Bought Goods on Hire Purchase and They're Faulty? Why the Finance Company May Still Chase You for Payment

"The sofa arrived already cracked. I assumed not paying would push the seller to sort it out — but the finance company keeps sending demand letters every month." People who buy furniture, appliances or even instruments on hire purchase often fall into exactly this trap: the goods are the seller's problem, yet the party chasing you for money is a different company.

Drawing on CLIC and the Hong Kong Judiciary, this article explains the three-party structure, why simply stopping payment is risky, and how to claim against the seller. (For the same trap in a beauty-salon setting, see Paid for a Beauty Package by Instalment or a Finance-Company Loan?)

How Hire Purchase Differs From an Ordinary Purchase

You start as a hirer, not the owner

CLIC explains that a genuine hire purchase is an arrangement in which the hirer hires and buys goods by paying instalments to the owner, and legal ownership passes to the hirer on payment of the final instalment or exercise of the option to purchase. Until then, you may not legally own the goods.

The seller and the finance company are different companies

A common set-up: you choose goods at a shop, the shop introduces a finance company, the finance company buys the goods from the seller and provides them to you on hire purchase. That creates three parties:

Role	Who	Your relationship
Seller	The shop or supplier	Description, quality and delivery of the goods are mainly the seller's responsibility
Finance company	The company that funds the purchase	The other party to the hire purchase agreement; instalments are paid to it
You	Hirer / buyer	Facing two obligations of different kinds

Faulty goods are the seller's issue; the monthly payment is owed under a separate agreement. One does not automatically cancel the other.

Is It Covered by the Money Lenders Ordinance

Many readers ask whether instalments to a finance company mean the Money Lenders Ordinance (Cap. 163) applies. CLIC's answer is that it depends on substance, not just form. A genuine hire purchase is not a loan of money by the owner to the hirer; but if a transaction is in form and substance a loan, it is caught by Cap. 163, and calling it hire purchase does not disguise its true nature.

Which side your own agreement falls on turns on its terms, and this article cannot decide that for you. If the other party says it is a licensed money lender, you can check the Companies Registry licensee register; if you suspect the arrangement is really a loan, get professional advice before deciding what to do.

Why Stopping Payment Is the Weakest Position

When goods turn out faulty, the instinct is to stop paying and wait. But note:

• In many hire purchase agreements, the obligation to pay is a contractual duty owed to the finance company, and whether a fault in the goods lets you suspend or set off payment depends on the agreement's exact wording;
• Once you stop paying, the finance company may send demands, and prolonged non-payment could affect your credit record and add charges;
• Silence makes it harder to prove later that you raised the dispute promptly.

The safer course is to tell the finance company about the dispute in writing and, at the same time, raise the fault with the seller.

Read your agreement first

Whether or not the goods are faulty, check the paperwork you already hold and look for these points:

• Who is the seller and who is the finance company — the names and addresses on the agreement tell you where written notice of a dispute must go;
• Payment terms — the amount and date of each instalment, late charges, and any wording saying you must keep paying regardless of the goods' condition;
• Defect clauses — whether the agreement says how, and to whom, a problem with the goods should be notified;
• Early settlement and termination — what conditions and costs apply if you want to settle early or end the agreement;
• When ownership passes — whether the agreement clearly says the goods become yours only after the final instalment.

These terms determine which kind of agreement you hold, and what you can rely on when you raise a dispute with the finance company. If the wording is unclear, ask a professional to explain it rather than guessing.

Why written records matter so much

Whether you end up settling with the seller or filing at the Tribunal, paper evidence is what carries a dispute: photographs on the day of delivery, when and how you told the seller, the finance company's replies, and proof of every instalment. A verbal promise that "we'll look into it" is very hard to prove later, so after each phone call, follow up with a short email or WhatsApp message confirming what was said. Without a record, a claim against the seller comes down to one word against another.

What to Do When the Goods Are Faulty

Know the seller's obligations

According to CLIC's guide to the Sale of Goods Ordinance (Cap. 26), goods for sale must be of satisfactory quality, fit for purpose and as described; if the seller fails any one of these it is in breach of contract, and a consumer may reject the goods and demand a full refund. Buyers are also entitled to a reasonable time to inspect.

Reject clearly and promptly

The same CLIC material notes that a valid rejection needs a clear indication that you do not accept the goods; keeping goods for a reasonable time without telling the seller you reject them may be treated as acceptance. Even after acceptance you may still be able to claim compensation from the seller, but it is more complicated. So act as soon as you spot the problem:

1. Photograph or film the defect; keep the delivery note and agreement;
2. Tell the seller immediately, by phone and in writing (email or WhatsApp), that you reject or want the fault dealt with;
3. At the same time, notify the finance company in writing that there is a dispute over the goods, and ask for a written reply;
4. Keep every message and proof of payment.

Three situations that come up most often

• The goods never arrive. The seller has taken the customer's signature and passed the paperwork to the finance company, but nothing was delivered. This is a failure of delivery on the seller's side; tell both the seller and the finance company in writing straight away rather than waiting for the first instalment to fall due.
• The goods arrive faulty. A cracked frame, an appliance that will not start, an instrument out of tune from new. Photograph it on the day, reject clearly, and keep the goods available for inspection.
• The goods are not as described. A different model, size or material from what the salesperson promised. The description given by the seller is one of the statutory tests under the Sale of Goods Ordinance, so keep any brochure, quotation or chat message that shows what was said.

In each case the pattern is the same: document the problem, tell the seller, tell the finance company, and keep paying or seek advice on your position rather than going quiet.

Claiming Against the Seller

Start by complaining to the Consumer Council for mediation; if the seller will not engage, send a formal demand letter stating your reasons and a deadline. If that fails, consider the Small Claims Tribunal. According to the Judiciary, the Tribunal hears money claims of up to HK$75,000, including claims about goods sold and consumer claims; hearings are informal and parties cannot be represented by lawyers. A claim above HK$75,000 cannot be split into several cases, but you may abandon the excess.

To see how a goods-payment claim is organised in practice, read the goods-payment recovery case — it shows the process, not a guaranteed result for your own claim. For related goods disputes see the in-store electronics dispute guide and the product warranty refusal guide. The overall approach is in the goods payment recovery guide; if you would rather not handle forms and procedure yourself, see what our filing assistance service covers.

One point to keep clear: a Tribunal claim is against the seller. If the finance company later sues separately for outstanding instalments, that is a different legal question, and the answer turns on the exact wording of the hire purchase agreement — it is not resolved by your claim against the seller. Keep all your documents and seek professional advice early.