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Hire Purchase

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How to deal with hire purchase debts (235kb)

Depending on the circumstances, hire purchase may be a priority or a secondary debt.

The following section relates to hire purchase regulated under the Consumer Credit Act 1974. This will not apply to amounts borrowed over £25,000 or where the agreement is between two companies. If your agreement is not regulated or you are unsure, phone us for advice.

Hire purchase (HP) or conditional sale?
Don’t assume that all goods bought on credit are on HP. You can buy goods on all sorts of different credit agreements and the difference is important.

Creditors can only take back goods if you have a HP or conditional sale agreement. This is because you are not the owner of the goods until you have made the final payment.

The company does not have to go to court to take back goods if you have paid less than a third of the total charge for credit. If you have paid more than this, the creditor will need a county court order. It is a criminal offence to sell goods on HP, without the consent of the HP company.

With nearly all other credit agreements you own the goods and the only action creditors can take is to start action in the county court to get their money back (see What if my creditors take court action?).

If you are not sure if your credit agreement is HP, read it, ask your creditor or phone us for advice. If it is called a HP or conditional sale agreement your creditor may have the right to repossess the goods.

If you wish to keep the goods you will need to demonstrate that you can pay the normal payments plus something towards the arrears.

However, in certain circumstances repossession of the goods can be suspended on terms where payments are less than the original agreement. You would need to show that this is all you can afford and explain why it is important that you keep the goods, for example to continue trading.

If you no longer need the goods and wish to hand them back, you may be able to do this without paying anything further if you have already paid over half of the total charge for credit, and depending on the state of the goods. Look at your agreement to see whether you have paid back half, if you have not then a shortfall will be left to pay which would then be treated as a secondary debt.

Issues around hire purchase and conditional sale can be complex, so phone us for advice.

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