Charles
Wheeldon
Lenders should be more aware than
ever of the quality of cars financed at the point of sale, as
consumers are being urged to pursue HP lenders to release them from
contracts signed on faulty vehicles.
Go deeper with GlobalData
Consumers’ rights were highlighted
last month in an article in the Daily Mail, which advised
the public to quote the Supply of Goods (Implied Terms) Act 1973 to
funders of faulty vehicles in order to secure release from HP
agreements, and urged them to contact the Financial Ombudsman
Service (FOS) in the event of being refused.
The FOS states in a recent review
that the motor finance industry sometimes fails to recognise
customers’ legitimate complaints about faulty vehicles.
The review states: “We [have]
received an increasing volume of complaints about car finance –
mainly hire purchase or loans arranged through the car showroom.
Most of these complaints concern the quality of the car – ranging
from faults in brand-new vehicles to problems with older cars.
“We were able to deal with these
complaints because of provisions in consumer law that make
providers of credit liable for faults in the goods, in certain
circumstances. We frequently found that businesses had done little
to understand and evaluate the consumer’s complaint about the car –
often mistakenly arguing they had no responsibility for the
condition of the vehicle and simply directing the consumer back to
the garage.”
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By GlobalDataThe Government’s advice service
Consumer Direct maintains that their most commonly seen complaint
involves customers who buy a vehicle on credit, which breaks down
shortly afterwards.
The law protects customers under
the Sale of Goods Act 1979, the Supply of Goods and Services Act
1982 and the Supply of Goods (Implied Terms) Act 1973, which state
that goods must meet their description, be of satisfactory quality,
and be fit for purpose. If the vehicle doesn’t satisfy these
criteria, the supplier (often the lender) is obliged to solve the
problem (often by compensating the consumer). It is only if the
vehicle is sold directly to the customer by the motor dealer that
there is any legal right for a repair.
Section 75 of the Consumer Credit
Act 1974 gives customers similar protection if they purchased their
vehicle with a credit card or by a dealer-arranged loan. If the
garage refuses to repair the vehicle, customers can seek remedy
from the finance provider.
However, if a vehicle has been
purchased on hire purchase, section 75 doesn’t apply, because the
car doesn’t belong to the customer during the term of the hire
purchase – it belongs to the finance provider. This allows
customers to insist on their rights from the finance provider under
the Supply of Goods (Implied Terms) Act.
If the FOS rules in favour of a
customer, it can force lenders to allow customers to break loan
agreements, return vehicles, refund loan payments, pay for repairs
and pay compensation for taxi and car hire charges.
Paul Harrison, head of motor finance at the FLA, said: “In the
past year, more than 1.1m finance agreements have been written for
new and used cars. While the vast majority of customers are
satisfied, a few do result in quality of goods complaints. Our
members will work in partnership with motor dealers to do their
best to sort out any complaints quickly and fairly.”
