BOT Hire-Purchase Regulations Reshape Auto Finance

Many of you may have already heard the news that the Bank of Thailand (BOT) is stepping in to regulate hire-purchase and leasing businesses for cars and motorcycles. At iCONEXT, we work with several clients in the auto finance industry, so today we’d like to share the details of this important update with you.

New Hire-Purchase Law: A Milestone in Regulating the Auto Finance Industry

The Bank of Thailand (BOT) has announced the enforcement of a Royal Decree to regulate hire-purchase and leasing businesses for cars and motorcycles for the first time. The law, which takes effect on December 2, 2025, is not intended to “tighten control,” but rather to “ensure fair oversight.” Its aim is to raise industry standards and promote greater fairness within the auto finance market.

In addition, the BOT seeks to safeguard financial stability. This sector represents a total value of 1.6 trillion baht, which is nearly 10% of the nation’s household debt.

Reasons Behind the Oversight

The BOT’s involvement arises from growing household debt and a large number of consumer complaints.

This industry includes more than 3,000 operators. Most of them are small firms that often provide non-transparent information and impose high fees and interest charges. Therefore, the BOT’s new role will further complement existing regulators, such as the Office of the Consumer Protection Board (OCPB). This will help ensure stronger consumer protection and promote greater economic stability.

Scope of the Law

This Royal Decree applies to legal entities engaged in the hire-purchase and leasing of cars and motorcycles as a business. It excludes entities already regulated by other authorities, such as commercial banks and cooperatives. In addition, the law also covers a wide range of vehicles as defined under the Motor Vehicle Act.

Key Provisions of the New Regulations

The new law is designed to raise financial service standards and promote fairness between operators and consumers. To achieve this, operators are required to comply with four key principles:

• Interest Rates and Fees

The BOT will set maximum allowable interest rates and fees. These must be reasonable and aligned with actual costs. This measure aims to prevent businesses from overcharging consumers.

• Responsible Lending

Operators must assess customers’ repayment capacity and may not extend loans without evaluating the associated risks. This measure helps stop people from taking on too much debt and aims to lower household debt over time.

• Consumer Protection

Operators must clearly and transparently disclose all essential information. This includes interest rates, fees, repayment terms, and potential risks. The goal is to ensure that consumers can make informed decisions.

• Service Standards

Operators must provide assistance measures for distressed borrowers, such as debt restructuring, extended repayment terms, or emergency relief programs. These measures aim to reduce default risks and help borrowers regain financial stability.

BOT’s New Powers

The law grants BOT comprehensive supervisory authority, including:

• Issuing regulations to ensure that all operators comply with uniform standards.
• Monitoring and supervision to verify whether operators are acting in accordance with the law.
• Enforcement and penalties in cases of violations. The BOT has the authority to order immediate corrective actions. It can also impose both administrative and criminal penalties, such as fines or imprisonment. These measures aim to ensure effective enforcement and motivate operators to comply fully.

Impacts and Benefits

The new law is expected to create benefits for all parties.

• Consumers
  They will receive protection of their fundamental rights and fair treatment in terms of pricing, contract conditions, and services throughout the contract period. This will increase consumer confidence in using financial services.

• Operators
  Higher standards and greater transparency will strengthen credibility with both customers and investors. In addition, these improvements will foster greater trust in the market. Furthermore, the law will also create a “level playing field” among all operators, thereby reducing opportunities for unfair business practices and ultimately promoting fair competition.
• The Thai Economy as a Whole
  When lending is conducted responsibly and under strong supervision, it will help reduce the accumulation of household debt. This will enhance financial stability and support long-term economic growth.

Implementation Plan

This law will officially take effect on December 2, 2025. This marks the beginning of a period in which all relevant government and private sector entities must align their operations with the requirements of the new law.

The Bank of Thailand has provided a transition period for all parties to make necessary adjustments. During this period, operators are expected to take proactive steps to comply with the new requirements. Specifically, this includes preparing internal systems, establishing operational guidelines, and developing essential processes to ensure full readiness before the law is fully enforced.

In addition, the BOT has opened a public consultation process to gather input from stakeholders. These include businesses, financial institutions, operators, and the general public. The process aims to ensure that the law can be effectively enforced. It also seeks to align the law with real-world practices and minimize potential impacts on all parties involved.

The consultation process also helps build mutual understanding between regulators and the private sector. It serves as an opportunity to exchange perspectives and refine the enforcement approach to make the law more practical and effective.

Conclusion

The Bank of Thailand’s regulatory involvement marks an important step in raising standards in the auto finance industry and ensuring long-term fairness for consumers. Operators should prepare to adjust and improve their operations in line with the new requirements to ensure business sustainability.

_Source:

_{The Bank of Thailand and the ‘New Rules’ for Regulating Hire-Purchase and Leasing Businesses}

_{Why does the Bank of Thailand need to regulate the hire-purchase business?}

_{Media Briefing: Supervision of Hire-Purchase and Leasing Businesses for Cars and Motorcycles}

_{Supervision of Hire-Purchase and Leasing Businesses for Cars and Motorcycles}

_{Key Points of the Royal Decree on Hire-Purchase and Leasing – Bank of Thailand}