How to get rid of hire purchase commitments is a hot topic in today’s struggling economy. But there are legal remedies available that don’t require hiring a lawyer or going to court …
Which credit agreements are we talking about here?
Hire Purchase and Conditional Sale agreements are practically the same. They usually apply to consumer loans provided for buying a car and occasionally cover some white goods and furniture items too.
These particular credit agreements will usually be regulated by the Consumer Credit Act 1974. This is important as section 99 of the Act gives borrowers clear legal rights that can significantly reduce the amount outstanding on the credit contract. The Act covers loans of up to £25,000 taken out before April 2008 and credit of any amount after that date where the agreement is not for business purposes.
Under the Act, a borrower can terminate a Hire Purchase or Conditional Sale agreement voluntarily and owe less. Whether or not you have fallen into repayment arrears or not, you can still have the right to terminate.
How does it actually apply?
If you are getting behind with your Hire Purchase payments or just think they are unnecessary, you can hand the goods back and owe a fraction of the total amount you borrowed.
The sum you owe should equal 50% of the total amount borrowed (including interest) less any payments you have made; but adding missed installments that fell due. There should be a standard information box on the loan contract telling you what the lender believes the 50% figure to be.
However, your right to terminate exists only so long as there has been no formal Default Notice served (under section 87 of the Act) against you. If you received such a Notice, the loan company may be able to repossess the car and you would then owe the full balance remaining due less net profit from resale at auction.
It’s therefore very important to write to the creditor with your request to terminate voluntarily before you get too far behind with payments. And it is crucial that you not only keep a photocopy but also make sure the company gets no prior warning of what you are about to do. This is because many unscrupulous lenders will issue a Default Notice in order to try to deny you your rights.
The creditor may also try to argue that you need to have “paid 50% before you can terminate the agreement” but this has been proven not to be the case and the Office of Fair Trading – which regulates many lenders – has made relevant decisions that come down on the side of the borrower.
It is certainly true that returned goods need to be in reasonable condition. But any additions to the sum owed for claimed damage should not apply to reasonable wear and tear.
Suggestions on how to make provision for lost items
Of course, this all assumes you are able to live without the car, white goods or furniture subject to the agreement. If your household budget is tight, might you, for example, buy a £900 run-around to use for a while instead of struggle to pay several hundred pounds each month for a car that is above your means … ? Can you get by with an older television that isn’t wide-screen plasma?
On a slightly different tack, there are some well-off people who can afford monthly payments and they deliberately terminate once 50% is reached so they can have a newer vehicle every few years or so. Nice if you can do it …
Get tailored advice
Get full and advice about this issue and any other debt or credit problems you have by contacting 0845 345 4 345 and speaking to Community Legal Advice. They can provide full help with your general debt situation and provide assistance with welfare benefits, employment, housing and family law issues.
Also, Five Steps to Consider for Dealing with Debt is another article that provides good information and useful suggestions.
(N.B. This article is not in any way a substitute for obtaining full and proper legal advice and the author takes no responsibility whatsoever for any loss or problems caused by any actions taken by the reader. The article gives tips on reducing liability for Hire Purchase or Conditional Sale agreements. If you decide that advice in this brief article may apply to your circumstances, you should obtain full legal help tailored to your own circumstances (contact details for Community Legal Advice are at the bottom of this post.)