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Credit Sale Agreements

Such agreements involve a creditor selling goods to a consumer (the buyer) and lending the consumer the money to make the purchase.

Typically, a retailer, the creditor's agent, will supply the goods to the consumer, while transferring title to the creditor. The creditor will pay his agent for the transfer of title. The creditor then immediately transfers title to the consumer and effectively provides a loan, with the consumer making periodic payments to the creditor.

Traditionally, credit sale agreements have been regulated in parallel with hire-purchase agreements and conditional sale agreements, but they lack the reservation of title that is inherent in such agreements. The creditor therefore has no way of minimising the risk of the original agreement. Their use is therefore no different from a conventional debtor-creditor-supplier agreement, except for the fact that, here, the creditor is the supplier.

Their use is declining; where they are used, it seems to be due to historical factors.