Taking the trouble out of hire purchase

Press, Volume CXV, Issue 33783, 4 March 1975, Page 19

Taking the trouble out of hire purchase

An English judge once i described hire purchase ' "people being ‘ persuaded by someone t they do not know to enter contracts they do 1 not understand to pur- 1 chase goods they do not want with money they t have not got.” However glib or cynical ! these words seem, there is, unfortunately, a great deal m truth in them. The 1971 Hire Purchase Act solves* some of the legal problems hut the social problems — especially the excessive debt 1 burden hire purchase allows people to carry — remain. Yet, the fact is that hire! purchase provides people! with a means of enjoying a higher standard of living sooner than they wouldl otherwise achieve it. The! consumer gets immediate: use of the goods, paying a deposit and instalments of i the balance and interest, I while the seller retains own-] ership of the goods until the last instalment is made. Hire purchase is big business, and as our standard of living rises, hire purchase selling will increase. Its humble beginnings and its original lack of social acceptance have been forgotten and in the year ending September. 1974, New Zealanders took on hire purchase commitments of $32 Im. While people find Hire Purchase such a boon to their lives, governments have also found it a handy instrument with which to control the economy, whenever spending needs to be tightened or relaxed. The tougher credit terms introduced last year are an example. For all the influence that hire purchase has on our economic and social lives, the key to the whole thing, the consumer, was relatively unprotected until four years ago. He crossed into nevernever land at his peril. Now the climate is much more hospitable, although tome pitfalls remain. The key to modern hire purchase, the 1971 Hire Purchase Act, greatly extends the rights of buyers in retail transactions and it begins by setting out what should be contained in an agreement when a hire purchase sale is made. For a start, the agreement has to include in writing a description of the goods, the method of payment, a notice informing the purchaser of his rights, and a schedule of financial details, showing the cash price and the hire purchase price. From this, the buyer is able to figure the cost of credit. When you buy on hire purchase you art buying not only the goods, but the credit as well; and while the price tag on, say, a TV set may be the same in most shops, the credit costs may vary considerably. Similarly, the consumer, on seeing how much he is paying for credit may decide to save up the cash price and gets the goods later — but cheaper. Naturally enough, when you buy goods on hire purchase, you expect them to work and to do the job you want them to do. The law in fact safeguards the buyer in

this and implies conditions; s of “merchantable quality” je and “fitness of purpose”, p into the hire purchase agree- < t ment. ; c Goods are not of merchan- i it table quality if they have j b defects, which, in the opin-It ion of a reasonable man, would render the" l unfit for s normal use having regard to h the price paid and the des- s ' cription applied to thej j. goods. v For example, a recent case s concerned a 1960 Minx with a mileage of| e 1113,000, a new warrant of, a fitness, and a price tag of I j !s

1 5390. The customer had seen 1 the vehicle in the showroom, i driven it round the block i and thinking it looked a < ■ "tidy job”, had signed on 1 ' i the dotted line. A subsequent A.A. report ;i ■ disclosed that the car had a number of serious defects i ■ and was beyond economic ;i !; repair. The contract wash : nullified because of the gar-1 i age’s failure to provide a car t i! of "merchantable quality” and the man got his deposit I :land instalments refunded. i Similarly, where you say, ■ i or imply to the salesman, i > | that you want goods to do a ; ' certain job, then you must > I be given goods fit for the i ■ j task. Unfortunately the 1 j buyer does not get this pro- < 1 tection in every case. I The protection does not apply: : If the defects are specified! y in the agreement and! : the seller can show that they were drawn to the; purchaser’s attention > ; and accepted by him before the agreement was signed; If the purchaser has exam-, j ined the goods and thep , defects ' should have; , shown up under his! examination; ■ If the goods are secondhand] , and the buyer separately ] II signs a prominently l i placed, or “conspicuous; .! statement”, which says; ' \ that he understands the] >j goods are second-hand]; ij and that they are not] . I promised to be fit for ] J use or for any particu-i t 1 lar purpose. t. The first two grounds are; > reasonable, but the third, un- j , fortunately, allows a let-out] ; for the seller, as hire purt chasers are notorious for • signing agreements in places e indicated by salesmen without reading when they sign. n For reasons of haste, ignorance, trust or resignation, j people sign away every day j the substantial protection t they get from the act. n All the same, even if the'

