The confusion and the debate pertaining to moratorium have not abated. Many are still asking whether this moratorium will kick in automatically for all hirers regardless of the type of financing: conventional or Islamic based. The words “opting in” and “opting out” have been bandied about, vexing the issue further.
Many hold the view that since the moratorium is automatic, the issue of opting in does not arise. The only action that any hirer has to make is to opt-out, which essentially means that the hirer declines the moratorium and wishes to continue making the instalments payments under the hire purchase agreement.
The opting-in became the focal point of the debate arising from the Association of Bank of Malaysia’ press release on 30th April 2020. The third paragraph of the press release reads “On the other hand, all Hire Purchase customers who wish to take up the moratorium are now required to formally confirm the same with their respective banks upon receipt of communication from their banks”. The first sentence in paragraph 8 of the release further reads - On the other hand, all Hire Purchase customers who wish to take up the moratorium are now required to formally confirm the same with their respective banks upon receipt of communication from their banks. These sentences seem to convey the impression that opting in is mandatory before any hirer may take the benefit of the moratorium.
However, upon a proper reading of the press release as a whole what was sought to be emphasized is that there are procedural requirements that have to be complied with for hirers choosing to opt for the moratorium. What this simply means is that whilst the moratorium is given automatically there are steps that must be taken by the hirer to formalize the extended time for payment. This must be done so as to comply with the Hire Purchase Act 1967. It is rather unfortunate that the wordings in the press release are not drafted and/or interpreted to convey the actual meaning that it sought to convey:-
- That the opting in must be formalized in writing;
- That opting in will carry with it certain financial consequences, chief of which is, that certain payment of interest will be required. In short and in the language commonly used, the moratorium period is not given for free. It will be free of interest if upon the expiring of the 6 months period the hirer pays all the 6 months instalments immediately in October 2020.
As regards to item (ii) above the Finance Minister on 6th May 2020 had announced, much to the relief of many, that no interest should be levied for that period. Thus Item 6 of the Bank Negara Malaysia’s FAQ amended as of 7th May 2020 had since taken out the illustration that alludes to the requirement to pay interest with a stamen requiring all hirers to refer to the respective banks. It is hoped that the banks will soon issue clarifications on this too so that this confusion can be put to rest once and for all.
But coming back to the real issue: whether a supplemental agreement is really necessary in the first place? It is not difficult to fathom that when the association mentioned the need to formalize the extension of the 6 months it may have section 39 of the HP Act in mind. That section however will only be applicable in different scenario and with respect, it is submitted not applicable in the current scenario.
At the same time requiring a supplemental agreement will also post a logistical nightmare creates unnecessary and unproductive exercise. A better option would be for the banks to issue a letter of indulgence extending the period of hire purchase for 6 months and the same could be accepted by the hirer electronically. This would constitute the necessary evidence and if the matter is disputed in the future the courts can certainly take judicial notice of the pandemic and the moratorium. This, if adopted, would respectfully serve to protect the interest of the banks as well as the consumers.
Datuk Dr Abd Shukor Ahmad is a senior partner of the law firm of Messrs. Shukor Baljit & Partners and the author of the text Legal Aspects of Hire Purchase (2nd Edition).