Recovery of goods can
prove tricky once some of the agreed price has been paid, says
DWF’s David Wood.
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Section 90 of the Consumer
Credit Act is one of the more troublesome of its
provisions.
It is section 90 that
prevents a lender from recovering goods without a court order
following termination of a hire purchase or conditional sale
agreement, where more than a third of the price has been paid.
Ignore this provision at your peril, because if you do, the
customer could be released from all further liability and recover
all sums paid under the agreement.
This provision often causes
problems, most notably in relation to voluntary surrender and
abandonment, two areas which might appear to provide exceptions to
the rule.
First, a court order is not
necessary where the customer consents, and sometimes the customer
may say that he didn’t give this freely or that he was intimidated
by the lender’s agent into giving that consent.
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By GlobalDataSecondly, section 90 simply
prohibits recovery of possession from the customer’s control. It
doesn’t apply if the vehicle has left the customer’s control, that
is, if it has been abandoned.
A vehicle sold to a third
party will no doubt have left the customer’s control and could be
deemed abandoned (although it may not be recoverable if the
purchaser is an innocent private purchaser), but a vehicle left
with a dealer for repair will not. However, not only can views of
what is abandonment differ, but facts could later emerge which
suggest the vehicle had not been abandoned.
In both these circumstances,
your actions will not then be judged by what was known at that
time, but by the actual facts. It is about whether the customer has
indeed consented or relinquished control of the goods.
An example of this is one
case where a vehicle was left with a dealer for six months. The
customer had sought to terminate the agreement because of quality
issues and had refused to pay for repairs. The vehicle was held not
to have been abandoned, because the customer retained a vain (but
unexpressed) hope that the manufacturer would somehow relent and
pay for repairs under the warranty.
Also, a vehicle may not be
abandoned when it has been seized by the authorities but taken back
by the lender for “safe custody”.
The one-third rule can at
times be a nuisance, but the only totally risk-free course of
action is always to obtain a court order. However, if accepting
voluntary surrender following termination, you must get the
customer’s written consent sent by post before the vehicle is
collected (with an acknowledgement of liability for any shortfall
following sale of the vehicle, if appropriate).
David Wood is partner and
head of finance litigation at DWF LLP
