Unfortunately i havent had the chance to blog recently. My family have been away visiting relatives overseas, and work has been chaotic too, in addition i decided to take a holiday from work and shut off my PC for two whole weeks!!.
However, were now back and full steam ahead.
I recently did a moneybox program with the BBC Radio 4 on Excess Mileage charges and whether they are enforceable or not. This is an extremely interesting subject and heres why.
On the question of whether or not a creditor can charge excess mileage charges in a voluntary termination situation, it seems important to me to consider the statutory provisions which give rise to a consumer’s right to voluntarily terminate a hire purchase or PCP agreement. It is also important to bear in mind that a hire purchase agreement is exactly that, it is a hire agreement unless and until the customer decides at the end of the agreement to exercise their right to purchase the vehicle. If the customer does not exercise their right to purchase the vehicle then upon returning the vehicle at the end of the contract, the creditor may be able to impose its excess mileage charges which may be payable under the terms of the contract. However this is a markedly different situation to a situation where a consumer exercises a statutory right to voluntarily terminate in my opinion.
Section 99(1) Consumer Credit Act 1974 stipulates that at any time before the final payment by the debtor under a regulated hire purchase or regulated conditional sale agreement falls due, the debtor shall be entitled to terminate the agreement by giving notice to any person entitled or authorised to receive sums payable under the agreement. Section 100, sub-section 1, specifies that the consumer’s liability upon voluntary termination under s.99 shall be one half of the total price payable under the agreement, unless of course the agreement specifies for a lesser sum.
Therefore it does seem to me, in the context of a hire purchase agreement being voluntarily terminated as opposed to a hire purchase agreement which has run its course and come to its natural end, that the consumer’s liability is strictly regulated by s.100, sub-section 1, of the Consumer Credit Act 1974.
It is important to highlight that under s.100, sub-section 4, the customer does have a duty to ensure that they take reasonable care of the goods. Should the customer fail to take reasonable care of the goods then the creditor can seek compensation as a result. For example, if the vehicle is returned with dents or scratches which arise out of the customer’s failure to take reasonable care of the vehicle then the creditor may well be entitled to seek damages to repair such items and those damages would be in addition to the consumer’s liability under s.100, sub-section 1, Consumer Credit Act 1974.
I do also note that s.99, sub-section 2, Consumer Credit Act 1974 states that termination of an agreement under sub-section 1 does not affect any liability under the agreement which has accrued before the termination. It may, although again there is no clear authority from the Courts either way on this point, be the case that a creditor can argue that the liability for excess mileage charges accrued before the termination of the agreement and therefore those charges are payable. It seems to me that such an argument may fall into difficulty however when considered alongside the provision of s.100, sub-section 1, which clearly prescribes that the consumer’s liability extends only to 50% of the total price of the goods. It is also worth bearing in mind that s.189 Consumer Credit Act 1974 sets out a number of key definitions of words used within the Act. The words “total price” is defined as “the total sum payable by the debtor under a hire purchase agreement or conditional sale agreement including any sum payable on exercise of an option to purchase but excluding any sum payable as a penalty or as compensation or damages for breach of the agreement”. It seems to me therefore that whilst a creditor may well be able to charge excess mileage charges at the end of a hire purchase agreement having run its natural course, it does seem that there is an arguable point that may be taken to say that the creditor cannot charge excess mileage charges where a consumer exercises their right to voluntarily terminate under s.99 of the Consumer Credit Act 1974.
Of course the best option would be for there to be a test case on these points but the finance industry seems reluctant to take these issues further.
Also, there is the question over whether the imposing such charges creates an unfair relationship. For example, lets say you buy a BMW motor car on HP, and you use the BMW daily, you look after it, you keep it serviced but the credit agreement only allows you to do say 12 miles per day in the car before you go over the allotted mileage.
Now then, if you Voluntary Terminate, and say when you hand the vehicle back with 28,000 miles in stead of 24,000 miles, can the creditor really say you have failed to take reasonable care of the vehicle? has the additional miles devalued the car? Highly unlikely, of course if you return the car with 280,0000 miles on it then im pretty sure the lender would have a very good argument to say you haven’t taken reasonable care of the vehicle.
So the question is, is it unfair in those circumstances to impose such penalty charges ? would this create an unfair relationship under s140A Consumer Credit Act? Again without any authority of the senior Courts its difficult to say.
I would say though, what if the customer were to store the car for 6 months and not use it, and then VT, he would all of a sudden be back inside his mileage allowance and wouldnt be charged at all!!. Sees that such clauses are extremely arbitrary and arguably unfair. Whats more, why if the industry is concerned about excess mileage dont they just add 1% to the interest rate to cover such events.
Im sure this matter will be determined one way or another, but it certainly is an interesting topic.
Anyway theres a fair amount happening, but i dont have the time to blog about it just yet, but i will do when things quieten down at the weekend.