Fred
Crawley
Lenders and dealers should
pay particular attention to the timing of vehicle deliveries after
implementation of the new Consumer Credit Directive (CCD), legal
firm HBJ Gately Wareing has warned.
Go deeper with GlobalData
Senior associate Jo Owens
said: “Lenders should consider now whether vehicles or other assets
should be delivered to customers before the right to withdraw has
expired,” adding the issue may prompt finance providers to “review
their trading terms with dealers”.
The issue centres around the
new Right of Withdrawal which, from 1 February 2011, will entitle
consumers to withdraw from agreements relevant to the CCD without
reason within 14 days of the date of a credit agreement being
signed. Notice will need to be given verbally or in
writing.
Consumers will have 30 days
from the day after notice is given to repay credit with any accrued
interest. If this does not happen, lenders will be able to pursue
unpaid sums as a statutory debt.
If credit is offered under a
conditional sale or hire purchase agreement, Owens explained, the
new provisions of the Consumer Credit Act (CCA) state that title to
the asset will transfer to the customer once outstanding sums have
been paid.
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By GlobalDataThe new right will
effectively replace the existing rights of cancellation in the CCA,
where the right to cancel only applied in limited circumstances.
Owens added few customers actually cancelled under the old
system.
“Due to other changes to
pre-contract disclosure and the giving of adequate explanations,”
she explained, “the right to withdraw will be more greatly
publicised and maybe used more.
“Customers wanting to
withdraw must be able to fund the acquisition of the vehicle, but
the credit agreement will treated as if it had never been made.
This will affect how lenders report any breach by the customer in
repaying the credit to any credit reference agency.”
Owens added: “It is unclear from the new provisions of the
CCA whether the obligation of the customer to acquire the vehicle
after withdrawal will constitute a contract for sale so that an
innocent third party could acquire title from the customer acting
as a buyer in possession.”
