What Is a “Deficiency” — and Why Does the Finance Company Claim It?

Under a standard hire-purchase agreement, if the lessee defaults on installment payments, the finance company typically has the right to terminate the contract and repossess the vehicle. If the repossessed car is sold at auction for less than the outstanding balance, the difference is called the “deficiency” or “shortfall.” Finance companies commonly rely on the original contract terms to hold the lessee — and any guarantor — liable for this amount.

The Key Issue: Returning the Car “Before” Contract Termination — and “Implied Mutual Rescission”

The critical factor is the sequence of events between the car’s return and the contract’s termination. If the finance company comes to collect the vehicle while the hire-purchase agreement has not yet been formally terminated (no written termination notice has been issued), and the lessee voluntarily surrenders the vehicle without objection, Supreme Court Decision No. 5055/2567 (2024) established that this constitutes an “implied mutual rescission” of the hire-purchase agreement.

Implied mutual rescission means that even without a written termination document, the conduct of both parties — one seeking to take back the vehicle, the other voluntarily handing it over — amounts to a mutual expression of intent to end the contract at that moment.

The Legal Consequence: Why the Finance Company Cannot Claim the Deficiency

Once the hire-purchase agreement is deemed mutually rescinded by implication, all rights and obligations under the original contract are extinguished. Neither party owes anything further under that agreement. Therefore, the finance company has no legal basis to use the original contract terms to sue for the deficiency — even if the contract explicitly states that the lessee remains liable for any shortfall after returning the vehicle. Once the contract has been rescinded, those terms no longer apply.

Important Caveats: When This Principle May Not Apply

The implied mutual rescission principle applies only when the specific conditions are met — the finance company accepts the car back before formal termination, and the lessee voluntarily surrenders it. The outcome may differ if:

• The lessee objected or resisted the repossession.
• The finance company properly terminated the contract through formal procedures (e.g., a written termination notice with the required notice period) before repossessing the vehicle.

In such cases, implied mutual rescission may not apply, and the finance company may retain the right to sue for damages or the deficiency under the law and contract terms. Each case must be assessed on its own facts.

Advice for Hire-Purchase Lessees

If you have already returned your car and are now facing a demand or lawsuit for the deficiency, review the sequence of events and all related documents carefully. If the circumstances suggest implied mutual rescission, consult a lawyer promptly to build your defense. If you are currently struggling with installment payments, before deciding to return the vehicle, understand the legal implications and consult a lawyer about your options to best protect your rights.

Summary

When a lessee voluntarily returns a vehicle to the finance company before the hire-purchase agreement is formally terminated, the Supreme Court treats this as implied mutual rescission of the contract — extinguishing the finance company’s right to sue for the deficiency. However, the specific facts of each case matter greatly, and consulting a legal professional is always the best course of action.

If you are facing a hire-purchase dispute or being sued for a deficiency, the expert legal team at OSP LEGAL is ready to advise and represent you. Contact us via Line: @osp-legal or call 02-578-8303 / 098-509-0956.

Card Use: “In-Store Purchases” vs. “Cash Withdrawals”

First, it is important to distinguish between the different ways a stolen card can be misused. This article focuses on cases where the thief uses the card to make purchases at a point of sale (POS), which typically requires a signature on the sales slip — not cases where the thief knows the PIN and withdraws cash from an ATM, where the liability framework may differ.

The Deciding Factor: When the Merchant Fails to Verify the Signature

Under the agreement between merchants and the bank that owns the EDC (Electronic Data Capture) terminal, merchants are generally required to verify the customer’s signature on the sales slip against the signature on the back of the card before accepting payment. If a card is lost or stolen and the thief uses it to make purchases — and the merchant neglects to verify the signature, or does so carelessly — the merchant is in breach of its agreement with the EDC bank.

