When is it Time to use a Time Order?
With nine out of every ten new cars in the UK being purchased using car finance agreements, there is growing concern that consumers don’t know what their rights are, particularly if they begin to experience financial difficulties and are no longer able to maintain their payments under their agreements.
Car hire arrears
The effects of this can be particularly severe, especially where the agreements are hire purchase, conditional sale or personal contract purchase (PCP) agreements.
For example, not only can the finance firm’s serve arrears notices, but they can also serve default notices, which terminate the agreements, if not complied with, and can result in the full amount owed under the agreement becoming payable. The finance firms can also remove the borrower’s right to voluntarily surrender the vehicle, which allows them to take steps to repossess it, often without a court order.
There is, however, a little known remedy available to motorists in such circumstances, which can prevent them losing possession of their car, whilst allowing them to reschedule their repayments and remedy any default under the agreement.
What is a time order?
A Time Order (not to be confused with a time to pay direction and time to pay order in Scotland) is a legal remedy that exists under UK consumer credit law. It allows for someone who has gone into arrears to ask the court for more time to repay their agreement and to reverse the termination of the agreement by the lender. Time Orders are particularly useful when the contract involved is a finance agreement for a car, such as a hire purchase, personal contract purchase (PCP) or conditional sale agreement.
Time Orders can be applied for early on, once a consumer receives an arrears notice from their lender. These notices are served by the finance firm once someone has missed two payments under the agreement. They can also be applied for once a lender has served an official default notice under the Consumer Credit Act 1974; or when a court action has been raised to demand payment of the money owed and the return of the vehicle which is subject to the agreement.
Effects of a Time Order
When the court instructs that a Time Order should be granted, it can either be on the basis the borrower either remedies the default by making a lump sum payment towards the arrears or alternatively by making their normal contractual payments each month, with an added amount to help reduce the arrears owed. The benefit of this is if the court agrees to such an order, it effectively reschedules the agreement and allows the borrower to remedy their default of it.
This can also be important, as it prevents the lender from repossessing the vehicle that is subject to the finance agreement. Lenders are able to do this under the Consumer Credit Act 1974 for hire purchase, conditional sale and PCP agreements, even where a court order has not been granted if less than one third of the total amount owed has not been paid (arguably in Scotland a court order is always required). The court also can make ancillary orders to vary the rate of interest that is being applied under the agreement and reschedule the amount of time the consumer has to repay the amount owed.
The other important effect of a time order is as they effectively remedy the default, the decision by the lender to terminate the agreement is reversed, which means the statutory and contractual rights of the consumer are restored.
This means where the borrower has already paid more than half the amount owed under the agreement in the case of hire purchase, conditional sale and PCP agreements, they regain their right to voluntarily surrender the vehicle without having any liability to make further payments, providing the vehicle is returned in a reasonable condition. The benefits of this are not only can the finance firm not apply to have the vehicle forcibly repossessed, but they also can no longer demand payment of all sums owed under the agreement.
Why finance firms aren’t telling you about time orders
With the number of finance agreements for cars now growing exponentially, interest in what Time Orders are is likely to grow. Finance firms, however, generally don’t like them and will not advise consumers on what they are, even where they agree to pay off the arrears owed under the agreements. The reason being is when cars are voluntarily surrendered firms will usually lose money when the car is sold. Obviously, they prefer to keep their customers in default so that they can still pursue them for the full amount owed under the agreement.
Applying for a Time Order, however, can be complicated and usually requires specialist advice from a solicitor or an experienced money adviser.
If you are struggling with your car finance agreement, you should seek specialist advice. If you wish to speak to a friendly, trained money adviser, contact Creditfix on 0808 2085 198. Our advisers always discuss all options available to you.