The CCA allows the customer to terminate the agreement before the end of the contractual term.
Termination is not the same as settlement, because title to the good does not pass to the customer if they decide to terminate.
Voluntary termination, also referred to as the Half Rule, protects customers who can no longer afford repayments because they are in financial hardship. But it is not just available for customers with financial difficulties; all customers under a regulated hire purchase or conditional sale have the right before the last payment falls due.
If the consumer elects voluntarily to terminate a contract, he/she must comply with the following:
- Pay or have paid at least 50% of the total amount owed to the finance company. The amount owed comprises everything the customer would have paid if the agreement had run its full course including the deposit, amount borrowed, interest and all fees and charges.
- Bring up to date any arrears that are owed to the finance company, even if this results in more than the 50% being paid.
- Return the goods/vehicle in a reasonable condition for their age and mileage.
- Write to the finance company to explain the option they wish to take - this is known as the “surrender” or “voluntary surrender” letter.
Provided the customer has paid at least half the total amount payable and is up to date with his payments and taken reasonable care of the goods, then the goods can be returned to the finance company with no further liability.