Know your rights
If you can’t make payments on your consumer credit contract, contact the trader or finance company immediately or you will be breaking your contract.
In these situations, you have different options:
- claim under your credit-related insurance if you have it and you are covered, eg for injury, unemployment, sickness, disability or death
- ask the lender to change your repayment arrangements
- make a hardship application
- ask the trader to take the products back and cancel the credit sales contract, ie voluntary repossession.
Ask to rearrange payments
Anyone can negotiate with their lender over changes to their payments. The lender may agree in writing to spread the payments over a longer period. This means:
- the total amount you will have to pay increases, as you will pay more interest
- the contract will last longer.
You may apply for a payment holiday if you get behind in your payments due to an unexpected event.
Applying for hardship
You can also apply in writing to the lender to change the credit contract on the grounds of unforeseen hardship under the Credit Contracts and Consumer Finance Act (CCCFA). You need to set out your reasons for the unforeseen hardship and include supporting information, such as a letter advising redundancy or a doctor’s certificate.
You can apply to:
- extend the contract term, so that each payment amount is reduced
- postpone the dates on which payments are due
- extend the contract term and postpone payments.
You can’t apply to reduce the annual interest rate or the unpaid balance of your contract. The lender can agree to other changes, but this is their decision.
When considering your hardship application, the lender must comply with the Lender Responsibility Principles. This includes considering your hardship application in a careful, diligent and skilful way, and treating you reasonably and in an ethical manner.
Lenders must meet certain deadlines to process your application and make a decision:
- 5 working days to acknowledge receipt of your application in writing
- 10 working days if they need to request further information
- 20 working days to agree to your request or decline it
If the lender agrees, they must give you specific information about the change before it takes effect. If the lender does not agree to the changes, they must advise you of the reasons for the decision and a clear summary of your rights to apply to the courts to change the terms of the credit contract.
If you apply for hardship once, you have to wait for four months under the same credit
contract before you can apply again, unless:
- the lender agrees to consider a new application
- the reasons for the new application are very different from the previous application.
You can’t make a hardship application if you have missed payments for:
- two weeks or more after receiving a repossession warning notice or a Property Law Notice
- four or more consecutive payments on the due date
- two months or more.
If you get your payments up to date, you can then apply for hardship.
The lender also doesn’t have to consider your request if you could reasonably have foreseen the hardship when you entered the contract. In this situation, a lender must still comply with the Lender Responsibility Principles.
Voluntarily returning products bought on credit
You can ask the lender or trader to take the products back and cancel the credit sale contract, if this is allowed by the credit contract (voluntary repossession). If they agree, the products will be sold. You will still owe the lender any amount unpaid under the contract after the sale.
The lender can’t charge you for the costs of repossession, unless you ask them to collect the products. However, they can charge you for costs they incur after repossession, eg preparing them for resale. These costs must be set out in a notice after the products are repossessed and again after sale. If you cancel your credit sale contract through voluntary repossession, the lender has to follow the rules of repossession.
Read Repossession to find out more.