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Thread: A guide to voluntary termination: Your rights

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    Default A guide to voluntary termination: Your rights

    Disclaimer: Any posts made are intended as general guidance in relation to your rights and responsibilities, and does not constitute legal advice. No liability can be accepted for any losses, omissions or errors that may arise from your reliance on any advice, information or other matters published by me on this forum. Should you require legal advice, you can do so by using the Law Society's Find A Solicitor.

    If you have any questions please start a new thread HERE (you will need to register) and tag R0b by using @R0b if you need help






    1. What does voluntary termination mean?
    2. Calculating the amount before you can VT
    3. Tips
    4. FAQs
    5. Complaining to the Financial Ombudsman
    6. Sample Letters to Finance Company
    - Letter terminating the agreement under s.99 CCA 1974
    - Letter disputing excess mileage charges

    - Letter disputing damage charges for condition of the vehicle
    - Letter to lender disputing collection fees


    1. What does voluntary termination mean?
    Voluntary termination is a process by which the consumer has a right to terminate a regulated credit agreement under the consumer credit act 1974 and liability is restricted to 50% of the total amount payable. You can terminate your agreement at any time before the final payment under the agreement becomes due however if you have not yet paid 50% of the total amount at the point of termination, you will still be liable for the remaining balance which makes up the 50%.

    What is the difference between a Hire Purchase and Conditional Sale Agreement?

    A Hire Purchase Agreement is a hire agreement which provides the option (however there is no obligation) to purchase the goods.

    A Conditional Sale Agreement is an agreement for the sale of goods which the lender retains ownership of the goods until payment of the price has been fulfilled. Usually, this type of agreement will enable the lender to repossess the goods in the event of a default.

    2. Calculating the amount before you can voluntarily terminate your agreement
    Your liability is restricted to 50% of the total amount payable and this includes not only the credit of the lender but also the interest. Your pre-contract information sheet should identify how much the you are required to have paid before your rights can be invoked. A further example is below.

    Credit amount: £7,000
    Interest: £1,500
    Less deposit: £1,000
    Total amount payable: £7,500
    Amount before you can VT (50%): £3,750


    The law relating to voluntary termination
    There are several provisions uner the CCA which provides certain rights to a debtor in relation to voluntary termination. I have set out the provisions below and highlighted the key words in each section which are most relevant.


    Section 99: The right to terminate the agreement at any time


    (1) At any time before the final payment by the debtor under a regulated hire-purchase or regulated conditional sale agreement falls due, the debtor shall be entitled to terminate the agreement by giving notice to any person entitled or authorised to receive the sums payable under the agreement.

    (2) Termination of an agreement under subsection (1) does not affect any liability under the agreement which has accrued before the termination.
    Section 100: Liability is restricted to 50%

    (1) Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.

    (4) If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention, and subsection (2) shall have effect accordingly.
    Section 173: Conflicting contractual terms are void and not enforceable

    (1) A term contained in a regulated agreement or linked transaction, or in any other agreement relating to an actual or prospective regulated agreement or linked transaction, is void if, and to the extent that, it is inconsistent with a provision for the protection of the debtor or hirer or his relative or any surety contained in this Act or in any regulation made under this Act.

    (2) Where a provision specifies the duty or liability of the debtor or hirer or his relative or any surety in certain circumstances, a term is inconsistent with that provision if it purports to impose, directly or indirectly, an additional duty or liability on him in those circumstances.

    Section 189: Useful definitions


    “total price” means the total sum payable by the debtor under a hire-purchase agreement or a conditional sale agreement, including any sum payable on the exercise of an option to purchase, but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement

    3. Tips on Voluntary Termination


    Take photographs immediately after collection and before you VT
    This might not sound so obvious at the start but about 80% of disputes I have seen relate to the condition of the vehicle. It is advisable that to take photos of the vehicle when you first take control of the vehicle and before you hand it back to the lender. Make sure to forward on the initial photographs to the lender as this will give a benchmark as to the condition of the vehicle and compare it with the condition at handover.

