Hire Purchase Cars ~ ruling in the High Court (27-07-2011)

PaddyBloggit

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A lot of people have posted on AAM about handing back cars acquired through hire purchase.

Press release from FLAC

FLAC wins appeal against decision of Financial Services Ombudsman

27 Jul 2011

In a decision in the High Court this morning, Judge Hanna found that the practice of some Finance Companies in refusing to accept back cars where agreements were terminated was wrong in law.
In all hire-purchase agreements, the car remains the property of the finance company until the final hire purchase payment has been made. The Consumer Credit Act 1995 sets out what is to happen when a hirer cannot keep up repayments and needs to terminate the agreement early. An agreement which is terminated early still requires a hirer to pay up to half of the full hire-purchase price and allows the Finance House to get the vehicle back. The case concerned the refusal of GE Money to accept the car back until such time as the 50% of the overall hire-purchase price had been paid.
In this case, Michelle Gabriel had acquired a car on hire-purchase from GE Money in 2008 but needed to end her agreement in 2009 when she got into financial difficulty. Working with the support of MABS, she tried to return the car to GE Money but the company refused to accept it unless she paid 50% in total of the hire-purchase price. Ms. Gabriel appealed to the Financial Services Ombudsman who agreed with GE Money that she had to pay the additional amount up to 50% before they had to take the car back.
Today's case was the outcome of an appeal brought to the High Court on Ms. Gabriel's behalf by FLAC the Free Legal Advice Centres. Judge Hanna found that there was no legal basis for a precondition that 50% of the full hire purchase price had to be paid once an agreement was terminated and that the Financial Services Ombudsman had been in significant error in insisting that the payment be made.According to FLAC's Noeline Blackwell "today's decision is important for many people in similar circumstances with arrears on vehicle hire purchase agreements. A number of Finance Companies take the view that they have to get the full 50% of the price in advance of taking back a car. This case clarifies that this is not the case. The payment of 50% is not a precondition to handing the car back. The sum may still be due by a hirer but at least hirers in financial difficulty won't be left with cars they don't own and that are deteriorating in front of their eyes".
 
Paddybloggit, any idea how would this effect someone who has not yet got to half way payment, that is 3 mths in arrears but if met arrears could hand back under half rule. Does this ruling mean they could hand back car & effectively walk away now with no more liability?
 
I don't think so. The company is still entitled to begin proceedings to get the person to meet all liabilities. I think this means that you can terminate a HP Agreement at any time. Doesn't change your contractual obligations.
 
Not a notion shinners - I just remember reading a lot on AAM about it and thought this might be welcome news for some people.
 
so in essence a person can terminate a HP agreement at any stage & hand back but if HP co sell & there is a shortfall you can be held liable for it, so it appears that is still better for most to do utmost to get to half way & then hand back under 1/2 rule.
 
The full court judgement is here

http://www.flac.ie/download/pdf/judgement_in_the_gabriel_case.pdf

This is my understanding of the implications of the case.

1) You can return the car at any time to the HP company
2) If you have not paid 50% of the HP Price, you will owe the balance up to 50%
3) The HP company can sue you for the balance up to half the HP payments

Some HP companies had been refusing to take back cars until the 50% was paid.
Others had been refusing to take back the car if the hirer was in arrears. They can no longer do this.
 
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