How to Deal with Hire Purchase Agreement Default
What to Do When it Isn't Possible to Keep up with the Repayments
Nov 23, 2008
Most hire purchase agreements tend to be for cars, although some do still take place for furniture. It involves making a specific number of payments at a set amount to the seller. The problem comes when the buyer can't afford to keep up with repayments because of financial problems.
Repossession Rights of the Seller when Less than a Third of the Sale Price Has Been Paid
Provided that all repayments are made in full and on time the item will become the property of the buyer. If the buyer fails to keep up with the repayments because of financial problems the lender can take action to repossess the goods. All repossession rights should be stated in the agreement small print.
A seller is entitled to 'snatch back' any goods when less than a third of the amount has been paid back. It is imperative that an agreement is reached with the seller. They may be willing to accept a reduced rate for a while if financial problems exist.
Repossession Rights of the Seller when a Third of the Sale Price Has Been Paid
Once more than a third of the sale price has been paid by the buyer, repossession rights change as they are now 'protected goods'. The only way a seller can get possession is through a court order or through the voluntary return of the item by the buyer.
If the seller now 'snatches back' the goods without a court order, the buyer is entitled to a refund of all payments made to date. This would apply if a car was removed from a driveway by the seller.
Don't Sell the Item Until the Last Payment Has Been Paid
The customer who pays by hire purchase does not own the goods until the final payment has been made. This means that the goods cannot be sold without the consent of the seller. To do so constitutes a criminal offence.
Unenforceable Hire Purchase Agreement
From April 2008, all new hire purchase agreements for less than £25,000 are regulated by the Consumer Credit Act 1974. If an agreement made prior to the 6th April 2007 doesn't comply with certain prescribed terms it could be deemed an unenforceable hire purchase agreement. This could result in the debt being written off and being able to keep the item purchased on HP.
Identify a Debt Solution
If financial problems mean that it has been impossible to keep up with the repayments on a number of financial agreements, it would be useful to talk to a debt counsellor. There are a number of debt solutions that could help deal with debt problems and associated creditor harassment.
No matter how difficult it is it's important that any financial problems are discussed with the creditor. There may be a way around things or the creditor could at least advise on how the problem should be handled. If negotiations don't work out, there is always a debt solution that can be utilised to escape any financial hardship.
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