Hire Purchase and Conditional Sale Debt Advice

If you buy goods such as cars or furniture under Hire Purchase (HP) or a similar scheme, known as a conditional sale agreement, you don't own them until you have made the final payment. Until then, they belong to the creditor (the finance company).

If you miss payments before you've paid a third of the total amount you owe (this figure will be on the front of your agreement), the creditor can take back the item. They can do this only if it is in a public place, so they may be able to repossess a car, but they cannot come into your home and take furniture.

If you have paid a third or more of the total amount you owe, the creditor must start court action to get the goods back, or to get you to pay.

You will then receive a hearing date, when the court will decide whether you must return the item or accept any offer by you to make payment.

You can ask for a time order, under which the court can reduce the payments to a level you can afford . The court can also make a suspended order, which means that the finance company can get the goods back only if you miss future payments.

If you want to avoid court action, you can write to the creditor to end your contract and return the goods. You will have to pay only half of the total amount you originally owed (this figure will be on the front of your HP agreement), and the cost of repairing any damage to the goods.

What the law says

Anyone who offers credit must be incensed by the Office of Fair Trading.

Most credit agreements for amounts of £25,000 or less  are covered by the Consumer Credit Act 1974. These are called regulated agreements and if you have a regulated agreement, you are entitled to: -

• have specific information included in your agreement, such as the amount you are borrowing, the length of the agreement, interest rates, any charges, the amount and frequency of payments and your cancellation rights (if applicable -see below). It must also include the total charge for credit and the Annual Percentage Rate (APR), which is the annual cost of credit after interest and all other charges have been added together. If this information is not included, the agreement may be unenforceable
• be given a copy of the agreement, which is not binding until signed by both you and the creditor
• be sent a statement or copy of other documents on request. You may have to pay a small amount
• be informed of the procedures to be followed, such as sending you a default notice, before court action is taken.

Is your credit agreement a regulated agreement?

Your agreement will state under its heading whether it is regulated by the Consumer Credit Act.

Most agreements involving credit or hire charges of less than £25,000 (for example, credit cards, personal loans, and most catalogue credit and hire agreements) are likely to be regulated,. There are some exceptions, such as low cost credit from a credit union. If you want to check whether your loan is regulated, contact your local Trading Standards Department.

How Harrington Brooks Can Help

We can offer advice as to how to deal with any type of debt. Just phone and we'll be happy to explain your rights if you're unsure or are feeling that you're not being fairly correctly by the creditor.

If you have multiple unsecured debts and the cost of these is contributing to you not being able to honour your hire purchase payments, then a debt management plan or IVA may be the answer. This will free some of your money each month to pay higher priority debts such as this and allow you to retain these items.