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4 Oct 2022

Econ Digest

A draft royal decree on hire purchase business to expand consumer protection


        The Bank of Thailand (BOT) and the Fiscal Policy Office (FPO) have jointly issued a Royal Decree (draft) indicating that certain types of financial business operations to be under the Financial Institution Business Act B.E. 2551 (2008) to regulate the business of hire purchase and leasing1  of cars and motorcycles, which are currently not clearly regulated (Draft Royal Decree). The Draft Royal Decree is open for public hearing from August 15-31, 2022 and will come into effect 180 days after its publication in the Royal Thai Government Gazette.

        KResearch has summarized the essence of this Draft Royal Decree for hire-purchase of cars from non-bank leasing operators as follows:  

  • To help close regulatory loopholes and complement consumer protection for people who hire-purchase cars for rental/business use, or hire-purchase cars in the name of a juristic person. The lack of a specific regulator for these operations has resulted in the above segment not receiving regulated and fair services.

  • To regulate the operations of leasing companies, by focusing on openness, fairness and achieving standards

  • The BOT is authorized to announce additional regulations, such as announcing the highest interest rate that can be charged, ordering the suspension or rectification of the operation, and stipulating penalties for violations.

        In summary, the Draft Royal Decree will help set standards for hire-purchase and leasing businesses by regulating standards and guidelines for hire-purchase contracts, so that lessees are treated and protected equally without discrimination against any purpose of hire-purchase. Under the Draft Royal Decree, although leasing operators may incur higher operating costs during the transition period, it is conducive to improve the image of hire-purchase and leasing businesses as financial services that are beneficial to users, and that they can use with confidence.

        The solving of car and motorcycle debt is one of eight guidelines to resolve the household debt situation according to the resolution of the Committee on Resolving Household Debt, which was approved by the Cabinet on December 28, 2021. As the government has set 2022 as the year to address household debt, this decree may soon come into force.


1 Hire-purchase contract means a contract in which the parties intend to use or make use of the property and transfer ownership to another party.
Leasing contract means a contract in which the parties intend to use or make use of the property for a certain period, but the lessee can choose whether to own the property or not.

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