Disputes with Motor Finance Lenders

Whilst the purchase of a vehicle is often exciting, it can also prove to be a stressful experience, especially when purchased with motor finance. Indeed, a consumer’s experience with the vehicle and motor finance may not always be as smooth sailing as they had hoped. These difficulties can range from the vehicle being defective to disputes concerning ownership, and everything in between including facing legal action from the finance lender.

The obligations and rights of a consumer under a finance agreement will of course vary but the detail will largely be deep within the terms. The finance agreement should clearly set out the parameters of which the consumer will hold possession and/or title to the vehicle including both the lender and consumer’s respective contractual rights.  The provisions of the Hire Purchase Act 1974 (the “HRA”), the Consumer Credit Act 1974 (the “CCA”) and the Consumer Rights Act 2015 (the “CRA”), to name a few, may also coincide with the contractual provisions. It is therefore imperative for a consumer to understand their rights not only under the motor finance terms, but also within law.

Right to reject, repair and replace

The rights and protection given to consumers under the CRA are far ranging and it pays to be aware of them, particularly in circumstances where the lender and/or dealer fails to meet reasonable expectations, including, but not limited to:

• The vehicle is of unsatisfactory quality;
• The vehicle is not fit for purpose;
• The vehicle is not as described or advertised; and
• The vehicle does not match the model seen or examined by the consumer.

In these circumstances, by way of a whistle-stop overview, the CRA specifies a number of remedies available to consumers, including;

1. The short term right to reject the vehicle and receive a full refund within 30 days from the later of either possession, delivery or notification of installation the vehicle.
2. The right to demand that the vehicle is either repaired or replaced if the fault is identified within the first 6 months.
3. The right to either reject the vehicle or demand an appropriate price reduction if the fault persists after repair, or that further faults appear.

The burden of proof falls on the consumer to exercise such rights under the CRA and these rights will vary dependant on how long they have been in possession of the vehicle. Unless proven otherwise, the alleged defects of a vehicle are presumed to have been there upon its delivery if they are raised within 6 months of delivery. Where a defect is detected after 6 months but before 6 years of delivery, it is for the consumer to prove that the defects were there at the time of delivery.

Termination

Arguably, the most concerning eventuality for a consumer embroiled in a dispute with their car finance company is having the finance terminated. Indeed, the implications, financial or otherwise, of a motor finance agreement being terminated can prove significant and are likely to impact the consumer’s credit profile. The lender may take such action, for instance, if the consumer’s default on payments, fails to sufficiently care for the vehicle, parts with possession of the vehicle or even for exceeding any annual mileage limit.

In turn, the consumer will be liable for the sums outstanding under the motor finance and, dependant on the circumstances, the lender will also demand the immediate delivery up of the vehicle. However, the consumer may not always be in a position to settle the outstanding sums (particularly by way of lump sum if so demanded) nor may they be able to return the vehicle due to either necessity or because they have already sold the vehicle.

In any event, the consumer should seek legal advice as to their position at the earliest opportunity to explore whether matters can be dealt with before expensive and costly court proceedings become necessary. Alternatively, in some instances the CCA allows the consumer to voluntarily terminate their motor finance early.

Repossession of vehicle

Leading on from the above, legal ownership to the vehicle is subject to the motor finance terms and will likely remain with the lender up until full settlement of the loan amount. Therefore, upon termination of the motor finance, the lender may seek to exercise its contractual rights and demand the return of the vehicle.

However, pursuant to the CCA, under a regulated agreement, a lender can only recover the vehicle without a court order in certain circumstances. For instance, if the consumer has paid over a third of the total sums payable under the motor finance agreement, the vehicle is classed as protected goods, and the lender is unable to recover the vehicle without either the consumer’s informed consent or court order. A lender’s failure to comply with these CCA provisions may result in the customer being released from all liability as well as a refund on all payments made under the motor finance.

Dispute ownership

Another unfortunate instance where a consumer may find themselves in difficulty with a motor finance lender is later discovering that the vehicle is subject to outstanding finance. In these circumstances, the consumer is at risk of having the vehicle recovered by the lender and, dependant on the facts surrounding their purchase, without reimbursement of the monies paid.

The rights and legal position of a consumer upon purchasing a vehicle subject to motor finance will largely depend on their good faith. A consumer will have obtained good title to the vehicle if they can demonstrate that they had purchased in good faith and are ultimately protected under Section 27 of the HRA.

However, it may be that the consumer was not the first private purchaser and instead there is a chain of prior transactions which will render determination of ownership more complicated. Legal advice should be sought in these circumstances.

How we Ellis Jones help?

If you have a dispute with a motor finance lender, it is recommended that you seek legal advice from the outset to avoid enforcement and/or court action. Our Dispute Resolution team can advise on all aspects of motor finance disputes and be contacted on 01202 525333 or by emailing resolution@ellisjones.co.uk.