statement is pointed out and i explained, the consumer is 1 probably not in any position ; to bargain. When hire pur-; chase finance is as tight as; it is now. a purchaser will; be told he can take it or leave it. I Of course, the seller should be allowed to protect' himself by using the conspicuous statement where he is selling goods on an "as is where is” basis. But he should not be able to have . the best of both worlds and entice the customer into an agreement with sales talk yet use the conspicuous! statement to get Out of any liability for unsatisfactory; goods. Perhaps the consumer | would be better protected if the “conspicuous statement”! was not effective until its! purpose, and effect was ex-i plained to the buyer. At! least he would then realise, he could not expect redress] if the goods turned out to; be unsatisfactory. He could j then shop around ..itil he; found a better deal. Failing! this, the consumer should be; careful what he signs. The possibility of repos- ’ session for *-’.ilure to keep j up instalments is one of the] biggest fears of the hire; purchaser. Fortunately, al-] though repossesion may be■ made if the purchaser gets| behind in the payments or: breaks any of his obligations in the agreement, such a; procedure is not the vicious. ] degrading business it once was. Subject to the maximum ; credit-period regulations, sellers are generally willing to extend the period of credjit in cases of genuine diffijculty, as a repossession is i inconvenient for them as well. But if agreement cannot be reached, the shop or finance company must give ten days notice of intention to repossess the goods. The seller can repossess without notice only when he has reason to believe the goods have been, or will be, damaged or concealed. The repossession, which must be reasonable in time ' and manner, does not entitle I the seller to sell the goods '| seized. He must, within 21 days of the repossession, ;serve on the purchaser a j comprehensive statutory notice in writing which informs the purchaser of the financial details, the purcha- ! ser’s options and a summary of his rights. The seller cannot dispose 'of the goods until 21 days from the serving of this ] notice, and in that time, the purchaser can either reinstate the agreement by pay;ing the arrears and costs of prepossession, or settle the ;! agreement by paying off the goods. It should be noted that the j seller cannot make a profit on reselling them, and if 'there is any surplus, after /deducting the outstanding amounts and costs, he must /make a refund. Finally, the act provides ■ for early completion of the . agreement. If, for example ■ you find yourself better off . financially and can pay off ■ the balance earlier than , agreed, then you are entitled ’ to a reduction in the i credit charges. Another important ini! novation is that if the seller

.agrees, the purchaser may 'voluntarily return the goods and terminate the agreement ; instead of completing it. In this event, the repossession formula operates to adjust the financial positions of the parties. Hire-purchase agreements can also be assigned by the seller or the buyer. In this way, a friend may pay you a sum of money for your "share” in the goods and complete the payments with the seller. The hire purchaser is nowprotected from the time an agreement is signed until the goods are paid off. There are shortcomings in procedure which can trap the unwary, but, all the same, the law as it now stands achieves a respectable level of consumer protection without unduly stifling the freedom of the market place. There is now a reasonable balance between buyers and seller. Entering into a hire-pur--1 chase agreement is still 1 stepping into never-never land, but the environment is now less hostile to the consumer.

Earthquake.— A fairly sharp earthquake was felt in ■New Plymouth at 4.45 a.m. ] yesterday. No damage was 'reported!! The seismological ; observatory in Wellington recorded the quake as 4| on the Richter Scale. — (P.A.)

g Hire purchase is a vast i and growing business and v can be a boon to us all if t it is used wisely. In this ' article, the third of a six- £ part series written in | preparation for the Con- h sumer Rights Campaign j which opens on March 17, L ANDREW TERRY, lec- f turer in law at the Uni- it I versity of Canterbury, jc takes a look at the hire ] . c purchase system and the | t legal regulations that t control it. I