1. Background

On 12 October 2022, the Notification of the Contract Committee re: Prescribing Hire Purchase Business for Cars and Motorcycles as a Contract Controlled Business of 2022 (the "2022 Notification") was published in the Government Gazette and will become effective after 90 days from the date of publication in the Government Gazette, which will be on 10 January 2023. The 2022 Notification will repeal and replace the Notification of the Contract Committee re: Prescribing Hire Purchase Business for Cars and Motorcycles as a Contract Controlled Business of 2018 (the "2018 Notification"). The intention behind the enactment of the 2022 Notification was to provide a solution for consumers affected by the COVID-19 pandemic and in debt from the hire purchase of cars and motorcycles.

In principle, both the 2018 Notification and the 2022 Notification regulate the hire purchase agreement for cars and motorcycles between the business operator and the individual person (the "Agreement"), which is a controlled contract under the Consumer Protection Act of 1979 (the "CPA"), provided that the cars or motorcycles hire purchased are only for personal use and not for transportation in a commercial manner. However, the 2022 Notification stipulates several new requirements and criteria for the Agreement, which are different from the 2018 Notification. In this article, we aim to shed light on material changes made to the 2018 Notification by the 2022 Notification.

2. Summary of material changes made by the 2022 Notification

To illustrate, we set out in the table below the summary of material changes with respect to the requirements and criteria for the Agreement made to the 2018 Notification by the 2022 Notification.

No. Matter 2018 Notification 2022 Notification
1. Maximum chargeable effective interest rate for the Agreement for each type of vehicle It is silent on this matter. The maximum chargeable effective interest rate per annum shall vary for each type of vehicle, as follows:
  • not more than 10% for new cars;
  • not more than 15% for used cars; and
  • not more than 23% for motorcycles.
The above mentioned rates shall be subject to review and adjustment to correspond with the national economic conditions every 3 years.
(Clause 5(1) b. of the 2022 Notification)
2. Minimum discount on interest which is not yet due in the case of:
  1. early payment of the hire purchase price in full; or
  2. the purchase of the cars or motorcycles by the hirer or the guarantor after the business operator terminates the Agreement
 Discount is at the rate of not less than 50% of the interest not yet due.
(Clause 4(5) a. and Clause 4(10) of the 2018 Notification)
 Discount varies upon the amount of installments paid, as follows:
  • not less than 60% of the interest not yet due in the case where the installments paid do not exceed 1/3 of the total installments stipulated in the Agreement;
  • not less than 70% of the interest which is not yet due in the case where the installments paid are from 1/3 but not exceeding 2/3 of the total installments stipulated in the Agreement; and
  • a waiver of all the interest not yet due in the case where the installments paid exceed 2/3 of the total installments stipulated in the Agreement.
(Clause 5(4) a. and Clause 5(9) of the 2022 Notification)
3. Amount owed by the hirer in the case where the Agreement is terminated by the business operator and the proceeds from the sale of the car or motorcycle by a public auction is less than the outstanding debt under the Agreement
  1. the outstanding installments due;
  2. the installments which are not yet due;
  3. the interest not yet due; and
  4. penalties, official fees or any expenses actually and reasonably incurred from the debt collection process.
(Clause 4(5) c. of the 2018 Notification)
  1. the outstanding installments due;
  2. the installments which are not yet due; and
  3. official fees or any expenses incurred from the debt collection process prior to the termination of the Agreement.
(Clause 5(4) c. of the 2022 Notification)
4. Rate of penalty in case of default in payment of installments by the hirer The business operator may impose upon the hirer the penalty in case of default in payment of installments at the effective interest rate plus 3% per annum, however the rate shall not exceed 15% per annum in total.
(Clause 5(2) of the 2018 Notification)
 The business operator may impose upon the hirer the penalty in case of default in payment of installments at the rate of not exceeding 5% per annum of the default payment.
(Clause 6(2) of the 2022 Notification)


In addition to the material changes set out in the table above, the 2022 Notification makes several other changes to the 2018 Notification for the benefit of the hirer and the guarantor (if any). Furthermore, the 2022 Notification also contains other general requirements for the Agreement which the business operator shall comply with.

Notably, any business operator who fails to deliver the Agreement containing the terms and provisions in compliance with the 2022 Notification shall be liable for imprisonment for a period not exceeding 1 year or a fine of not more than THB 200,000 or both.?1 Therefore, failure to comply with the above requirements regarding contract terms would be subject to such penalty. In the case where such offence is committed by a juristic person through the order or the omission of the director, manager or any responsible person of the juristic person, such persons shall also be liable for the penalty for such offence.?2

3. Conclusion

The 2022 Notification will only be applicable to Agreements executed after the 2022 Notification becomes effective and will not affect Agreements executed before the effective date.

Footnotes

1. Section 57 of the CPA

2. Section 59 of the CPA

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.