    Service the vehicle regularly
    By ensuring that you service the vehicle regularly and in accordance with the manual, this can help deflect some of the arguments which the lender might put to you in recovering charges for excess mileage. Servicing the vehicle can allow you to argue that you took reasonable steps to keep the vehicle in a reasonable condition.

    Do not sign any paperwork you are not comfortable signing
    There is absolutely no obligation for you to sign any paperwork from the lender. Common documents include a receipt agreeing to pay for collection fees and damage reports. If the agent or lender refuses to collect the vehicle without a signature on the paper, then kindly point out that there is no legal obligation to do so, only to hand the vehicle back. If they still refuse, then politely explain that if the vehicle is not collected by the date stipulated in your letter to them, you will cancel the tax and insurance on the vehicle and any liability moving forward will rest with the lender/agent. Once the agreement has been terminated, then your responsibilities are under the agreement are extinguished however that does not mean that you should not ensure the vehicle is looked after until it is collected or taken away.

    Note: By signing the paperwork or collection fees or damage report, the lender can argue that you had agreed to pay those charges. This then becomes an uphill struggle if the matter ends up in court. Even if the paperwork was signed most lenders or agents put undue pressure on debtors to sign the paperwork or they refuse to collect the vehicle and that could be a defence to any claim. Equally, just because you have signed something does not mean you cannot argue that your rights are limited under the Consumer Credit Act as lenders cannot remove this right.


    4. FAQs

    Can a lender prevent me from terminating the agreement voluntarily?
    The ability to VT an agreement is set out in law and lenders cannot carve this out of the contract. Furthermore, the agreement must also state your right to terminate and include the right to terminate once you have met the 50% mark.

    I have been charged excess mileage, what can I do
    Provided that you have followed the correct procedure in terminating your agreement under section 99 of the CCA, lenders cannot charge you for excess mileage, even if there is a term within the contract which says they have a right to do so. Lenders may try to charge this in one of two ways

    They can charge because there it says so in their agreement
    Section 100 of the CCA says that liability is restricted to 50% of the total amount payable and so they cannot enforce it under the contractual term because the relevant reasons are set out in section 173 above. The term in the agreement is conflicted with your limited liability and so the Ca prevails over the contractual term.

    The excess mileage has caused the car be in a condition beyond reasonable

    This appears to be another tactic which is used by some finance companies, the burden of proof is on the finance companies. Simply saying that the excess mileage has caused damage to the engine is not enough, they would need to specify what damage has been caused. Equally if they went to court and raised this argument then they would need to provide an independent expert at their own cost, because the courts will not accept the opinion of a non-expert when it requires the opinion of an expert.

    You could also rebut this in cases where the vehicle is being used predominantly on motorways by saying that the cause is likely to be in a better condition than it would be through city driving because there is less stop / starts which would otherwise put wear and tear on certain parts such as the brakes and clutch.

    You could also say that the car has been regularly serviced (if it has) in accordance with the service manual and therefore there is no issue with the condition of the vehicle other than wear and tear. It would be up to the finance company to prove otherwise, which would be unlikely since it would cost them money to do so.

    The excess mileage was accrued prior to termination
    This one is a bit of a debate but if you read the specific wording of section 100(2) above, the finance companies will rely on the words that liability is not affected which was accrued before termination. The key thing to note here is that it says anything accrued immediately before termination - the only thing that could accrue immediately before termination would be any missed payments or upfront costs before taking hold of the vehicle. This would not extend to excess mileage because the finance company did not invoice you prior to termination of the agreement and did so only after it was terminated. It is a contractual term which does not form party of the monthly instalments so for the finance companies to recover this, thye should be only entitled to do so if you were asked to pay for it before you terminated the agreement.


    The lender has sent me a bill relating repairs for damage to the vehicle
    Lenders may charge you for repairs to the vehicle if the car was not returned in a reasonable condition. The CCA does not define what is reasonable however the guidance below may indicate that the vehicle is in a reasonable condition.

    1. Regular servicing
    2. Valid MOT
    3. Small stone chips and scratches resulting from motorway driving
    4. Any minor scratches or dents
    5. Minor scuff marks on alloy wheels

    To reiterate, the above is just a guide and is very much subjective. It is up to you to decide whether the vehicle is deemed to be in a reasonable condition. Most of the time, lenders will sell the vehicle at auction and despite charging for repairs, will not have carried out the repairs and so there has been no loss. In any event, the lender cannot guarantee the vehicle would have sold for more at auction if the repairs were done as the vehicle is being sold at auction and therefore have no control over the selling price.

    Unlike commercial rental vehicles, it is arguable that the vehicle does not need to meet a certain standard as it was intended for private use and so the vehicle is not required to be at a certain standard other than a reasonable condition that is roadworthy. In addition, the lender would need to provide some form of substantial proof of the market value of the vehicle in a reasonable condition and the market value of the vehicle in its current condition. This can be quite difficult for lenders to quantify as many private sellers may charge various prices with little discrepancy between the condition of the vehicles.

    Finally, in order to reclaim any charges for damage to the vehicle, the lender must make an application to the court. For the reasons above, the lender is unlikely to do this as it would not be commercially viable and cost effective as such claims are likely to end up in the small claims court and legal fees are generally not recoverable.

    The lender has referred me to the BVRLA guidelines
    The BVRLA guidelines is a manual which is generally used in the commercial sector for the hiring and financing of commercial vehicles. They do not generally apply to consumer related agreements. Regardless of whether the lender is a member or not, you should point out the fact that the guidelines are explicitly used for commercial rentals and leasing and are therefore not applicable to consumer credit agreements.

    If you wish to check to see if the lender is a member you can do so here http://www.bvrla.co.uk/advice/public...mber-directory.

    I am being asked by the lender to pay collection charges
    This is another common claim by the lenders and the simple fact is that they cannot charge you to collect the vehicle. The Consumer Credit Act states that once you have invoked your right to terminate under section 99, lender’s cannot impose any further liability which includes charging for collection of the vehicle.

    Although it has been previously mentioned that you need only deliver the vehicle a reasonable distance, I have yet to discover any conclusive evidence that this is obligatory. Therefore, if you wish to deliver the vehicle, it would not be unreasonable to receive reasonable expenses in doing so.

    Does voluntary termination affect my credit file
    No it will not affect your credit rating at all. However, lenders can put a mark on your file to say that you voluntarily terminated the agreement. The effect of this is that it may alert other lenders who run a search on your report that you have not seen your agreement through to the end. This may or may not be a factor in the decision criteria of the lender which could result in being accepted but you are then offered a higher interest rate or the lender may reject you on the basis that you run the risk of terminating early.

    Can you tell me which agreements I can voluntarily terminate?
    Person Contract Hire (PCH): A PCH agreement is not too similar to a Hire Agreement and therefore the right to VT is not available. This is because Hire Agreements are treated differently and there is no option to purchase the vehicle. If you wished to cancel early, then you will likely have to pay a hefty sum or the remainder of the agreement.

    Personal contract purchase (PCP): A PCP agreement is similar to a Hire Purchase or Conditional Sale agreement so you as long as you have paid half of the total amount, then you can return the vehicle.

    Fixed sum loan: These types of agreements are the equivalent to taking out a bank loan and so is not in fact an agreement which gives a consumer the right to VT.

    Be aware that if you are seeking to purchase a Peugeot vehicle on finance through Peugeot Financial Services it is likely the type of finance will be a fixed sum loan agreement, and you will need to pay the full amount owed under the contract but you should own the vehicle.

    5. Complaining to the Financial Ombudsman (FOS)

    If you are still not satisfied with the response given by the finance company and they have sent you a final decision or it has been 8 weeks since your first complaint, you have the right to ask the FOS to investigate your complaint.

    What powers does the Ombudsman have?
    If the FOS upholds your complaint against the finance company, it can make a monetary award as it sees fit and/or a direction for the finance company to take certain actions or steps. Examples of a direction may include:

    1. The removal of any adverse credit information on your credit file
    2. Amend the terms of the agreement
    3. Make the finance company give an apology

    Do I have to accept the Ombudsman’s decision?
    Whatever the Ombudsman’s decision, they will write to you explaining their reasons as to how they have come to their decision. If they agree with you and uphold your complaint, you can accept their decision and this will becoming binding on both yourself and the finance company. If the finance company refuses to follow the Ombudsman’s decision then you can apply to the court to enforce the decision. This is simply a formality as the law already states that the decision is legally binding. If they still fault to comply, then you will several methods of enforcement as if you obtained a judgment in the court.

