KUALA LUMPUR, Dec. 2 -- Malaysian banks will offer a "goodwill discount" to customers with existing fixed-rate car loans who choose to settle their financing early, in a collective move to align with the country's new, fairer Hire-Purchase Act.

The initiative was announced today by the nation's main banking associations following the passing of the Hire-Purchase (Amendment) Bill, which will abolish the controversial "Rule of 78" interest calculation method for new loans.

The new law will require all future hire-purchase agreements to use a fairer "reducing balance" method for interest calculation.

The goodwill discount is the banking industry's proactive measure to ensure that existing customers, whose loans are still under the old Rul...