MP Al Doy files instalment sales bill setting prison term and BD5,000 fine for unlicensed traders

TDT | Manama

Email: mail@newsofbahrain.com

Hidden mark-ups in instalment deals would face new checks under a bill by MP Hamad Al Doy requiring sellers to disclose the original price, the final instalment price and the yearly interest rate, with unlicensed traders facing up to one year in prison and fines of up to BD5,000.

The draft law would bring instalment sales under a dedicated legal framework in Bahrain, covering goods and services sold on deferred payment terms, even where the deal is described as a lease.

Sales of real estate by instalments would remain outside its scope.

Any company or sole trader wishing to carry out instalment sales would need a licence from the ministry concerned with trade.

Transactions

Sellers would also have to keep a special register for those transactions in a form to be set by the ministry.

The bill would require each contract to spell out the seller’s trade name, address, commercial registration number and contact details, along with the buyer’s name, nationality, occupation, address and contact details.

It would also have to identify the product, state the cash price, the instalment price, the down payment, the deferred balance, the true annual interest rate, how that rate is worked out, when interest starts, the repayment term, the number and value of instalments, payment dates, penalties for delay, and the rights and duties linked to ownership of the product during the repayment period. Contracts could also be made electronically.

Al Doy said Bahrain still lacked a full legal framework for a type of sale that had become common.

He said there was “no integrated regulation” for instalment sales despite their importance and wide use among contracting parties.

The lawmaker said court cases had exposed a gap in the law, with some contracts failing to state the original price of the product or the amount added through interest, and instead showing only one total figure divided into monthly instalments.

“The practical application has revealed a legislative shortcoming in regulating this type of commercial sale,” he wrote.

That gap, he said, left courts to rule on the figure written into the contract even where it was well above the market price.

Worth

He added that this had led to products sold by instalments being priced above their real worth because of high interest charges, and argued that new rules were needed to “protect and balance the relationship between the contracting parties”.

The bill would also curb a seller’s power to cancel a sale after missed payments.

A court would not be allowed to rescind the contract if the buyer had already carried out 75 per cent of their duties.

If the sale were cancelled, the seller would have to return the instalments already paid after deducting an amount for use of the item and compensation for damage caused by abnormal use.

Agreement

Any agreement placing a heavier burden on the buyer would be void.

Another clause would stop the full unpaid balance from becoming due after a single missed instalment.

That would be allowed only if the buyer had failed to pay at least two instalments in a row.

Right

Buyers would also be given the right to settle early and receive a reduction equal to the interest due for the period cut short by early payment.

Any agreement denying that right would be void.