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Ending A Hire Purchase Agreement Early


Cresta Fiesta
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In the late 70s/early 80s, boarding house owners were handing back the keys to the bank because they could no longer service the mortgage. What else should they have done?

 

The difference being that property doesn't depreciate in value in the long term like motors do. If you default on a mortgage, it's almost certain that the bank would recoup all their initial loan back by selling it on. That's not the case when they get handed back a motor that isn't worth the outstanding amount.

 

I think you would have been very helpful to Lehman Brothers.

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This evening, I watched the documentary on the collapse of Enron "The Smartest Guys in the Room" which I'd recorded when it was on a while ago - a major part of the film is Enron's bilking of the regulations around California's energy supply.

 

Enron went out of its way to find the loop holes in the regulations to try to squeeze profits out of unscrupulous practices.

 

In this part of the Enron scandal it was less fraud, than deliberately using poorly written regulations to their advantage - it was interesting listening to the energy brockers who had been recorded while making their trades (they were recorded for compliance purposes etc) sneering about how they were suckering money out of California - afterwards they admitted the culture in Enron had encouraged them to take every advantage they could find - and acknowledged it was short sighted - what they were doing wasn't sustainable and contributed to Enron's fall.

 

What they were doing was within the rules - but unethical - I do think that moral difference exists. There are many behaviours which are legal but unethical.

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In the late 70s/early 80s, boarding house owners were handing back the keys to the bank because they could no longer service the mortgage. What else should they have done?

 

The difference being that property doesn't depreciate in value in the long term like motors do. If you default on a mortgage, it's almost certain that the bank would recoup all their initial loan back by selling it on. That's not the case when they get handed back a motor that isn't worth the outstanding amount.

 

I think you would have been very helpful to Lehman Brothers.

 

You're the one making ridiculous comparisons.

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No, just pointing out that introducing a moral dimension isn't particularly helpful. It is a straightforward issue of whether the right exists or not. Like I take a jumper back to M&S, nothing wrong with it, I just don't like it. There is no statutory obligation on M&S to refund me. But they do, because they say they will; it is a condition of the sale. No moral issue there is there? Just as CF was looking for a legal way out; statute may have made the ability to terminate a condition of his agreement with CT (as it happens, we are told it hasn't, but that does not detract from the argument as he was looking for an above board way out).

 

However, I have actually worn the jumper out, but just hid the tags with the intention of getting a refund and the use of the jumper. Now, that is morally wrong, because I have tried to obfuscate and mislead M&S in giving me a refund, because I did actually like the jumper enough to wear it out and am looking for a refund for it in less than shop sold condition.

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To Chinahand -

 

But CF is not talking about bending rules, or applying a convenient interpretation of them, just using a statutory right which may, or may not, be available to him. You are also using Enron, an exemplar of institutional dereliction, as a comparator for an individual's moral behaviour. The two just do not correlate.

 

I understand and, in general, agree that many of our current economic problems could have been averted had simple morals and ethics been applied by the major institutions. But in the case of a consumer who is counterparty to these institutions, applying a straightforward right to get themselves out of a financial bind cannot be compared to the moral morass that has recently come home to roost.

 

As it happens, we are told that the route is not legally available to CF, so end of story really. But are his morals really in question if he looks for a legal way to terminate? To suggest another less legal route is where the moral dilemma begins.

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Stop getting all worked up. The calculation on HP upon which the 50% and half time is based is worked out carefully and of longstanding. In UK it goes back to 1950's

 

HP compnaies know

 

HP is noty only for cars but consumer durable, ie white goods and lots more

 

The deposit plus what you pay in the first half of the agreement period will mainly have covered the cost of the goods and some inmterest

 

By surrendering and then allowing sale in an orderly fashion the HP company will not lose They will stil make a profit.

 

If it were not the case they wopuld have lobbied for its replacement long ago.

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Am I missing the part of this entire story where we're supposed to feel sorry for finance companies and/or financial institutions in general?

Like them or not, many of us would be screwed without them.

 

As was pointed out earlier, if the finance companies just got back what they had leant, or even a small percentage more, then they would not be able to exist as a business entity.

 

After the repayment of the captial from a car loan, only a small portion of the excess will be true 'profit'. They need to cover operational costs out of the 'interest'. Now obviosuly, the greater the loan term (i.e. mortgages etc) the greater that 'profit' will be.

 

Obviously banks or other credit companies, like any business, need to try and forecast cashflow etc. If there was a mechanism for their customers to just walk away from agrrements with impunity, this would dramatically effect the income into the business. Which would ultimately lead to higher rates, or companies going to the wall, with all the knock on effects that woudl have.

 

Whilst it may not be truly about morality. There is an element here of knowing what is right and wrong, And that's pretty close.

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I fully agree that this is being overdone - I think my only point is that this part of the legislation isn't well known, isn't often used - if it was the costs would go up for everyone - the HP companies do have to swallow the negative equity when this occurs.

 

If more and more people use this legislation then costs will go up - getting legislation changed ain't easy it involves lobbying, taking on special interest groups etc. - a more likely result if this part of the statute becomes more widely used is not lobbying to get this provision removed, rather it is that costs would go up, and agreements would be made shorter and hence less affordable for people generally .

 

I think these types of problems where a minority take advantage of a provision where the costs have to be borne by the majority are becoming increasingly important in a society which seems to take the "I'm all right Jack" legalistic approach where people are encouraged to simply take every advantage and benefit available.

 

I fully agree I am making more of this than I need to - but examples where people deliberately look for loop holes for their advantage, bend consumer protection laws etc are I believe becoming more prominent. M&S offer to take anything back no questions asked, but if more and more people go and get some clothes, wear them for a party or whatever and then dump them back on M&S afterwards there is an increasing risk that voluntary provision will be lost.

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Just out of interest's sake I've asked the guy who's done this more than once across, and he said he's got car finance again with the same finance company no problem, which backs up what John said about there still being a profit in it for the company even if you do take THE MORALLY REPUGNANT RESPONSIBILITY DODGING LOOPHOLE of, ummmm, exercising a clear statutory right.

 

Apparently it isn't all that unusual for people to use this MORALLY REPUGNANT RESPONSIBILITY DODGING LOOPHOLE, and he also pointed out that the companies involved would simply stop offering HP agreements and simply do straight loans if it was really any kind of problem for them.

 

Which obviously it isn't.

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