Key Post What to do if you are struggling with your HP agreement

Note: This only applies to personal consumers and not to business HP.

If you have paid at least half the hire-purchase price, you may terminate the agreement, and return the car without making any further payment. This should not damage your credit rating although it will be recorded. But each bank has its own credit scoring system.

Talk to the HP company. If you want to keep the car and you are struggling, they will reschedule the agreement for you. The HP companies do not want to take possession of cars and will be very flexible in their dealing with you.

Avoid having your car repossessed - surrender it voluntarily and issue a notice of termination at the same time
If you have not paid half the hire-purchase price and you can’t find the money to bring it up to the half way mark, then voluntarily surrender your car as a last resort. If it’s repossessed, it will just cost you more in legal costs and repossession costs. Give the bank notice that you are terminating the agreement under the Half Rule.

Can I terminate an agreement under the half rule if I am in arrears?
Permanent tsb claims that you cannot terminate an agreement which is in arrears, but I can’t see how they can interpret Sub-section (1) in that way.

Of course, you are still liable for the arrears: “without prejudice to any liability which has accrued before termination”

Even if you are not struggling, it may make sense to terminate the agreement as the price of many cars have fallen by much more than 50%. In such cases, you may be able to terminate the agreement and buy the identical car for less.

If you are terminating the agreement, make sure to fix any damage first, or else the HP company may pursue you for the cost

Can the HP company repossess my car?
If you break the agreement, the HP company can simply repossess the car if you have paid less than 1/3rd of the HP Price. They do not need to take any legal action to do this.

If you have paid at least 1/3rd of the HP price, they must get a court order.

They can not repossess your car from outside your home at any time.



The National Consumer Agency leaflet is excellent and explains everything very well with very good examples.

Section 63 of the Consumer Credit Act

63.—(1) A hirer shall at any time before the final payment under a hire-purchase agreement falls due, be entitled to determine the agreement by giving notice of termination in writing to the owner or any person entitled or authorised to receive the sums payable under the agreement.
(2) Where a hire-purchase agreement has been determined under this section, the hirer shall, without prejudice to any liability which has accrued before termination, have the option to either
( a ) pay the amount, if any, by which one-half of the hire-purchase price exceeds the total of the sums paid and the sums due in respect of the hire-purchase price immediately before termination, or such less amount as may be specified in the agreement, or
( b ) purchase the goods by paying the difference between the amount already paid under the agreement and the hire-purchase price after the latter amount has been reduced in accordance with section 52 or 53, or such lesser amount as may be specified in the agreement.

(3) Where a hire-purchase agreement has been determined under this section, the hirer shall, if he has failed to take reasonable care of the goods, be liable to pay for the failure.

Translation and example
"pay the amount, if any, by which one-half of the hire-purchase price exceeds the total of the sums paid and the sums due "

In plain English

You can terminate a HP agreement at any time by giving notice in writing.
You must pay the amount to bring the payments up half the hire-purchase price.
You can purchase the goods by paying the balance due.

http://www.irishstatutebook.ie/1995/en/act/pub/0024/sec0063.html#zza24y1995s63Sample letter of termination from the National Consumer Agency

Company's Address
Dear Sir/Madam
Re: Account Number (Car Make/Model and Registration Number)
I wish to exercise my right to terminate the above Agreement under Section 63 of the Consumer Credit Act 1995.
Please send me details of how the vehicle can be returned to you.
Please confirm receipt of this request by telephone/fax to me on (your telephone number or fax number).
Yours faithfully
Your Name

What does "Voluntary Surrender" mean?

The National Consumer Agency recommends that you do not voluntarily surrender your car as it does not necessarily mean that you are terminating the agreement under the Half Rule.

So to be absolutely sure, you should do both: terminate the agreement and sign a voluntary surrender.

You don't need to sign a voluntary surrender, but it does clarify that you have surrendered the car and that it has not been repossessed. This makes sure that legal action stops and that they cannot charge you legal costs.

Always terminate the agreement in writing. Doing it on the phone might not be considered adequate.

I don't know if the finance houses will reschedule based on today's interest rates. Some may well do but I fear that many will charge the same rate as the initial rate due to the inbuilt high commissions to garages.

I would agree that the biggest point to get across is that a voluntary termination under the half rule is the best option if you are struggling to meet payments.

THIRD RULE - Once you pay a third of the price the finance house cannot repossess without going down the legal route. In such cases it may make more sense to try and pay to half and then terminate as opposed to doing a surrender. Surrendering the vehicle means that you are then liable for all the payments (and not just half).
It may be cheaper in the long run to struggle with the payments until you meet half of them.But it will depend on the individual case e.g. if you paid a deposit or traded in.

