Correct termination and
genuine consent will avoid section 90 perils, says Paul
Loveridge.
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Where consumers have hire
purchase or conditional sale agreements regulated by the Consumer
Credit Act 1974 (CCA), and have paid more than a third of the
total, the vehicles become ‘protected goods’ under s90 of the Act.
This means they can’t be recovered from consumers without either
their consent, or a court order. Without either, there could be
trouble for the finance house in the form of orders being set
aside, defences being raised, and counterclaims for
damages.
Where s90 is breached, the
agreement is terminated. If not already freed, the consumer is
released from all liability under the agreement, and has a right to
recover damages equal to all payments made under the agreement.
These may include the value of a part-exchanged vehicle.
To avoid this, finance
houses, as owners, must ensure the agreement has been correctly
defaulted and terminated. If it hasn’t, there’s no basis to take
the vehicle, as consumers retain contractual rights to possession
of as hirer under the agreement terms.
If the agreement has been
correctly terminated, consumers have no right to possession as the
contractual right to possession as hirer terminates with the
agreement. However, they do have statutory protection as hirer
against the owner repossessing the vehicle under s90, and that
means that finance houses should take care as owners of the
protected vehicle.
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By GlobalDataThe easiest method of
repossessing protected vehicles is to obtain consumer consent. This
also minimises costs, which may not be recovered.
Consent must be genuine and
given voluntarily. Finance houses should ensure processes are
adequate if third-party recovery agents are used to repossess
protected vehicles.
As a minimum, the finance
house should obtain from the hirer a signed mandate upon
repossession. It should clearly and unequivocally state consent.
The mandate should also fully specify the hirer’s name and address,
the vehicle description and related agreement number. For
transparency, the mandate may have tick boxes indicating
repossession circumstances. For example: (a) keys
provided, (b) log book provided, (c) refused
repossession. If a and b are ticked and signed,
it reduces risk of a s90 claim. The mandate should be in
triplicate, and a legible carbon copy given to the hirer at
repossession.
Any coercion or
misrepresentation is likely to create problems in establishing true
consent. Such practices could cause licensing problems under the
OFT Irresponsible Lending Guidance.
If consent to repossess the
protected vehicle can’t be obtained, the only option is to obtain a
court order for its return.
The process of issuing
proceedings inevitably involves risk and costs, and may cause
delays because of the need to attend a return-of-goods hearing.
However, it’s a necessary step to avoid breaching s90.
Paul Loveridge is
associate at Optima Legal
