The Consumer Credit Act 1974 (the Act) confers certain rights on individuals in the United Kingdom who enter into credit agreements. Section 99 of the Act applies to hire purchase and conditional sale agreements. A conditional sale contract allows the individual to buy goods by instalments; he will own the goods when all payments have been made. Under a hire purchase agreement, an individual agrees to make regular, monthly payments to rent the goods over the length of the agreement, typically between one and five years. At the end of the agreement, he has the option to buy the goods by paying a small fee, known as an "option to purchase fee." Section 99 sets out the processes and rights that apply when an individual chooses to end a conditional sale or hire purchase agreement ahead of time.
Under Section 99 of the Act, an individual has the right to terminate a hire purchase or conditional sale agreement, and return the goods, at any time before the final payment falls due. The right to terminate must be clearly visible on the credit agreement. This right does not apply if the full balance has become payable, or if the credit provider (creditor) has already terminated the agreement. If an individual wishes to voluntarily terminate his agreement, he must inform the creditor in writing. On termination, the individual must surrender the goods to the creditor.
When goods financed by hire purchase or conditional sale are surrendered to a creditor, the individual may still need to make a final payment to extinguish his liability.The Act restricts the individual's liability on termination. The individual must pay any outstanding arrears; beyond that he is liable for no more than 50 per cent of the total amount payable under the agreement, less the amount paid and any arrears due at the date of the termination.The total amount payable includes the initial deposit and all subsequent contractual payments. The amount paid includes the deposit and all instalments paid by the termination date. If the calculation results in zero or a negative figure, the individual needs only to pay the arrears. If the individual has paid more than 50 per cent, the difference is not refunded.
Return of Goods
A creditor cannot require an individual to return the goods to a location that is not within a reasonable distance; neither is the creditor permitted to charge a fee for collection of the goods. A creditor may pursue the individual for damages if the goods are returned in poor condition.
Termination of a hire purchase or conditional sale agreement does not terminate any subsidiary agreements, such as insurance. The 50 per cent rule does not apply to subsidiary agreements, and these must be paid according to their terms.
If a creditor terminates the credit agreement, the 50 per cent rule does not apply and the individual's liability is likely to be greater than in the case of voluntary termination. For this reason, creditors issuing default notices are required to inform individuals of their termination rights.
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