At long last, after listening to the views of various parties, Bank Negara Malaysia (BNM) has decided that the amount of commission payable to car dealers by finance companies is to be no more than RM600 per hire-purchase application. Previously, commissions paid by finance companies were based on the amount loaned and the term, causing an unnecessary burden to buyers. The decision comes into effect on July 13th 2000.
BNM has declared that the payment will be for the services rendered by car dealers in processing applications by customers for loans. The services include filling and submitting of application forms, liaising with the JPJ, and ensuring that vehicles meets legal requirements. Additionally, the dealers are expected to explain to customers the various aspects of the loan applied for and arrange insurance coverage for the vehicles sold.
BNM has made it clear that the handling fees are to be borne entirely by the finance companies and should not be passed on to consumers. On their part, the finance companies have given assurance that the payment would not have an effct on prevailing interest rates which have falled significantly since BNM stopped the practice of commissions being paid to car dealers for H-P loans.
In an effort to prevent any covert arrangements, BNM has made it clear that the finance companies are not to make any other form of payment to car dealers other than the prescribed handling fee. This is to avoid the unhealthy situation whereby dealers will be ‘persuaded’ to direct customers to use certain finance companies that pay additional commissions.
Car buyers are not obliged to accept financing offered by specific finance companies or recommended by car dealers. They have the right to choose their own finance company and to deal directly with the finance company if they wish.
And to put an end to a well known problem faced by some buyers, BNM added car dealers must not discriminate against car buyers who wish to pay in cash (ie not take any loan) or those who could get financing through their employers. In the past, there were complaints about this issue which was due to dealers not wanting to lose their precious commissions.
BNM warned car dealers that they should not impose hidden charges on any other services and must not impose any other form of additional payment without the knowledge and consent of the car buyer. Its statement noted that the handling fee for H-P loans is based on the services provided, and is more transparent and fair to all parties, namely the car dealers/representatives, consumers and finance companies.