In Focus Consumer Credit
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Left-right: Russ Barrett; Sarah Watts; Simon Bayley; Oliver Smith >>
High Court, so that has to be borne in mind in terms of how significant it
is, but Mr Gordon bought an Audi Quattro for around £50,000 and from the moment he bought it, a loud rattling noise would not go away. He took it to the dealer and twice they tried to repair it, but they could not fix the problem. During all that time, not only was he in touch with the dealer, but he was also calling the lender saying that he would not be paying for it. Every time he did that, the lender would
say ‘we are very sorry, but if it is to do with the quality of the car, then you have to sort it out with the dealer’, which is not an unusual response in this market. So it went to court and the court first decided that it was a serious enough issue that the customer was entitled to say it was not of a good enough quality, which was not controversial, but what was more interesting was that, although there is not a default position that the dealer is acting as an agent for the finance company – not in common law anyway – because every time the lender had spoken to the customer, they had said that because it was to do with the quality of the car he had to take it up with the dealer, the court decided that this was enough to make the dealer an agent for the finance company in those particular factual circumstances. So the lender was completely on the hook
for everything to do with the quality of the car and Mr Gordon was entitled to reject the car, and he did not have to pay for it. Of course, it is always important to keep in mind that the lender may have been trying to sort things out behind the scenes. The court may not have been aware of that and sometimes lenders put forward reasonable proposals which customers will not accept. As I say, it is not a High Court case and it is not the first time that something has been
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Repossession can be the best option, not only for the lender, but also for the customer
decided like this, but it did bring home to me how, what is quite often a response by finance companies to say ‘if it is anything to do with the car – it is not the affordability or way in which the finance was sold – then the customer needs to sort it out with the dealer’, then this decision certainly brings it much closer to home for the finance company. I suppose it suggests that a few finance companies need to join up their procedures a bit more with some of the dealers, so that when things really are not getting sorted out over a period of time, maybe a finance company needs to be a bit more involved than it might have been in the past. It will depend on which finance firm and which dealer you are talking about, so I would not draw too many conclusions, but it is useful to consider what you would do with a dealer in this situation.
ADO: It is interesting to compare that, in our own invoice-finance industry, we have a scheme where every individual who operates in the space should be aware of our code of conduct and knows the processes need to be followed. It just shows that regulation, at least in part, is there to close the gap of the lack of financial sophistication on the part of both the consumers and businesses to an extent. I would class myself as semi-financially literate, but some of the car-ownership schemes that we have at the moment are difficult to get your head around and I would
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not say that I necessarily could say which is the best one. So, possibly if you talk to a less sophisticated consumer, then what chance have they got? Regulation is trying to close that gap as much as anything else.
Do you view repossession as a last resort? Do you feel that there are fixed circumstances when an asset should repossessed, as opposed to an arrangement being made – or is this different for each customer? PC: Repossession can be the best option, not only for the lender, but also for the customer. An arrangement can be appropriate and can work, but often it is only putting off the day when the car is repossessed, and in the interim the customer remains stressed and struggling to make the agreed repayments. But yes, each case needs to be evaluated on its own merits.
SK: I would suggest that this would be dependent on each individual customer. I would assume there would be a streamlined process of this situation should it arise and what type of enforcements should and could be used when relevant, but it would be a case of analysing what is known of the customer – KYC or Know Your Customer is crucial – and projecting what the best chance of realisation would be determined from that.
GM: On the repossession front – we concur with that view that it is essential to be sure that you have assessed any vulnerability. Are the ongoing future payments affordable? And what is the best outcome for the customer? As appetites grow to lend higher values against retail price and larger GFVs, this will cause greater losses under the hammer. CCR
December 2019
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