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Excess Mileage Charges Following Voluntary Termination of PCP - Response to Claim

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  • Excess Mileage Charges Following Voluntary Termination of PCP - Response to Claim

    Hi Group,

    I was wondering if you could advise on a recent communication with Audi Financial Services around charges applied to a VT. As per your website, I emailed challenging their position, however, they have responded with the below. I would be curious as to whether you had any information on the Mercedes Case, as after googling, I can find little reference. Any advice on a response I could provide to them would be appreciated. I have attached below both my original challenge and their response. Thanks in Advance.

    Dear Mr. H

    Thank you for contacting Audi Financial Services, we are sorry you had cause to raise concerns. Following your recent contact with us, we now consider your complaint as resolved.

    We understand things go wrong sometimes and we thank you for providing us with the opportunity to resolve this.

    Following our call on 15 May 2019, I advised;

    You have referred to section 100 of the Consumer Credit Act 1974 (the “Act”) but have failed to note that section 99 (2) explicitly states that “Termination of an agreement under subsection 1 [the right to terminate] does not affect any liability under the agreement which has accrued before the termination.

    The section where it states you only have to pay 50% of the total balance and there will be nothing further owing is in relation to the monthly payments, in the paragraph before this, it refers to excess mileage.

    In regards to the Mercedes-Benz case, our legal team has been in contact with Mercedes-Benz and they are unable to locate any information on the case you refer to.

    We have applied excess mileage charges based on 11.4 of the signed terms and conditions The agreement was voluntary terminated and therefore, the mileage was pro-rated.

    Our agreements are drafted by leading Counsel in consumer credit and therefore we are confident that they are not inconsistent with the Act.

    ************************************************** ************
    My Original Challenge:

    I am writing further to your letter dated 2nd May 2019 claiming excess mileage charges against the vehicle.

    Although the hire-purchase agreement refers to excess mileage being charged on a pro-rated basis in the event that the agreement ends early, you will know that the agreement is subject to and regulated by, the Consumer Credit Act 1974 (“CCA 1974”). Therefore, the hierarchy of laws dictate that Acts of Parliament (in this case the CCA 1974) takes precedence over any common law contract. This is further clarified in Section 173 of the CCA 1974 confirming that contracting out of the Act is strictly forbidden and any attempts to do so will render the relevant contractual provision void and unenforceable.

    Under the CCA, I presume you believe you are able to recover excess mileage charges in addition to one half of the total price payable under Section 100(1). With respect to that view, it is simply wrong for a number of reasons:
    • The correct interpretation is that sums already paid under the agreement cannot be recovered and not, as you suggest, to allow recovery of further sums under the agreement prior to its termination. Historically, Sections 99 and 100 were introduced for the protection of the debtor against excessive minimum payment clauses as well as those who were in debt, and the halfway rule was seen to strike a balance. On the other hand, your interpretation of Section 99(2) would imply that not only would excess mileage charges apply, it would also extend to any other costs or expenses under the agreement, the result of which, would effectively render the limited liability principle under Section 100 useless.
    • In the consultation paper, A Consultation on Voluntary Termination of Hire Purchase and Conditional Sale Agreements Under the Consumer Credit Act 1974, 2 September 2004, URN 04/1557 (enclosed is an extract of this document), the paper sets out a basic definition of voluntary termination:

      “Sections 99 and 100 of the CCA permit a customer who has purchased goods on a HP agreement or CS agreement to hand back the goods to the finance company and have no further liability under the credit agreement provided at least 50% of the total amount due under the agreement has been paid. This is called voluntary termination (“VT”).”

      and

      “At the time of termination the customer is liable for any amount that has not been paid under the original agreement up to a maximum of 50% of the total amount due to be paid under the Agreement.”
    • Further to the above, the intention of Section 100(1) is to act as a backstop in that it serves as a limitation of liability for the benefit of the debtor. It imposes a statutory limit on the amount of liability owed by the debtor to the creditor under a hire-purchase agreement which is defined as one half of the total price payable. “total price” is defined (see Section 189) as, “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”. This position is also aligned with the voluntary termination protection statement you referred to under the Consumer Credit (Agreement) Regulations 2010 and as set out on the first page of the agreement.
    • In a recent County Court case between Mercedes-Benz Financial Services (UK) Limited v Cahalane (Willesden County Court, 26 February 2018) District Judge Ellington (as she was then) held that excess mileage charges were not recoverable. Her reasons included, that the definition of total price excluded the recoverability of these charges, the statement “Termination: Your Rights” was explicitly clear that liability was limited and, in any event, she was bound by the Court of Appeal decision in Julian Hodge Bank v Hall [1997] EWCA Civ 1852, which established that “total price” excludes compensation and damages for breach of the agreement for the purposes of calculating the total price payable.

