Friday, 1 May 2015

Is there a worse way of buying than hire purchase?

If there’s a worse way of buying things than hire purchase I don’t know what it is.

The biggest single problem with hire purchase is simple and the clue is in the name: the word “hire”. When you hire a car, do you own it? No, the car hire firm owns it, you’re just borrowing it in return for a fee. It’s exactly the same when you buy a sofa, laptop or fridge on hire purchase. Even though you now “possess” the item you don’t own it, the store still does. Ownership only passes to you when you’ve made the final payment in your repayment plan, often two or more years after it was delivered to your house.

This one of the reasons why if there’s the slightest problem with your repayments the store can just come round and recover the item from you with no extra paperwork. It belongs to them, not you. What’s more when you signed the HP agreement you probably didn’t notice the clause in the agreement that said they can enter your property to recover your goods without a court order, but with the specific permission you granted them. It’s a licence to invade your home.

In theory the whole business is regulated by the Hire Purchase Act, a piece of law designed to formalize HP agreements and also to provide some protection to both the stores that sell on HP and those of us who are unlucky enough to sign their agreements. In yet another example of how forward-thinking our early legislators were, the Hire Purchase Act was passed in 1961, way before many of us (even me) were born. So there’s no excuse for stores or their lawyers not to know what it says.

You don’t need to read the entire Act but there are a few things it says that you should know, things that in principle could protect you if you get into trouble.

The agreement you sign must disclose the cash price of the item you’re buying. If you’ll be paying P4,000 over two years then the agreement must make it clear that the cash price is P2,000. In fact that’s probably what it really would be in a two-year agreement, buying on HP over two years usually costs about double the cash price.

It must also give a full description of the goods you’re buying, “sufficient to identify them”. It should include the model name of code number, it’s size, colour and anything else it takes to identify the goods. The reason for this is two-fold. Firstly it’s a protection for you in case the wrong goods are delivered. You have a piece of paper to prove they’ve delivered the wrong thing. However it’s there to protect the store. If they ever need to repossess the goods they can make sure they take the right thing.

The law also allows you to get regular statements of your account with the store that explain how much you’ve paid so far and how much you have left to pay. You can even get a copy of the original agreement if you lose your copy of the agreement. The store can’t keep you in ignorance.

On the other hand there is an often overlooked obligation that can get you in trouble. The law requires the buyer to tell the store every time the purchased goods change location. Every time you move house you MUST tell the store. Remember that the goods don’t belong to you yet. They belong to the store. The store has a right to know where the goods are at all times.

You do have some rights though. For instance you can, if you can afford it, terminate the agreement early. Section 14 (b) of the Act says that you can pay all of the remaining installments up front and it even says that you are entitled to a 5% per year discount on those payments. However that assumes you now have the cash you should have used in the first place rather than buying the item on HP. However it does mean that if you suddenly get some cash you can put it to a good cause rather than spending it on booze.

There’s another right you have that stores often neglect to tell you but this one only applies when things have already gone wrong. If you’ve defaulted on your payments and the goods have been repossessed you can still get them back, so long as you pay all the arrears within 21 days of the date the goods were repossessed. That might not be a long time but the advantage is tremendous. You’ll need to pay the remaining installments anyway so it’s surely better to have them in your house rather than someone else’s.

However there’s a major problem with the Act. Such a glaring problem that it almost certainly doesn’t apply to you.

None of the protections are real.

Section 2 (3) (a) of the Hire Purchase Act says that that Act shall “apply to agreements … under which the purchase price does not exceed P4000”.

There were times when P4,000 was a LOT of money. When this rule was set it was probably enough to buy a car but these days when you’re buying something on HP, it’s next to nothing. When I looked at a furniture store insert from a newspaper last weekend it contained sixty-two items that were available on hire purchase. Of those only three were for less than P4,000. The average price was almost exactly P10,000.

This Act is no longer worth the paper it’s written on.

When can we expect the same level of protection that the authors of this Act meant for us? When can we have the same protections that neighbouring countries offer their people?

It needs to be soon.

No comments: