Trying to keep a lid on consumer debt

Trying to keep a lid on consumer debt

The central bank is now regulating hire-purchase and leasing of cars and motorcycles

Auto hire-purchase and leasing businesses have posted continuous growth since 2017, according to the Bank of Thailand. (Photo: Pattarapong Chatpattarasill)
Auto hire-purchase and leasing businesses have posted continuous growth since 2017, according to the Bank of Thailand. (Photo: Pattarapong Chatpattarasill)

Thailand is stepping up its supervision of auto hire-purchase and leasing of cars and motorcycles to ensure consumer protection and deal with elevated household debt.

The cabinet on March 7 approved a draft decree to allow the Bank of Thailand to regulate the growing sector of auto hire-purchase and leasing of cars and motorcycles, aiming to upgrade the standards of the two businesses.

The decree includes the two businesses in the regulations of the Financial Institution Business Act of 2008.

According to the central bank, auto hire-purchase and auto leasing businesses expanded by an average of 5.6% per year from 2017-2021.

At the end of 2021, their outstanding transactions totalled 1.8 trillion baht, accounting for 12.4% of total household debt. One-third of the transactions were conducted by businesses or non-banks that are not regulated by a state agency.

As of the last quarter of 2021, outstanding household debt accounted for 90% of GDP, tallying 14.6 trillion baht.

The central bank reported consumer complaints about the two businesses also increased.

The government committee in charge of probing household debt resolved that a specific agency be set up to regulate these operators, resulting in the central bank and Fiscal Policy Office jointly drafting the decree.

The draft decree is meant to ensure auto hire-purchase and leasing companies treat consumers fairly, providing them with sufficient information to make decisions about loans. (Photo: Pattarapong Chatpattarasill)


The main objective of the decree is to maintain the country's financial stability by keeping household debt at an appropriate level, preventing consumers from becoming overburdened.

The decree is also meant to ensure the two businesses treat consumers fairly, providing them with sufficient information to make decisions about loans and offering access to products at reasonable prices.

The decree applies to all juristic business operators in the two businesses, but does not cover commercial banks, financial institutions that have specific purposes, and operators such as taxi cooperatives that operate under separate regulators.


The decree mandates operators are open in providing crucial information at their offices, such as interest rates, service fee discounts and fines, allowing customers to easily access the data.

Operators have to inform customers of their methods for calculating annual service fees. The central bank can determine the calculation method of such fees for the operators.

The decree also empowers the central bank to order operators to enter into contracts with customers, according to Bank of Thailand guidelines.

Operators must upgrade their consumer protection measures and report operation information to the central bank. However, they are not required to ask for central bank permission to operate.

The regulator might consider ordering businesses to improve operations if they are found to operate in a manner that damages the public, according to the decree.


The decree takes effect 90 days after publication in the Royal Gazette.

The central bank is drafting details of its regulations and guidelines to supervise businesses under the decree.

The regulator said while consumers will be treated more fairly, business operators can gain more confidence in consumers and compete fairly under the decree's guidelines.

Related state agencies can better manage household debt and maintain the country's financial stability with these businesses regulated, according to the central bank.


Thai Honda, a manufacturer and distributor of Honda motorcycles, believes the new decree may affect sales in the automotive market.

The regulation could lead to a higher rejection rate for hire-purchase and loan applications to buy or lease vehicles, said Wiwat Lertpati, chief sales and marketing officer of Thai Honda.

"This decree can affect both car and motorcycle sales, but Thai Honda is confident it can cope with the impact," he said.

Thai Honda is a major vendor in the domestic market, with sales of 1.38 million units last year. The company recorded sales of 1.2 million units in 2021, commanding a 70% market share in Thailand.

Mr Wiwat said the details of the draft decree remain unclear.

Motorcycle and car manufacturers will wait and see how the measure opts to regulate hire-purchase and leasing in order to steady high levels of household debt, he said.

"Manufacturers are talking about the regulation amongst themselves. They have yet to discuss their doubts with the government," said Mr Wiwat.

Thai Honda is aware the decree aims to ensure fair treatment of potential purchasers of cars and motorcycles, he said.

"The company believes the government will eventually find a balance between measures to protect consumers and support businesses," said Mr Wiwat.

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