We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Guarantor for a [Not a loan] Hire Purchase Agreement?! - Help!!

My father in law is in serious debt troubles. 

In short, a failed business has compounded years of losing money into a substantial debt (circa £50k) which has mainly been hidden until now. Just found out that he coerced my mother-in-law (his wife) into signing up to some weird "Finance Agreement". She foolishly signed on as the Guarantor, even though she could never actually afford the payments, nor was given time to look over papers, and her husband was pressuring her to sign "Sign this, or we lose everything, do it now!" kind of stuff. 

I have found all the legal documents etc. I thought this was a good case for a mis-selling of a guarantor loan, but all the paperwork says it is not a loan. The email i found outlines it as follows: 

"The finance offered will not be a loan but instead will be a sale and hire back arrangement, you will sell some of your goods to and hire them back from us for a primary term requiring a notice period to terminate and which will be followed by a secondary term until the notice period ends. At the end of hiring you may have options to regain title to the goods. " 

It is an unregulated finance agreement. The house has been signed over as part of this. To make matters worse, my FIL has had a stroke and now cannot work due to ill health. Given his situation, his mind is foggy and getting accurate information from him is near impossible - compound this with his genuine stubborness and want to hide this anyway!! There is enough money in their account to cover maybe 2 months of payment, and we are frantically looting the house for things to sell too. 

My MIL works part-time, has no way to increase hours or make further income. As family, we can help with payments for another couple of months, but then our options will fully run out. 

My partner and I are furious at them for letting this happen, and how the FIL has been hiding this for years and let it compound to this level. My MIL is sick with worry about the prospect of having to file for bankruptcy and losing the house. 

I would like to know the following: 

Do you think the mis-selling to/of the guarantor still applies in these kind of agreements? 
Does anyone have any other advice as to how we might handle this? 
Has anyone come across these kind of loans before? 

Thanks to all in advance! 

Comments

  • sourcrates
    sourcrates Posts: 30,629 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    What are these "goods" they refer to in the agreement ?

    If its an unregulated credit agreement, then the consumer credit act will not apply, just the terms written within the contract.

    You may be able to make a mis-selling complaint, but you may also have to take it to court yourself if the FOS won`t look at it.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Herzlos
    Herzlos Posts: 15,395 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You'll definitely need to identify which goods your FiL sold and is hiring, because in theory they aren't his to sell. If they aren't listed anywhere then that sounds like it's still a loan which may give you some more clout should you be able to get it to a court.

    I think you need to find a contract lawyer and see what they say about it, because we won't be able to help you.
  • Grumpy_chap
    Grumpy_chap Posts: 17,067 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    edited 16 April 2021 pm30 5:59PM
    Is the "loan" or whatever it is called in the personal names of FIL and MIL, or in the names of the failed company?

    When was the "loan" taken out?

    It sounds like a sale and lease back agreement, and you state it includes the house.  I understand that this type of agreement for primary residential address is no longer permitted.  It may be worth verifying the dates of the loan and checking against when rules changed so that the sale and lease back for house was not allowed.

    EDIT:  It looks as though my original comments and understanding may be incorrect.  I have "struck through" the relevant parts and here is a link that gives some information about "sale and rent back schemes":
    https://www.citizensadvice.org.uk/debt-and-money/mortgage-problems/how-to-sort-out-your-mortgage-problems/sale-and-rent-back-schemes/
    Sorry if I caused any confusion or distress.
  • BrassicWoman
    BrassicWoman Posts: 3,217 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Mortgage-free Glee!
    see if these people (charity) can help interpret the agreement

    https://www.businessdebtline.org/
    2021 GC £1365.71/ £2400
  • SeanG79
    SeanG79 Posts: 977 Forumite
    Part of the Furniture 500 Posts Name Dropper
    This sounds like a Sale & Leaseback/Sale and HP back agreement. The facility is likely not secured on the house but more likely to be secured on vehicles or machinery. 

    The reason why your MIL will have had to sign is because I bet that she is named on the mortgage. The lenders that offer Sale & Lease/HP back agreements will only lend to homeowners because by nature or raising cash against assets, they are high risk.

    If you fail to make payments, they will repossess whatever assets were included on the agreement (there will be a separate schedule of goods, if there are no assets listed on the agreement), the assets will be sold at auction and then they will seek the balance. If the balance cannot be paid (or repayment terms cannot be agreed), they will seek a charge against the property. 

    It is unlikely that they could force sale of the property, however once the property is eventually sold, they will get their money. 

    The agreement is non-regulated and a commercial facility, as such it is not covered by the consumer credit act and complaints of miss-selling do not hold as much weight as consumer transactions are. 

    Good luck.
  • pbartlett
    pbartlett Posts: 1,397 Forumite
    1,000 Posts Name Dropper
    edited 19 April 2021 pm30 2:28PM
    reading between the lines, it seems they have no way of repaying the 'loan', and thus you all should steel yourself for the assets being sold and a charge for the remaining debt against the house.

    they may even force the house to be sold.

    bankruptcy is not an option as they have assets (the house)
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    This a commercial arrangement where personal guarantees are required to cover any shortfall for the finance company. A risk that one takes when it's your own business. Not anybody fault's when ill health is the root cause. Though this could itself been mitigated. 
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.3K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.9K Work, Benefits & Business
  • 617.2K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.