Cancelling Finance - Financial Power

Cancelling a finance agreement can seem daunting, but understanding your rights and the process is key. Whether it’s for a car, a personal loan, or a retail purchase, the ability to cancel often depends on the specific agreement and the laws of your jurisdiction. Here’s a breakdown of common scenarios and how to approach them.

Cooling-Off Periods: Some finance agreements, particularly those arranged at a distance (online or over the phone), offer a “cooling-off” period. This is a legally mandated timeframe, typically 14 days, within which you can cancel the agreement without penalty. If your agreement has a cooling-off period, the cancellation process is usually straightforward: notify the lender in writing (email or letter) of your intention to cancel. They are then obligated to refund any payments you’ve made, though they may deduct reasonable costs for services already provided.

Voluntary Termination: For car finance agreements like Hire Purchase (HP) or Conditional Sale, you might have the right to voluntarily terminate the agreement under Section 99 of the Consumer Credit Act. To qualify, you typically need to have paid at least 50% of the total amount payable, including any interest and charges. If you’ve paid less than 50%, you can still terminate, but you’ll need to pay the difference. Termination usually involves returning the car to the finance company. Keep in mind that you won’t get back any payments you’ve already made.

Rejection of Goods: If the finance agreement is tied to the purchase of goods (e.g., a sofa or a washing machine), and those goods are faulty or not as described, you may have grounds to reject the goods and cancel the finance agreement. This often involves invoking your rights under the Consumer Rights Act. Contact the retailer first to attempt to resolve the issue. If they fail to address the problem adequately, you can then notify the finance company that you’re rejecting the goods and seeking cancellation of the finance agreement. Provide detailed evidence of the fault and your attempts to resolve it with the retailer.

Mis-selling: If you believe you were mis-sold the finance agreement (e.g., the lender failed to properly assess your affordability or didn’t clearly explain the terms), you may have grounds to complain and potentially cancel the agreement. This often requires gathering evidence to support your claim, such as records of communication with the lender and details of how you were misled. You’ll typically need to complain to the lender first, and if they don’t resolve the issue to your satisfaction, you can escalate your complaint to the relevant ombudsman service.

General Tips: Regardless of the reason for wanting to cancel, always put your cancellation request in writing and keep a copy for your records. Clearly state the reasons for your cancellation and include your account details. Be prepared to provide evidence to support your claim. If you’re unsure of your rights, seek advice from a consumer rights organization or a legal professional. Cancelling finance agreements can impact your credit score, so consider the implications carefully before proceeding.