    However, if the decision does not go your way, you are not obliged to accept their findings and you will not be bound by the decision unless you accept it. If you disagree with any of the reasons made by the Ombudsman, you can ask for a further review of the decision and provide them with an answer as to why you disagree. If, after a review of the initial decision your complaint is still not upheld, you can still reject the Ombudsman’s decision. At this point the finance company will need to bring a claim against you in court for the recovery of the outstanding balance (for more information on whether a finance company will take you to court, see the FAQs above).

    How do I make a complaint to the Ombudsman?
    First you will need to download the complaint form from their website. You can do this by clicking on the following link: http://www.financial-ombudsman.org.u...complaints.htm

    Next you will need to complete all the relevant information so make sure that you have all your paperwork to hand before writing your complaint. If you are missing anything that you feel is relevant to your complaint which the finance company has, you can request that information to be provided to you. Some of the information that you will require when filling out your complaint will include:

    1. A copy of the agreement and the date which you entered into it
    2. Photographic evidence of the vehicle
    3. The relevant provisions of the Consumer Credit Act
    4. The final decision letter from the finance company

    How successful will my complaint be?
    Unfortunately, it is difficult to say how successful your complaint will be. It depends on how well your complaint has been drafted and the evidence you have put to the Ombudsman, as any missing evidence or information won't be relied upon and it is not advisable to expect them to know. Whilst the Ombudsman can depart from any legislation as it wishes, where it favours the consumer it is likely that they will accept the legal position and uphold the complaint. However, they may also look at what is fair and reasonable.

    There are many times where consumers have complained to the Ombudsman only to have a decision awarded against them. This might be that the consumer does not provide any evidence of the relevant Consumer Credit Act provisions and so the Ombudsman will only rely on the contractual provisions. Equally the Ombudsman dealing with the complaint is unlikely to be legally trained and so they may not have an understanding or interpretation as a judge might if the claim went to court.

    It is therefore important to ensure that you provide as much evidence as possible relating to your complaint including the relevant sections of the Consumer Credit Act to have any chance of being successful.


    6. Sample Letters to Finance Company

    Voluntary termination letter to lender

    Dear Sir / Madam,

    TERMINATION OF AGREEMENT PURSUANT TO S.99
    OF THE CONSUMER CREDIT ACT 1974

    Agreement number:

    Registration:

    I am writing to notify you that I wish to invoke my statutory right under section 99 of the Consumer Credit Act 1974 and hereby give you notice that the agreement is terminated effective immediately from the date of this letter. Please confirm by return acknowledgement of this letter and to make arrangements for collection of the vehicle.

    The condition of the car is noted as being in a reasonable condition for its age and photographic evidence has been taken in the event of any future dispute as to the condition of the vehicle.

    You will be aware that the Consumer Credit Act limits my liability to half of the total amount payable under the agreement but excludes any sum payable as a penalty, compensation or damages for a breach of the terms of the agreement. Such terms imposed are inconsistent with my rights under the Act and are therefore deemed void and unenforceable.

    The vehicle is now available for collection and I would be grateful if you could contact me on [NUMBER] to arrange a suitable time within the next 14 days.

    Yours faithfully,

    [NAME]

    ---------------------------------------------------------------------------------------------

    Response to lender disputing excess mileage charges

    Dear Sir/Madam,

    Re: Voluntary Termination

    Agreement Number:
    Vehicle Registration:

    I am writing further to your letter dated [DATE].

    Please note that liability in relation to the alleged outstanding balance for excess mileage is denied.

    You have suggested in your letter that I am liable to pay excess mileage under the terms of the agreement, however this is not correct. Section 100(1) confirms that liability is restricted to one half of the total price payable. The CCA defines ‘total price’ as “total sum payable by the debtor under a hire-purchase agreement or a conditional sale agreement, including any sum payable on the exercise of an option to purchase, but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement” (emphasis added).

