“What rights do I have when I buy goods on credit?”

Your rights when buying on credit You will have an equal claim against the finance company as well as the retailer when you:

This applies even though you may only have paid the deposit by credit. Section 75 of the Consumer Credit Act 1974 gives you these rights. Beware If you do not keep up payments, you will be in breach of contract.The retailer may sue you for the outstanding balance. Also,if you are buying a car on hire purchase, it is likely that the finance company (the owners) will repossess the vehicle. You could also be liable to pay any expenses that the finance company incurs in carrying out any necessary repairs to the vehicle.

Types of credit

Credit Cards: Under Section 75 of the Consumer Credit Act 1974, if you use a credit card to buy goods or services costing more than £100 and the goods or service prove to be defective, you will have an equal claim for compensation against both the seller of the goods or service and the finance company. Section 75 (equal liability) applies only to credit transactions.The finance company does not have any liability for purchases paid for by charge cards because these are debit cards,not credit cards. American Express and Diners Card are examples of debit cards.

Credit Sale: A credit sale is an agreement where the trader supplies you with goods but arranges finance for you with a separate finance company. The trader will give you a copy of the signed credit agreement and will send another copy to the finance company. If the finance company approves the loan they will sign it and return a signed copy to you.

Interest Free Credit: You have to sign a credit agreement and usually you must agree to make payments by direct debit. You may settle the account in full before the end of the interest free period. If you do not clear the account within the interest free period, the finance company will activate the direct debit and take payments out of your account. You will then have to pay interest on the total amount of the loan from the date when you sign the agreement.

Most companies do send you a reminder towards the end of the interest free period but it is your responsibility to make payments on time, so we recommend that you keep your own records.

Hire Purchase This type of credit is often used for buying vehicles. When you negotiate with the garage to buy a car on hire purchase, the garage sells the car to the finance company. As the car’s legal owner, they then hire the car to you. You will have an option to buy the car at the end of the agreement, but you will not become the owner until you have made the last payment. Until then, you will also need permission from the finance company to sell the vehicle. Any faults that occur will be the responsibility of both the finance company and the garage, and you can refer your complaint to either of them.

Cancellable agreements If you buy goods at home and sign a Finance Agreement you normally have a ‘cooling off’ period (the Consumer CreditAct 1974 covers this). However, this protection does not apply:

What should I do if I change my mind and want to cancel the credit agreement or cancel the goods or service I had agreed to purchase?

When you sign an agreement at home the salesperson should give you a notice of your cancellation rights. If they do not do so this is a criminal offence. You will receive a signed copy of the credit agreement from the Finance Company and, when you receive this, you will have a further five days to cancel the agreement and the goods or service you agreed to purchase.

If you want to cancel you should normally:

If they will not cancel the order or do not reply  - contact your local Trading Standards Service or Citizens Advice Bureau for advice.

Can I terminate the agreement earlier than the agreed date?

In many cases you can end an agreement earlier than the agreed date. However, you need to be aware that there may be a financial penalty for doing this. If you want to terminate an agreement early you should ask the Finance Company for a calculation of how much this will cost you. If you think you are being charged an unreasonable amount or can’t understand their explanation of how they have calculated the amount, contact your local Trading Standards Service or Citizens Advice Bureau for advice.

Benefits of using your credit card

If you buy goods which cost over £100 using your credit card, you have an equal claim against the finance company. This is very useful if you have faulty goods and the seller has ceased trading as you can hold the finance company liable for the total value of the contract.

REMEMBER If you buy goods at home and sign a Finance Agreement you normally have a‘cooling off’period. The trader should give you a copy of your cancellation rights when you sign the agreement. Write to the Finance Company or trader or both within the‘cooling off’ period to cancel an agreement. You may be able to end the agreement earlier than the date specified but there may be a financial penalty to pay. For further advice contact Consumer Direct or your local Citizens Advice Bureau.