Introduction
A conditional sale agreement looks from the outside like any completed contract the seller sells the goods and the buyer receives them. However, conditional sale agreements involve a creditor selling goods to a consumer (the buyer), whilst withholding title to the goods until all payments have been made.
Typically, a retailer, the creditor's agent, will supply the goods to the consumer, while transferring title to the creditor. The creditor will pay his agent for the transfer of title. The consumer can use the goods while continuing to make periodic payments to the creditor. On paying the final installment, title passes from the creditor to the consumer.
Formal Requirements
The Act (and Regulations) lay down strict requirements for the form and contents of regulated Agreements. They must
- be in writing;
- contain a statement that the Agreement is regulated by the Consumer Credit Act;
- contain certain prescribed information including the APR (the Annual Percentage Rate of Interest), the amount of credit, the cash price and the dates and amount of installations
- Follow a set format for example, include the debtors signature;
- In certain cases give the debtor cancellation rights where the Agreement is signed away from the trade premises of the Creditor. The cancellation right must be clearly set out on the Agreement itself; and
- be in more that one part so as to enable one (or more usually two) copies of the Agreement to be given to the debtor.
Conditional sale or Hire purchase which is right for me?
Traditionally, conditional sale agreements have been regulated in parallel with hire-purchase agreements. If there has been a difference between them, it is purely that under hire-purchase, the consumer is under no obligation to take title to the goods, whereas under conditional sale, transfer of title is automatic upon the completion of the condition (usually of course, the full payment of the goods).
But there is one odd difference between them, brought about by the 2003 changes to the Sale of Goods legislation. While all the new provisions for redress apply to all conditional sale agreements, only the old rights apply under hire-purchase agreements.
Credit sale and Conditional sale
A credit sale is similar to a conditional sale except the buyer of the goods immediately becomes the owner of them as a 'buy now, pay later' situation (that is, the price is payable by instalments).
What if I cannot afford to pay?
If you fall behind on the payments on a hire purchase or conditional sale agreement, the creditor may be able to repossess the goods. If you have paid more than a third of the total owing the creditor must go to court to ask for the goods back. They cannot call at your home and remove them. Even if you have not paid more than a third of the agreement, the creditor will need an order from the court to remove the goods from "any premises" they are on. This appears to include your garage or drive, but not a car park or roadside.
If you want to keep the goods and make a payment arrangement with the creditor you may be able to do so if you can afford the full monthly instalment plus something towards the arrears. You will have to apply to the court for a time order.
How much will I owe if the agreement ends?
If you have to decide whether to end a hire purchase or conditional sale agreement there are two options:
- to return the goods; or
- to allow let the creditor end your agreement and repossess the goods.
There can be a difference in the amount you end up owing depending upon how the agreement is ended.
For example, if you decide to end the agreement voluntarily and hand back the goods to the creditor you should only have to pay up to half of the total figure in the original agreement, less what you have already paid, plus any arrears from missed instalments, plus damages. If you fall behind on the agreement the creditor will order you to return the goods. You may have to pay the full amount owed on the original agreement less what you have paid and less the amount the creditor gets back from selling the goods.
Matters to be aware of?
Lenders must give you key information about the contract that you can take away and consider before you buy.
The Conditional sale contract you are given to sign must state in plain language what is expected of you and how much you will pay. You should read the contract carefully and only sign it if you are completely satisfied. If you are unsure about what the provisions in the contract mean, seek legal advice or ask the creditor to explain.
If your agreement is for under Ł25,000 and does not include all important financial information, the lender may need to get a court order to enforce it.
If you have any questions, ask your retailer or lender. If you are still unsure, seek independent advice before committing yourself. Don't sign anything you don't understand.
For example, you might need to itterate and therefore ask any of the following:
ˇ the title of the agreement?
ˇ Whether it is it in proper prescribed form?
ˇ the purpose of the loan?
ˇ the gross payment shown in the agreement?
ˇ thether it is a Regulated agreement?
ˇ the interest rate contracted?
ˇ the Amount of each payment?
ˇ the annual percentage rate (APR)?
ˇ start date of loan?
ˇ whether the lender licensed under the Office of Fair Trading?
ˇ whether there is a term in the agreement allowing for variation in the agreement?
ˇ a description of the goods is provided in the agreements
ˇ details of any sureties
ˇ when the owner ship will be passed to the debtor in the agreement
ˇ when the debtor would be able to further sale the goods?
ˇ whether you are in default in payments can the seller take the possessions of goods back?
ˇ whether you can end up the agreement early?
ˇ what will happen if the there is default in payments?
ˇ have you a written copy of the agreement
ˇ whether there is any element of extortion in the agreement?
ˇ whether there is any collection charges that should also be mentioned in the agreement
Relevant Net Lawman document templates:
Relevant Net Lawman articles on Consumer Credit:
| 
