04. Hire Purchase (HP) problems

If you buy goods such as cars or furniture under hire purchase (HP) or a similar scheme, known as a 'conditional sale agreement', you don't own them until you have made the final payment. Until then, they belong to the creditor (the finance company).

If you miss payments before you've paid a third of the total amount you owe (this figure will be on the front of your agreement), the creditor can 'snatch back' the item. They can do this only if it is in a public place, so they may be able to repossess a car, but they cannot come into your home and take furniture.

If you have paid a third or more of the total amount you owe, the creditor must start court action to get the goods back, or to get you to pay.

You will then receive a hearing date, when the court will decide whether you must return the item or accept any offer by you to make payment.

You can ask for a 'time order', under which the court can reduce the payments to a level you can afford (see 'Time order' for more about how this works). The court can also make a 'suspended order', which means that the finance company can get the goods back only if you miss future payments.

If you want to avoid court action, you can write to the creditor to end your contract and return the goods. You will have to pay only half of the total amount you originally owed (this figure will be on the front of your HP agreement), and the cost of repairing any damage to the goods.