New Disclosure Requirements On HP Agreements

Thursday, 2. October 2008

The 1st October sees the introduction of new regulations that ensures that customers with hire purchase or conditional sale agreements are reminded specifically of their rights to voluntary terminate (VT) the agreement when 50% of the total amount due has been paid. The Consumer Credit Act 2006 states that from the start of October 2008 ‘post-contract transparency requirements’ will come into effect, and will include notification of voluntary termination rights. Under section 99-100 of the Consumer Credit Act 1974, customers are allowed to terminate their HP contract once half the payments have been made and return the goods to the finance provider with no further commitments. This piece of regulation, of which many consumers are still unaware, will soon appear on all relevant financial statements according to the CCA, potentially resulting in an increase volume of VT’s. The Finance and Leasing Association, representative body of the industry, have said that the law hasn’t changed, just the way that the rights are communicated. As a result it is expected that more customers will make use of these rights and therefore rates will have to increase to allow for the associated increased costs resulting from losses realised on cars that have been early terminated. As I have explained on many occasions this is a very powerful piece of consumer legislation and a very important reason why consumers should consider Hire Purchase over personal loans. This legislation only applies to HP and conditional sale agreements which includes PCP’s but excludes Contract Hire and other types of lease. On a positive note there are many customers who find themselves half way through a Hire Purchase agreement and want to remove themselves from the agreement in order to benefit from some of the low monthly cost lease deals that we have. However, they have been told that they are into a heavily negative equity position if they try to pay a settlement figure and try to sell the car privately when in fact all they have to do is hand the car back. If you are considering doing this call me first, it needs to be handled properly. By Graham Hill