Navigating New Regulatory Frameworks: Key Takeaways for the Hire Purchase and Leasing of Automobiles and Motorcycles Business (Thailand)

2. Key Takeaways under the Royal Decree

2.1 Scope of application of the Royal Decree

The Royal Decree generally imposes obligations on the operators of the Hire Purchase and Leasing Business which are juristic persons. However, the Royal Decree shall not be applicable to certain entities, financial institutions under the financial institution business law, cooperatives under the cooperative law, for example, taxi cooperatives, and individual operators. Instead, the Royal Decree shall be applicable to any juristic persons acting as business operators regardless of the purpose of the hire purchase or leasing of automobiles or motorcycles, whether for personal use or commercial purpose.

2.2 Obligations of the operators of the Hire Purchase and Leasing Business

The Royal Decree sets out certain obligations for the operators of the Hire Purchase and Leasing Business to comply with as follows:

The performance of certain obligations above require further clarification which may be provided in the sub-regulations that have not yet been issued by the BOT.

In furtherance of the above obligations, the BOT has the authority to issue sub-regulations stipulating additional requirements on various matters that the operators of the Hire Purchase and Leasing Business shall adhere to, for example,

1. the form or context of an agreement to be executed between the business operators and consumers,
2. the rules in the event that the business operator is entitled to alter an agreement unilaterally,
3. the disclosure of the business operator’s information※5, and
4. details concerning the hire purchase and leasing, namely, the interest rate, service fee, deposit, security in the form of property, proceeds from the transactions, and penalties chargeable by the operators of the Hire Purchase and Leasing Business※6.

2.3 Monitoring the Operators of the Hire Purchase and Leasing Business

The governing regulatory body under the Royal Decree is the BOT. The BOT is authorized to appoint an inspector to check the business, assets and debts of the business operator, including any related person, whether in general or specifically. The inspector has the duty and authority to:

1. order a director, a manager, an employee, or an auditor of the business operator to give a statement concerning the business operator’s assets and debts and to hand over a copy of the information, accounting statements, documents, seal or any evidence or display information thereof; and
2. seize or confiscate any assets, documents or objects which are involved in an offence for the benefit of examination or legal proceedings.

If the operator of the Hire Purchase and Leasing Business or the person having the management power of the business operator※7 is found to be in violation of this Royal Decree or any sub-regulation issued thereunder, the BOT shall:

1. issue a warning letter to the business operator or related person to suspend any violating act or to comply with the regulations, or
2. issue an order prohibiting the violating act or demanding compliance.

Furthermore, in the event that the business operator violates the Royal Decree or engages in unfair or exploitative acts towards consumers which may cause severe damage, the BOT may issue an order to the business operator to rectify its operation or to temporarily suspend an operation partially or entirely for a specified period.

2.4 Penalties

The Royal Decree stipulates the penalties for the operators of the Hire Purchase and Leasing Business in the event of a violation of the Royal Decree, which are referenced from the penalties under the Financial Institution Business Act B.E. 2551(2008) (“FIBA”) as summarized in the table below. The penalty to be imposed is limited to the fine penalty, but the range thereof is considerably high for certain violations.

Most importantly, the fine penalties also extend to a director or the person having management power or any person responsible for the operation of the business operator if an offence is committed on such person’s (i) instruction or act or (ii) omission to instruct or act.

The prescription period for an offense is 2 years from the date the BOT discovers the offense or within 5 years from the date of committing such offense.

3. Conclusion

The operators of the Hire Purchase and Leasing Business should prepare for due compliance with the Royal Decree which will become effective in December this year.

The details of certain obligations under the Royal Decree and other requirements with respect to the Hire Purchase and Leasing Business may be further elaborated in the sub-regulations to be issued by the BOT. Thus, the operators of the Hire Purchase and Leasing Business should proactively monitor the updates and be prepared to make necessary adjustments to their practices.