Imposition of interest on deferred instalments for hire purchase loans is wrong in law

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There has been confusion and anxiety among the borrowers following the announcement by the Bank Negara Malaysia on the requirement for hire purchase borrowers to officially confirm to take up the six months moratorium. On April 30, 2020, the Association of Banks in Malaysia (ABM) has issued a press statement, inter alia, stating the following: “Hire purchase customers who choose to take up the moratorium will have an option in terms of their repayment. They can either choose to: (i) Pay the accumulated six months’ deferred instalments together with their October 2020 instalment without being charged any additional interest; or (ii) Continue the repayment of these instalments post-October 2020 through an extension of six months in the repayment period after the original maturity date. In this case, interest based on the contractual rate will be charged on the amount of the deferre…