    As you have already alluded to, the excess mileage is a contractual term of the agreement and therefore cannot be included as an amount which is owed. This position is further clarified under section 173 of the Act in that any contractual term which is inconsistent with any rights under the CCA and imposes additional liability, whether direct or indirect, shall be void and unenforceable.

    [I note that your letter refers to s.100 of the Consumer Credit Act insofar as the vehicle is not in a reasonable condition as a result of the excess mileage. Despite this claim, you have not provided any evidence outlining specifically the damage caused to the vehicle due to the excess mileage. I am of the opinion that the vehicle was maintained in a reasonable condition throughout the period of the agreement. Therefore, such damage charges you are claiming would amount to fair wear and tear and the vehicle does not need to be returned to you in any better condition other than a reasonable one.]

    Nonetheless, the excess mileage clause is based on the principle of ascertaining an estimated value of the car, taking into account its age and anticipated mileage at the end of the hire period. The hirer is then offered the option to purchase the vehicle at the suggested price. Mileage which exceeds the stipulated amount under the terms does not however, mean that the vehicle is not in a reasonable condition.

    In any event, such sums you are alleging to be owed may only be recovered by a court order only and should you wish to pursue this matter in court, your application will be strongly defended.

    Please confirm by return that this matter is now closed.
    Yours faithfully,

    [NAME]

    ---------------------------------------------------------------------------------------------

    Response to lender disputing condition of the vehicle

    Dear Sir/Madam,

    Re: Voluntary Termination

    Agreement Number:
    Vehicle Registration:

    I am writing to you with reference to the above matter and your letter dated [DATE]. Please note that liability in relation to the alleged outstanding balance for excessive damage to the vehicle is denied.

    The vehicle was maintained in a reasonable condition throughout the period of the agreement and therefore such damage charges you are claiming would amount to fair wear and tear; the vehicle does not need to be returned to you in any better condition other than a reasonable one. Photographic evidence was taken prior to the vehicle being transferred to you which clearly shows that the vehicle was in a reasonable condition. The onus is on you to prove that the alleged damage caused was more than reasonable fair wear and tear.

    Notwithstanding the above, I have paid circa [XX%] of the total amount payable and any alleged damage to the vehicle would be covered by these additional payments.

    [USE THE EITHER THE PARAGRAPH ABOVE OR BELOW]

    Notwithstanding the above, I am prepared to pay a reasonable sum of [£XXX.XX] relating to the [DESCRIBE WHAT COSTS ARE FOR].

    In any event, such sums you are alleging to be owed may only be recovered by a court order only and should you wish to pursue this matter in court, your application will be strongly defended.

    Please confirm by return that you agree to the payment above / this matter is now closed.

    Yours faithfully,


    [NAME]

    ---------------------------------------------------------------------------------------------

    Response to lender disputing collection charges

    Dear Sir/Madam,

    Re: Voluntary Termination

    Agreement Number:
    Vehicle Registration:

    I am writing further to your letter dated [DATE].

    I am under no obligation to pay any fees for the collection of the vehicle. The Consumer Credit Act 1974 explicitly states that, my liability under the agreement is limited to half the total amount payable and any terms under the agreement which imposes additional liability directly or indirectly is strictly prohibited by the Act. As such, I shall not be paying any collection fees.

    May I remind you that I wrote to you on [DATE] confirming termination of the vehicle, allowing 14 days for you to collect the vehicle. Should you refuse to collect the vehicle after the 14 day period has expired, I shall therefore cancel the remaining tax and insurance and return the V5C document to the DVLA informing them that you are now the registered keeper of the vehicle, and any subsequent liability shall rest with you.

    I would therefore urge you to arrange collection of the vehicle at the earliest opportunity to avoid any issues with the vehicle. Alternatively, I am happy to deliver the vehicle to a specific location provided that you confirm in writing to agree to pay all reasonable fees in doing so.

    Yours faithfully,

    [NAME]
    Last edited by R0b; 14th July 2016 at 15:17:PM.

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