Sambung bayar contracts are not legally valid – KPDN

hasn’t ended in pleasant fashion, either for the owner or the “buyer.” More importantly, the very act of pawning a vehicle is illegal.

This was reiterated by the ministry of domestic trade and cost of living’s (KPDN) director-general of enforcement, Datuk Azman Adam, who reminded the public that any contract signed for the purpose of continuing vehicle payments under a sambung bayar scheme is not legally valid, Sinar Harian reports.

He said that under the hire purchase agreement signed between the owner (in this case, bank or financial institution from which the HP loan was secured) and the lessee, there is a condition that states the lessee cannot ‘sell’ the vehicle without the owner’s permission. Doing otherwise is an offense to defraud the owner under the Hire Purchase Act 1967.

Azman said that this did not mean that someone else cannot pay for the vehicle and use it, as an assignment of rights under a hire purchase agreement is permitted under Section 12 of the Hire Purchase Act 1967. However, it can only be carried out with the bank/financial institution’s permission.

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In such cases, if the lessee intends to hand over his rights over the vehicle under the HP agreement, the lessee must inform the bank/financial institution of his intention and seek to obtain the bank’s permission and approval.

“If the bank agrees, the hire purchase agreement in the name of the lessee will not be terminated, but a new ‘assignment’ document will be prepared by the bank, and this will be signed by the original lessee, the bank as well as the party continuing payment for the vehicle, under the condition that the party continuing the payment is not on the blacklist of financial institutions. The rights and liabilities of the original lessee will continue to be in effect throughout the assignment period,” he said.

However, Azman said this was not the case with the majority of sambung bayar cases, with the activity happening outside the knowledge of the bank. In such scenarios, the lessee negotiates directly with the pay-as-you-go party about his intention to ‘sell’ the vehicle that is still subject to a hire purchase agreement.

“The pay-as-you-go party only needs to provide a small advance payment and continue the monthly installment payment to the bank on behalf of the lessee. Normally, the agreement between the lessee and the new party will be signed via a written contract or sometimes, just by a handshake,” he explained.

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