Is the Issuing Bank Liable? Supreme Court Decision No. 4568/2566

When a merchant — acting as an agent of the EDC bank — breaches this verification obligation, the Supreme Court in Decision No. 4568/2566 established that the issuing bank (which functions as a principal to the EDC bank) cannot rely on the cardholder agreement to disclaim liability. In other words, even if the cardholder agreement states that the cardholder bears responsibility for losses from a lost card, when the loss results from the merchant’s failure to verify the signature, the issuing bank must refund the amount debited from the cardholder’s account. The cardholder is not required to pursue or sue the merchant directly.

You May Not Get a Full Refund: When the Cardholder Is Also Negligent

However, in the same Decision No. 4568/2566, the Court also considered the cardholder’s own negligence — specifically, the failure to exercise reasonable care in safeguarding the debit card. Where both parties share fault (the merchant/bank and the cardholder), the Court applied Section 223, paragraph 1, of the Civil and Commercial Code — the principle of contributory negligence — to apportion liability. In this case, the Court ordered the bank to refund three-quarters (3/4) of the total fraudulent charges. This is a crucial point: even when the bank is liable, if the cardholder was also negligent, the court may not order a full refund.

What to Do If Your ATM/Debit Card Is Lost

1. Block the card immediately — Contact the bank’s call center or other available channels to block the card as soon as possible. The faster you act, the less damage can occur.
2. Keep a record of your report — Note the date, time, and name of the officer who handled your call, or save the SMS confirmation of the card block.
3. Review your account transactions — Check your account activity carefully for any unauthorized transactions after the card went missing.
4. Dispute unauthorized transactions — If fraudulent charges are found, contact your bank branch immediately to dispute the transactions and request a refund.
5. Gather supporting documents — Prepare your identification and relevant evidence (e.g., police report if available, card block confirmation, account statements).
6. Consult a lawyer — If the bank refuses to accept responsibility or disputes arise, consult a lawyer to assess the facts, applicable law, and the best course of action.

Summary

When a lost or stolen ATM/debit card is used for in-store purchases, and the merchant fails to verify the signature, the issuing bank is likely liable to refund the cardholder, based on the principle established in Supreme Court Decision No. 4568/2566. However, if the cardholder was also negligent in safeguarding the card, the court may order only a partial refund. Protecting your card and blocking it immediately upon discovery of loss are essential.

If your card has been lost, used fraudulently, and the bank disputes your claim, OSP LEGAL is ready to advise you and assess your legal options. Contact us via Line: @osp-legal or call 02-578-8303 / 098-509-0956.

The UNCITRAL Model Law on Cross-Border Insolvency provides an international framework for recognizing foreign insolvency proceedings. Currently, 41 countries have adopted this model law. In Asia, three countries — Japan, South Korea, and the Philippines — have implemented it, with Singapore also in the process of updating its legislation to enable cross-border asset recovery.

This limitation has eroded investor confidence in Thailand’s insolvency process. In today’s interconnected global economy, debtors frequently hold assets across multiple jurisdictions. When a debtor faces insolvency but creditors know assets exist abroad yet have no legal authority to seize them, it undermines trust in the system — discouraging both domestic and foreign investment.

Reform is needed. Thailand’s Bankruptcy Act (B.E. 2483 / 1940) has been in force for over 77 years. Although it has undergone some amendments, the core framework remains dated — and updating the law to address cross-border asset enforcement is long overdue.

Bankruptcy proceedings can be complex. Under Thai law, a creditor (or multiple creditors acting together) may file a bankruptcy petition if the debtor — an individual owing at least 1 million baht, or a juristic person owing at least 2 million baht — has a definite and ascertainable debt, whether due immediately or in the future.

Even after a bankruptcy petition is filed, the debtor still has options — including business rehabilitation and debt composition (both before and after a bankruptcy order) — allowing the debtor to negotiate with creditors and restructure debts to avoid full bankruptcy.

If restructuring fails, the case proceeds to formal bankruptcy. The official receiver takes control of the debtor’s assets for the benefit of all creditors. Other creditors must file their claims within the statutory deadline. Once declared bankrupt, the debtor loses all authority to manage their own assets — the official receiver assumes full control as required by law.

However, under the current framework, the official receiver may only collect assets located within Thailand — creating a significant obstacle in cross-border judgment enforcement cases.