Hire Purchase: Default, Repossession And Other Common Problems
A Hire Purchase agreement involving vehicles principally is an agreement to rent the vehicle and also to purchase it at a later time. In a hire purchase agreement, you agree to hire the vehicle until you fully pay off what you owe.
The glitches happen when the hirer cannot afford the instalments, which may lead to repossession. Also, keep in mind that your guarantor will be liable for your non-payments.
Hire Purchase – Default In Payment and Repossession
When you “default” on your hire purchase agreement, it means you have failed to fulfill your commitment to the bank. When this happens, the bank can repossess your car. Generally, repossession can happen when:
- You fail to pay for two consecutive month’s payment, or when you fail to pay your last payment, and
- In the case where the hirer is deceased, a default in payment for four months gives the bank the right to take possession of the car.
So, be prompt in your payment or you might also have to pay penalty fees. If in any case, you think you’re unable to pay the instalments, a good tip is to quickly contact your bank for a solution.
The Procedures of A Lawful Car Repossession by the Bank
Manner of Repossession
Sometimes there are oppressive measures taken. For example, we have all heard about “thugs” sent to repossess vehicles or selling off the car in a way cheaper price. Of course, legal actions can be taken if the repossession procedures are not in line with the Hire Purchase Act 1967.
Ethics on Repossession
Generally, repossession of vehicles can only be carried out by a registered repossessor. Repossessors are encouraged to adhere to the following ethics:
- No violence or oppressive means used to conduct the job.
- Hirer must have sufficient notice about the repossession and given time to take his belongings from the vehicle.
- The person in charge of repossession may only enter the premise with consent of the resident.
How to Deal with Problems Related to Repossession
Find a purchaser. You may introduce a buyer who is willing to purchase the vehicle according to the price prescribed in the notice you receive after repossession.
Consult the bank if you are facing financial difficulties. The bank may have the discretion to revise your monthly repayments to ease your burden. However, it’s not obligatory for a bank to do so.
Lodge a complaint or get advice. Say if you fall victim to the oppressive measures taken or if your rights have been wrongfully infringed during repossession, make a complaint to the bank you have your hire purchase agreement with. You may also complain to the Association of Hire Purchase Companies Malaysia to seek support.
Hire Purchase – Guarantors
In the case of guarantors, they are pretty much liable for your debt until the amount is completely paid off. Being a guarantor, he or she is tied by the hire purchase agreement like you, and is accountable to pay for your debts if you fail to do so.
Rights of a Guarantor Under a Hire Purchase Agreement
A guarantor has the following rights:
- To receive a copy of the hire purchase agreement
- To be free of any liability and indemnified against claims by the bank when the amount owed is fully paid off
- To take legal action against the hirer for breach of obligation