In recent years, hire purchase and leasing of cars and motorcycles have become widely accessible to the general public and have grown rapidly. Between 2017 and 2021, the industry expanded at an average annual growth of 5.5%, and by the end of 2021, its outstanding transactions were valued at 1.8 trillion baht, accounting for 12.3% of the total household debt. One third of the business value was operated by non-bank service providers, entities that are neither financial institutions nor companies within financial business groups, and was not subject to any designated supervisory agencies. Additionally, the number of complaints has been increasing.

Therefore, the Committee on Retail Debt Resolution has approved, in principle, the need to establish designated supervisory agencies and laws to regulate hire purchase and leasing of cars and motorcycles. The Bank of Thailand (BOT), the Fiscal Policy Office (FPO), and the Office of the Consumer Protection Board (OCPB) jointly convened and agreed to issue a Royal Decree under the statutory power of the Financial Institution Business Act B.E. 2551 (the (Draft) Royal Decree Prescribing Certain Types of Financial Business to be Subject to the Financial Institution Business Act B.E. 2551 B.E. ….), which will come into effect 180 days after its announcement in the Royal Gazette. 

The objectives of the (Draft) Royal Decree are as follows:

1. To regulate juristic persons that undertake hire purchase and leasing of cars and motorcycles in their ordinary course of business, which are not currently subject to any designated laws and supervisory agencies

2. To prioritize 2 key aspects of business undertaking:

2.1 Economic and financial system stability, to maintain an appropriate household debt level and to curb excessive borrowings

2.2 Consumer protection, to promote fair treatment, including access to clear and comprehensive information, non-intrusive services, and reasonably priced financial products and services. Future standards and regulations pursuant to the (Draft) Royal Decree will set out the roles and responsibilities of business operators, such as:

- Disclosure of information, e.g., interest rates, charges, and penalties

- Service enhancement, e.g., guiding principles for interest collection and the calculation of penalties.

- Financial reporting according to accounting standards

- Data retention and other reporting requirements for supervisory purposes

3. To impose penalties for violations and non-compliance, which may include fines, imprisonment, or both

The supervision of hire purchase and leasing of cars and motorcycles will be directly and indirectly beneficial for stakeholders:

• Consumers will receive standardized and fair services and will be sufficiently informed to make sound financial decisions.
• Business operators will gain consumer trust and compete on a level playing field under the proportionate, risk-based supervision.
• The government sector will be able to maintain economic and financial stability, particularly the household debt, in a more systematic and efficient manner, and will be able to encourage fairness in business practices.

Recognizing both the positive and negative impacts of the (Draft) Royal Decree on stakeholders, the BOT and the FPO are conducting a public hearing to gather feedback and suggestions from interested parties, stakeholders, and the general public to refine the (Draft) Royal Decree and ensure its appropriateness. Feedback and suggestions are welcome via the BOT website (www.bot.or.th) and the Central Legal System (www.law.go.th) from 15 August 2022 to 31 August 2022.

Following the conclusion of the public hearing, the process of issuing the Royal Decree will proceed, and the BOT, along with other agencies, will convene to draft further regulations.