GAP insurance and VT HP Finance

[DaniRTurner]

Hi,

I took out a Fiat 500 on HP in November 2013 and therefore only have 2 payments left. I have already purchased a new car and am trying to VT my Fiat 500, but this is proving tricky! My finance company, FCA, are not very helpful. They say I owe £115.99 in GAP insurance. When I looked at my HP agreement yesterday, the total price for the GAP insurance was £299.00 plus £50.08 interest. After paying my finance for nearly 4 years, how can I still owe £115 in insurance!

Any help would be greatly appreciated!

Many thanks

Dani

[Amethyst]

Do you have a copy of your HP agreement you can post ? It was a 5 year agreement ?

Would it not work out financially better to pay the final two payments then hand the car back ? ( presumably there's a balloon payment at the end if you wanted to keep it?)

IS the GAP insurance listed separately on the agreement - it may well have been exactly the same way as your actual purchase credit ( which seems daft tbh )

[DaniRTurner]

Hi Amethyst

Please see attached - it was a 4 year agreement due to end November 2018.

I only want to end it early as I have now bought a car and wanted to save myself a couple of payments. I pay £171.84 per month.

Thank you

[Amethyst]

Thanks for that, so the GAP insurance would be £106 in the balloon bit then your two monthly payments of £5 so the amount is right - it's been spread over the agreement in the same way as the actual car loan - I can't make out if there is a figure given for the VT ( and thus whether it includes the GAP ) I have a feeling ( R0b will know for certain ) that the GAP is separate so has to be paid regardless of the VT, but there have been arguments against it I think. You'd end up saving about £245 by VT'ing if there's no other issues then.

Hopefully R0b will look in later today anyway

[DaniRTurner]

That's great, thank you for your help.

Just another question, If I continued to pay the instalments until the contract end and the handed the car back, would I still then need to pay the £115 GAP insurance that is included in the balloon payment?

[Amethyst]

Can you type out the figures from this bit, I can't quite make them out in your picture, but looks like 6015 - so just the car loan ( 12,031), not the GAP, so yes the GAP would need paying ( if you were VT'ing much earlier you'd then be able to apply to the GAP insurer for a rebate but unlikely there'd be anything worthwhile due 2 months before end )
Did you get GAP terms with your contract as well btw? Did it cover you for the full 4 years?

[DaniRTurner]

The figures is £6015.70 .

I didn't get any terms with the contract and I wasn't advised whether it would cover the 4 full years either - I'm not sure who has even provided the GAP insurance, I haven't been given any details. Literally the only documents I have are those 3 pages which I've attached.

Ive just had a call from FCA and I have still decided to VT as paying the £115 for GAP is still better than paying 2 more monthly instalments (in my opinion). They say I need to pay a collection fee of £138 - I have read on these forums about these charges and I wonder do I actually have to pay this?

Thanks

[Amethyst]

Nope. Some info here http://legalbeagles.info/forums/foru...on-your-rights

So basically if your car was written off later on today, you have absolutely no idea whether the GAP insurance would cover that balloon payment. Think that's a complaint right there if you feel you need a bargaining chip.

Hang fire before doing anything else till R0b looks in - are you alright mileage wise ( 11k a year I think your agreement is for?)

[DaniRTurner]

Ok thank you for that

Yes, only done 37,000 over the 4 years

[R0b]

Hello

I would start off by saying that the issue relates to whether or not the hire-purchase agreement is considered one single agreement, or whether the contents of the agreement is in two parts and therefore deemed two agreements e.g. an agreement for hire purchase and a separate agreement for the value added product, being the GAP insurance.

These rules are governed by section 18 of the Consumer Credit Act 1974 and the section is notoriously difficult to understand for lawyers let alone the ordinary individual. That said, there is some case law that assists us in some way and in order for the hire-purchase loan and GAP insurance to be treated as separate agreements, the question is whether the agreement, and not the credit provided under it, falls into separate categories. The categories I am referring to are fixed sum credit, restricted use credit, running account credit and unrestricted use credit.

For hire purchase agreements generally,they tend to fall into the these are fixed sum credit categories. In my view, GAP insurance also falls into the fixed sum credit categories. You could probably argue that they both fall into a restricted use credit category too. So reverting back to the question as to whether hire-purchase loan and GAP insurance fall into two different categories, the answer would appear to be no. For multiple agreements to apply, the GAP insurance would have to fall into the unrestricted use credit category, for example like a credit card as you have unrestricted use.

Therefore, the agreement as a whole are not separate agreements rather it is just one single agreement. The fact that the agreement delineates the credit for the vehicle and the GAP insurance on separate lines does not in my view alter the fact that this is one single agreement. The fact that you are paying a single monthly instalment to cover both the GAP and credit for the vehicle is a factor that points towards this being a single agreement. I am assuming the VT amount in the "TERMINATION: YOUR RIGHTS" box only refers to 50% of the total credit for the vehicle and doesn't include the GAP insurance points towards a further fact that you are only liable for that amount and nothing more. If FCA failed to incorporate the GAP insurance amount into the total price payable amount for the purposes of VT then that is their fault not yours. I am not aware of anything that restricts lenders from including other products into the total price payable for the purposes of the VT amount.

That all being said, FCA might argue that this is indeed two separate agreements and therefore the GAP insurance is owed an payable. If that were the case, then the GAP insurance would require separate documentation to have been provided to you in the same way the documentation was provided to you for the vehicle loan amount. If they did not do that then the agreement has been improperly executed and is only enforceable by an order of the Court.

I've always argued that GAP insurance, unless separate documentation is provided (which lenders are perfectly capable of doing) does not make it a separate agreement to the hire purchase.

I should caveat the above that it is purely my opinion and it is not guaranteed that my explanation is legally the right one. It is possible that someone else and/or the Courts (if legal proceedings had commenced) might come to a different decision as it is likely to turn on the facts and also the interpretation of Section 18 plus the limited handful of case law available to date.

Whether you want to pursue and defend that position is entirely up to you. You could, as an alternative, contact the GAP policy provider and see if there is any rebate available if you cancelled the policy.

[Amethyst]

Thanks R0b xx

[DaniRTurner]

Hi Rob

That makes sense. Thank you for your help.

I will make contact with the GAP insurers as I was only ever given one policy document - for the HP agreement and I think I could dispute the charge.

In terms of the collection payment, I will also use one of your template letters to argue that charge too.

Many thanks to both for your help

[DaniRTurner]

Hi R0b

I had a further email from FCA this morning after I contacted them to see who provided the GAP insurance and she sent the following reply:

"Good Morning Miss Turner,

I have attached a copy of your original signed agreement for your reference.

Within your monthly instalments you pay £5.18 per month towards your GAP insurance and the remaining £105.62 is within the balloon payment at the agreement end.

You have so far made 45 monthly instalments of £5.18 = £233.10.

There is now £115.98 left to pay towards your GAP insurance.

Kind regards".

I have attached a clearer copy of the HP agreement - I just wonder whether you could have another quick look when you get chance as to whether they are right and I do need to pay, or whether I should dispute it. I did email them asking if it was two separate agreements and to inform them I didn't receive any documents for the GAP insurance, and their reply is as above.

Many thanks again, really appreciate it

[R0b]

I'll take a look at this later but you need to remove the PDF because it contains your personal information. This is a public forum accessible by anyone so you run the risk of potential fraud - redact the personal info and upload it again.

[DaniRTurner]

Thank you