The Bank of Thailand (BOT) and the Fiscal Policy Office have drafted a royal decree that will regulate the hire purchase and leasing of cars and motorcycles under the Financial Institution Business Act B.E. 2551 (2008).
This draft royal decree, which comes at a time when the level of household debt is surging in Thailand, aims to address the rise in outstanding debts related to hire purchase and leasing of cars and motorcycles. In recent years, there has been growing concern about such financing for cars and motorcycles, as these arrangements conducted by non-banks are currently unregulated and have sparked many public complaints relating to fees and practices.
Scope of Regulated Businesses
By virtue of the draft royal decree, businesses carrying out hire purchase and leasing of cars and motorcycles will become regulated businesses under the Financial Institution Business Act B.E. 2551 (2008).
The draft royal decree defines “hire purchase” and “leasing” as follows:
The draft royal decree is expected to mostly affect non-bank business operators and entities engaging in hire purchase and leasing of cars and motorcycles, which at present are not regulated under any particular law by any authority. It does not apply to financial institutions and specialized financial institutions under the law on financial institutions, business operators under other laws that are regulated and monitored by a specific government agency, and business operators that are not juristic persons.
The key requirements of the draft royal decree are described below.
In cases of noncompliance, the BOT can issue a warning letter or an order prohibiting the offending action or providing instructions for compliance. If business operations are deemed likely to cause harm to the public, the BOT may order operators to correct their operations or to temporarily cease some or all business operations. Fines and imprisonment for violation of some provisions are also stipulated as penalties in the draft royal decree.
The BOT recently completed a public hearing period for the draft royal decree, and is currently in the proposing and approval process. According to the current draft royal decree, the royal decree will become effective after 180 days from its publication date.
For more information on the draft royal decree, or on any aspect of financing arrangements in Thailand, please contact Tilleke & Gibbins at [email protected], [email protected], and [email protected].