HIRE-PURCHASE (AMENDMENT) BILL

Order for Second Reading read.

2.57 p.m.

The Minister for Law and National Development (Mr E. W. Barker): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The principal amendments that are proposed in the Bill appear in clauses 2 and 8 and are designed to confer some measure of protection upon finance companies which are owners of motor vehicles subject to hire purchase agreements and which suffer loss due to acts or omissions on the part of the hirers of such motor vehicles. These amendments, if passed, will in no way detract from the paramount policy of the principal Act, which is to safeguard the interests of hirers under hire purchase agreements, as part of the larger field of consumer protection. They will, however, ensure that hirers will be less likely to abuse their rights under the agreements to the disadvantage of the lawful owners of these motor vehicles.

Clause 2 which amends section 26 of the Act makes it mandatory for a hirer to inform the owner of the vehicle (the finance company) in the event that he changes his registered insurer during the period of the hire-purchase agreement. In the past, the new registered insurer, not being aware of the interest in the motor vehicle of the finance company, have, in some instances, where there has been a claim on a total loss basis by the insured hirer, made payments on a total loss basis direct to the hirer. Although the owners have a right at common law to sue the hirer in respect of their interest in the motor vehicle, this has not been shown to be a satisfactory remedy, for hirers have been known to disappear with the insurance monies received from the insurers. This amendment, accordingly, places a legal obligation upon the hirer, who by virtue of section 26 (1) of the Act alone must choose his registered insurer, to advise the owner if he decides to change his insurer. The owner will then inform the insurer of his interest in the motor vehicle under the Hire-Purchase agreement.

Clause 3 amends section 33 (c) of the Act in such a way as to provide greater flexibility in adjusting interest rates payable on overdue instalments. With the recent rise in interest rates in money markets the existing provision in this section fixing a ceiling of 9% per annum which finance companies may charge is unrealistic, having regard to the cost of these companies of borrowing money. It is, therefore, proposed that a maximum rate of 12% per annum should be fixed in section 33 (c) but at the same time to confer upon the Minister power to determine such lower rate from time to time as he may think fit. This lower rate, it is envisaged, should correspond approximately to prevailing commercial rates. Though interest rates now appear to be on a downtrend, they are likely to remain well above historical rates.

The other major amendment appears in clause 8 which amends the Fourth Schedule. The effect of this amendment will be to reduce the number of notices to repossess (under section 15 (1) ) that are sent out by finance companies to hirers who tend to be continually in default in their payment of instalments. Such hirers often find themselves in further arrears of instalments which have fallen due after the date of the notice. The existing Notice, therefore, fails to reflect the true position of the amount of arrears that are due up to the time that the finance company takes action to repossess. The amendment, accordingly is designed to deal with this matter by providing that the hirer, in order to avoid repossession, must pay all arrears of instalments that have fallen due since the date of the Notice.

Finally, the amendments proposed in clauses 4, 5, 6 and 7 seek to increase the penalties provided for in sections 35, 36, 37 and 38 respectively of the Act. These penalties, with the passing of time, have become a little unrealistic.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill.-[Mr E. W. Barker].

Bill considered in Committee; reported without amendment; read a Third time and passed.