Cars bought on HP - Judge overrules ombudsman

smcgiff

As reported in the Independent (paper version) - A person who bought a car on HP, supported by some agencies, took her finance company to court after the ombudsman took the side of the finance company.

The upshot is that you now don't even need to pay half of the payments to end a HP agreement.

The ruling is likely to have huge implications and possibly a raft of hand backs.

http://www.independent.ie/business/personal-finance/surviving-the-recession/firms-face-deluge-of-car-returns-after-ruling-2833262.html

The finance firm was entitled, through separate proceedings, to have all liabilities met by the hirer, he said.


^^^^^^^

What does that mean though? Sounds like they may still be chased for a few quid?

Absurdum

I presume that, unlike the half-rule, this would have implications for your credit rating?

Blazer

Absurdum wrote: »

I presume that, unlike the half-rule, this would have implications for your credit rating?

yep...you're still liable for what's left of the debt....
in other words you bought a car for €20,000 but only paid 8k off it and the car is now only worth 5 k..
so basically 20k-8= 12k outstanding minus the car 5k which means you're still liable for the 7k..

Absurdum

Sc@recrow wrote: »

yep...you're still liable for what's left of the debt....
in other words you bought a car for €20,000 but only paid 8k off it and the car is now only worth 5 k..
so basically 20k-8= 12k outstanding minus the car 5k which means you're still liable for the 7k..

not according to this:

The court ruled that a consumer does not need to have made half of the repayments before firms will accept a car back and end the agreement, without requiring the person to make any more payments.

With a hire purchase, you do not own the car until all the repayments are made. Up to now, people were not able to terminate the agreement until they had made at least half of the payments.

If you have not made half the payments but give back the car, the finance company can sell the car, using this money to pay off some of the debt; but the consumer still has to keep

GavMan

RoverJames wrote: »

The finance firm was entitled, through separate proceedings, to have all liabilities met by the hirer, he said.


^^^^^^^

What does that mean though? Sounds like they may still be chased for a few quid?

Thats how it reads too me.

I think the Judge is saying that GE should have let her terminate the agreement regardless of her not paying half the total amount and then they should have pursued her for the remaining liabilities through the existing mechanisms outlined in the legislation.

In effect, they were not allowing her to complete a voluntary surrender...

Mr. Presentable

Absurdum wrote: »

not according to this:

If you have not made half the payments but give back the car, the finance company can sell the car, using this money to pay off some of the debt; but the consumer still has to keep paying until the entire debt is paid

You left this bit off your quote.

Mr. Presentable

RoverJames wrote: »

The finance firm was entitled, through separate proceedings, to have all liabilities met by the hirer, he said.


^^^^^^^

What does that mean though? Sounds like they may still be chased for a few quid?

Agreed. They still owe a debt after the car is disposed of, unless somehow the car appreciated :rolleyes:

Blazer

Absurdum wrote: »

not according to this:

you forgot to include the important bit to keep repaying the remainder

seamus

Totally misreported, actually quite dangerous reporting.

The whole dispute was around the ability to terminate the hire-purchase agreement. The court rules that you do not have to wait until half of the term is up to terminate the agreement and return the goods.

However, the consumer is still liable for all outstanding costs after the car has been sold. Failure to pay these costs and the HP company can pursue you in court to force you to pay the remainder.

The issue here is that if someone is in financial difficulties, forcing their lender to terminate the HP agreement may make things worse. That is, rather than a €250/month liability draining their funds, the person may be presented with a €10k one-off bill for the shortfall in their agreement.

Motorcheck

I have a different understanding of this.

It appears to me that the case addressed the customers right to terminate their agreement under the half rule (not a voluntary surrender).

GE Money wouldn't accept the agreement had been terminated as half of the hire purchase amount had not yet been paid. This meant that the customer had to continue making monthly payments that they could not afford or risk falling behind and having the car repossessed.

The judge ruled that the customer did have a right to terminate the agreement under the half rule thus requiring the finance house to accept the car back and stop the monthly payments.

Of course the bank was still owed whatever amount was required to satisfy the half rule (circa 2k in this case) and the judge agreed that the finance firm was entitled, through separate proceedings, to have all liabilities met by the hirer.

So what was achieved? Merely that the agreement was terminated leaving the customer without a monthly obligation for repayments (or a car). They are still liable for half of the hire purchase price but as the agreement was terminated under the half rule this is the total liability.

They could have terminated the agreement as a 'Voluntary Surrender' but this would leave them liable for the total amount of finance left on the car less whatever it would achieve at auction. Certainly sure to be more than terminating under the half rule.

I agree that headlines “Firms face deluge of car returns after ruling” are misleading but I thought the comment by the free legal aid representative was a bit one sided too - "...hire purchase is a very expensive form of credit so they [the banks] get well-rewarded for the risk they take. “

HP was actually one of the cheaper options as long as the APR was reasonable. It's a fixed contract which means the monthly amount wont go up with interest rates but wont suit everyone - especially those who like to change cars frequently.

stevenmu

This reads to me like it doesn't change anything at all.

You can get out under the half rule and be completely rid of the car and the remaining payments. Or, you can do a voluntary surrender, which leaves you still liable for the full amount, but if you refuse to pay then the company has to chase you for it. Those two options were always there.

For somebody who is already facing bankruptcy or in serious financial trouble, the latter option could be quite attractive. And from the credit companies point of view they could end up spending a lot of money chasing someone in the courts who has no money to pay them with anyway.

So it seems like they were trying to force someone into paying at least up to the halfway mark, rather than being stuck at the end of a list of creditors in bankruptcy proceedings.

That may not be the circumstances in this particular case, but I'd guess they didn't want anyone doing this and triggering off a whole bunch of people voluntarily surrendering. I could see a situation where they are chasing people through the courts for money, the people are claiming they have none, and the judge ordering them to just hand back the car.