WITH Hari Raya just around the corner, many will be tempted to buy new furniture and electrical appliances. These purchases, which appear "affordable" with easy-payment schemes, are actually expensive.

The low weekly or monthly instalments under these schemes mislead consumers into thinking that the interest rate is low. But in reality, the interest rate or the annual percentage rate (APR) is high.

Take, for example, a camcorder advertised for RM1,899. It can be bought by making monthly payments of RM143 for 24 months. This comes to an exorbitant interest rate of 72.26 per cent per annum.

Take another example: a sofa set whose cash-and-carry price is RM3,399.

Someone without the cash can be the proud owner by making a weekly payment of RM35.54 for four years or monthly instalments of RM155.
Small as the payments may be, the interest rate for the sofa is 48.4 per cent.

Most consumers who sign up for easy-payment schemes are under the impression that they are hire-purchase loans.

However, these are not hire-purchase loans because under the Hire Purchase Act 1967, the interest charged cannot exceed 10 per cent per annum.

Since there are no laws regulating easy-payment schemes, there is no limit on the interest that can be charged.

The high interest rate cannot be justified since many customers pay through salary deductions, which minimises the possibility of defaulting the loan.

We recommend that the Ministry of Domestic Trade and Consumer Affairs bans easy-payment schemes so that only hire-purchase loans are allowed.