The Act is a bit vague, and different HP companies, interpret it differently. I don't agree with the following interpretation by the National Consumer Agency.

Ending your Hire Purchase agreement by voluntary surrender

If you cannot afford your repayments and you cannot afford to pay half the hire purchase price, your only option may be to surrender the car. You can give back the car to the finance company by signing a voluntary surrender form.
Giving back the car this way means you still owe the balance due on the agreement – your debt does not disappear with the car.

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The Act is quite clear

A hirer shall at any time before the final payment under a hire-purchase agreement falls due, be entitled to determine the agreement by giving notice of termination in writing

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and

(2) Where a hire-purchase agreement has been determined under this section, the hirer shall, ...
( a ) pay the amount, if any, by which one-half of the hire-purchase price

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Even if you can't afford to pay half the hire-purchase price, you can terminate the agreement.
You are still liable for the balance due to bring it up to half the hire-purchase price.

Giving back the car this way means you still owe the balance due on the agreement

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I don't think that this is correct. Certainly some HP companies don't interpret it this way.

Repossession on its own or voluntary surrender on its own does not constitute termination of the agreement under the half-rule.
So if your car is repossessed, give notice of termination. However, it is better to surrender it voluntarily rather than have it repossessed.

Brendan

I was listeninig to radio the last week (forget the program) and this issue was discussed.

They said to send in a notification in writing but to make it very clear that it was NOT a voluntary surrender and then not to sign anything relating to voluntary surrender when the car is collected.

Were they right or wrong does anybody know? Im planning on sending mine back next month and dont want to be stuck with the remaining balance!

car finance repayments

I wonder could someone help with this. I have a 5 year car finance agreement with Permanent TSB and am nearly 4 years into this never having missed a payment. 6 Months ago my salary was cut (as many others) and my hours were then went from full time to part time.I could not afford to meet the full repayment and contacted the lender and asked could I get the repayment reduced, they agreed that I could pay half the agreed amount for 6 months. THe 6 months are now up and they have began taking the full amount, My circumstances are worsened with the new tax etc. and I have again contacted them to request half payments and been totally honest with them and have told them I honestly cannot pay the full amount. They have said they cannot enter into any more reduced payments and to either surrender the car to them( which if I do I would then lose my job) I did not borrow the full amount for the car and put a good deal of money upfront-or let myself go into arrears and they would arrange with a collections agency?? does this make any sense? is there any thing I could do, I do not want to go into arrears and am willing to pay half again until circumstances hopefully improve.

Do not surrender your car.

If it is a HP agreement, they can't repossess it without a court order.
(if it's not a HP agreement, they can't repossess it anyway)

I very much doubt a court would order the repossession.

What are the numbers involved?

How much do you owe?
How much is the car worth?

Set out your case in writing and write to them with the proposal.
This will be very valuable if you end up in court.

Continue to pay as much as you can in the meantime.

If you have a mortgage, see can you get a payment holiday to pay off the car loan.

Consider talking to MABS.

Brendan

frostie makes a very important point in this post.

Be very very careful if it's a restructure that you are looking for, as this would be a new agreement, first of all. With HP, if you have paid back over half of the money borrowed originally, including any deposit you put down, you can hand the car back to PTSB.

If you restructure having already paid back a lot of money, you would be back to square one, as you would again have to have paid back half of this new agreement to avail of this piece of consumer law. Swyper's option of getting credit elsewhere to settle could also work, in either full and final, or partial and final settlement.

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return my car under the half rule ?

I know this has been covered before but could anyone advise me if I can return my car under the half rule under the terms and conditions below.

at any time before the date the loan should have been repaid, the borrower may give writing to the bank in writing terminating this agreement. On termination the borrower must pay the bank.
All instalment arrears due and payable up to the date of termination including any interest due on late repayments.
The balance of the instalments which would have been payable but for early termination reduced in accordance with the formula set out hereunder or in accordance with the method of formula specified in section 52 of the consumer credit act 1995 whichever shall be more favourable to the borrower
If the borrower fails to pay any instalment when due or otherwise breaks any term of this agreement or if any of the information which the borrower provides is materially inaccurate the bank may, subject to the provision of the consumer credit act 1995, terminate the loan after giving the borrower due notice in writing. On termination the borrower must pay the bank.
All instalment arrears due and payable up to the date of termination including any interest due on late payments
The balance of the instalments which would have been payable but for early termination reduced in accordance with the formula set out hereunder or in accordance with the method of formula specified in section 53 of the consumer credit act 1995 whichever shall be more favourable to the borrower.
Formula
The outstanding balance reduced by applying a rebate of the future interest calculated on the sum of the digits method ( rule of 78 ths)
Such rebate reduced by a sum equivalent to three months interest.
Where there are two or more borrowers the liability of each shall be joint and several.