The cabinet on Tuesday approved a law to allow the Bank of Thailand to regulate the business of leasing cars and motorcycles to strengthen consumer protection and tackle household debt, the Ministry of Finance said.
Transactions in the auto leasing sector accounted for 12.4% of total household debt, and were on an upward trend, the ministry said in a statement.
The new law will also ensure consumers are treated more fairly, it said.
The cabinet also let the central bank extend its soft loan programme for smaller firms until early April 2024.
The support measures will help business operators receive funds with appropriate interest rates during the ongoing economic recovery and in the future, it said.
The Bank of Thailand is currently devising new regulations for responsible lending to curb the household debt problem over the long term.
It wants to reduce the ratio of household debt to GDP to no more than 80% in the long term, from 86.8% as of the end of 2021.
Over the past 12 years, household debt has risen significantly from 59.3% in 2010, peaking at 90.1% in 2021, mainly attributed to the impact of the pandemic.
The BoT expects to hold public hearings for new responsible lending regulations in the second quarter of this year, with enforcement expected in the third quarter.
According to the guidelines, creditors are required to consider their client’s ability to repay debt and ability to afford other essential living expenses.
In addition, the central bank will explore incentive schemes to motivate creditors to adopt risk-based pricing by charging interest rates based on borrowers’ credit risk.