Why is this important?
Conditional sale agreements - buying on credit
There are many different types of credit agreement, which give you different rights if there's a problem with what you've bought. Credit providers may not always tell you what type of credit agreement they’re offering you, so you may not be aware of the rights you’ve got.
If you have a consumer problem with something you've bought on credit, it's important you check what kind of agreement you've got before you take any action.
This page tells you about conditional sale agreements, and what you can do if things go wrong.
Have you got a conditional sale agreement?
You're most likely to be offered a conditional sale agreement when you're buying an expensive item such as a car, furniture, or white goods, such as a washing machine or dishwasher.
If you buy something using a conditional sale agreement, you agree to pay for all or part of what you’ve bought in instalments. The goods you’ve bought belong to whoever has provided you with the credit, even though you've taken possession of them.
You won’t own the goods until you've paid off all the instalments. When you’ve done this, the goods transfer to your ownership. This is called getting good title.
Conditional sale agreements are similar to hire purchase agreements. However, with a hire purchase agreement, you have to pay an extra fee after you've paid the last instalment to finally own the goods.
Are conditional sale agreements regulated?
Conditional sale agreements are regulated by the Consumer Credit Act 1974. Your agreement must be in writing and contain specific information about the Act in order for it to be valid.
All companies that offer conditional sale agreements must have a credit licence. You can check whether your lender has a credit licence with the Office of Fair Trading. If they don't, this is against the law and you should report them to Trading Standards.
Who is your conditional sale agreement with?
With most conditional sales your agreement is usually with a separate finance company who buys the goods from the trader. You then pay your instalments to them. Sometimes your trader will arrange this for you.
Occasionally, you may have a conditional sale agreement where the goods you've bought are supplied and owned by the trader who sells them to you. In this case, your agreement is with the trader. Your contract will say who your conditional sale agreement is with.
If something goes wrong with the goods you’ve bought
If your goods develop a fault or something else happens, for example they turn up damaged or don’t turn up at all, you have rights to take action under consumer law.
Depending on who your conditional sale agreement is with, you will have to take action against the finance company or the trader.
It's important to tell the finance company and the trader as soon as you discover a problem with something you've bought. You may lose the right to get your money back if you are slow to do anything because you may be seen to have accepted what has happened.
If you need to take action because there’s a problem with goods you’ve bought on conditional sale, find out who is responsible for putting things right. Depending on your agreement, this could be the finance company or the trader.
Take action as soon as you know there's a problem so you are'nt seen to have accepted what's happened. Make it clear at the outset what you want done to sort the problem out. If you don't do this, you may lose the right to get your money back.
Send copies of letters about the problem to the finance company and the trader. Even though only one of them may be liable, both need to be aware of what’s happening.
Think carefully about stopping payments in protest about the problem as this could be reported to a credit reference agency and be recorded on your credit file. This could affect your ability to get credit in the future. You can continue to make payments but make it clear that you are paying ‘under protest’ while the problem is being sorted out.
If you can't sort your problem out directly with the trader or the finance company, find out if they belong to a trade association who may offer a conciliation or arbitration service.
Other useful information
Consumer Credit Association (CCA)
The Consumer Credit Association (CCA) represents over 75 per cent of firms that provided unsecured loans in the home credit industry. The CCA has a code of practice which its members must comply with, as well as a Business Conduct Pledge.
The CCA also has internal conciliation and arbitration schemes to help resolve complaints made against its members.
Consumer Credit Association (CCA)
Consumer Credit Trade Association (CCTA)
The Consumer Credit Trade Association represents credit lenders including finance houses, retailers and building societies. The CCTA has a code of practice with which its members must comply.
The CCTA has an internal conciliation scheme to resolve complaints made against its members. There is also an independent arbitration scheme, run by the Chartered Institute of Arbitrators.
Consumer Credit Trade Association
Suite 4 The Wave
1 View Croft Road
Finance and Leasing Association (FLA)
The Finance and Leasing Association represents the UK and finance leasing industry, including creditors offering hire purchase and conditional sale agreements, secured and unsecured loans, credit cards and store cards. The FLA has a code of practice with which all its full members must comply.
The FLA has an independent arbitration scheme for consumer complaints which is run by the Chartered Institute of Arbitrators.
Finance and Leasing Association
15 - 19 Kingsway