any fee or charge spent by the hire purchase provider to collect hire purchase installment(s) that has been due prior to the termination of the agreement.
4. The Hire Purchase provider must notify the hirer and the guarantor (if any) of the details of the seller, the date and time of the auction, and the selling price at least fifteen days before the auction date. Once the vehicle has been sold at auction, the hire purchase provider shall deduct the net proceeds of the auction from the debt owed by the hirer, any surplus shall be refunded to the hirer. However, if the net proceeds are less than the debt, the hirer shall be responsible for the remaining amount of such debt. Furthermore, the hire purchase provider must notify the hirer within fifteen days from the date the vehicle is sold with all details of the auction and the amount of debt as well.

In light of this, the aforementioned is only a partial requirement of the agreement that the hire Purchase provider must follow. There are still many details that the hire purchaser should know in order to prepare a legally binding agreement.  Any business operator who fails to deliver the agreement containing terms and conditions to the consumer in accordance with the Announcement shall be liable to imprisonment for a term not exceeding one year or to a fine not exceeding one hundred thousand Baht or both. Plus, the consumer should also be aware of this Announcement because it directly affects his or her rights. If a consumer sees that any business operator fails to comply with the Announcement, a consumer can file a complaint to Consumer Protection Board respectively.