      It is clear from the above that upon exercising my voluntary termination right, the ability to recover any sums exceeding one half of the total price payable no longer exist. Had I not exercised this right, and instead continued the agreement until the hire period expired and opting to return the vehicle, then the excess mileage charges would have applied as the limited liability rule would not be engaged.

      With regards to Section 100(4), the duty is to take reasonable care of the vehicle and to avoid any negligent act or omission that causes physical damage to it whilst in my possession. I have yet to see any evidence from Audi Financial Services which indicates that the excess mileage has resulted in physical damage beyond reasonable wear and tear. I would also point out that the same point was raised in the Mercedes-Benz case and failed on the basis that there was no correlation between the excess mileage and a failure to take reasonable care of the vehicle.

      I would appreciate your comments to the above and together with any evidence you have in your possession. In the absence of a substantive response, I have nothing further to add and consider this matter to be closed.

      Yours faithfully,
    Tags: None

  • #2
    There is no senior Court authority that answers this point either way.

    They argue the excess charge accrues before termination, that may be right, however the sum only crystallises once you have terminated, you only get told after the termination t akes place, so i would argue they are wrong

    Here is a money box show where i set out my views https://www.bbc.co.uk/programmes/b09nqnxd
    I work for Roach Pittis Solicitors. I give my free time available to helping other on the forum and would be happy to try and assist informally where needed. Any posts I make on LegalBeagles are for information and discussion purposes only and shouldn't be seen as legal advice. Any advice I provide is without liability.

    If you need to contact me please email me on Pt@roachpittis.co.uk .

    I have been involved in leading consumer credit and data protection cases including Harrison v Link Financial Limited (High Court), Grace v Blackhorse (Court of Appeal) and also Kotecha v Phoenix Recoveries (Court of Appeal) along with a number of other reported cases and often blog about all things consumer law orientated.

    You can also follow my blog on consumer credit here.

    Comment


    • #3
      It's a template response from Audi and their reference to leading counsel drafting the clause is just a red herring. There's a number of barristers I know who have drafted clauses and they've not been upheld in court so it really comes down to interpretation. As PT has said, even if it accrues before termination it only crystallises after the agreement has ended but that was one of the reasons made by the judge (see extract below).

      What is the total price under the Agreement?

      13. Turning then to the second limb of the claimant's argument which is whether the charge for excess mileage was part of the amount due under the agreement. That has to fail in my judgment as well. The reasons are that I cannot accept the claimant's submission that the excess mileage charge was rolling throughout the contract. It is true on the terms of this agreement that excess mileage became payable at the least as soon as 40,000 miles were exceeded on the claimant's submissions, but only if the defendant terminated the agreement by returning the car. It did not accrue at the point at which any mileage was exceeded, but it only accrued by crystallising on termination of the contract.

      14. I am supported in this conclusion by the factual interpretation of the agreement itself and in particular to the natural reading of the first page which has a heading "default charges" and refers first to additional interest for any payment which is late, and at the end includes the term which I have already recited.

      15. Further, I am bound by the authority of Julian Hodge Bank v Malcolm John Hall. Although that case was dealing with penalties for interest on late payments, as well as other charges which applied for sending letters following a breach of the agreement, I consider that it is of assistance to me in reaching my decision.

      16. In any event the definition of total price, in relation to which the defendant refers to section 189 of the Act, 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, and I find that these excess mileage charges do not fall to be included within the definition of total price set out there. I am supported in that by the wording in the agreement itself, which details the total amount payable as the figure of £29,711.68 and includes a box which says "Termination. Your rights", and sets out there that: "We will be entitled to the return of the goods and to half the amount payable under this agreement" - that is £14,855.84. So, bearing in mind those conclusions on the terms of this agreement and in the light of the interpretation I have given it, the claim has to fail.
      In regards to the Mercedes-Benz case, our legal team has been in contact with Mercedes-Benz and they are unable to locate any information on the case you refer to.
      Suspect they are playing dumb with that answer, I'm sure they are fully aware since they instigated the claim.
      If you have a question about the voluntary termination process, please read this guide first, as it should have all the answers you need. Please do not hijack another person's thread as I will not respond to you
      - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
      LEGAL DISCLAIMER
      Please be aware that this is a public forum and is therefore accessible to anyone. The content I post on this forum is not intended to be legal advice nor does it establish any client-lawyer type relationship between you and me. Therefore any use of my content is at your own risk and I cannot be held responsible in any way. It is always recommended that you seek independent legal advice.

      Comment


      • #4
        Originally posted by R0b View Post
        It's a template response from Audi and their reference to leading counsel drafting the clause is just a red herring. There's a number of barristers I know who have drafted clauses and they've not been upheld in court so it really comes down to interpretation. As PT has said, even if it accrues before termination it only crystallises after the agreement has ended but that was one of the reasons made by the judge (see extract below).




        Suspect they are playing dumb with that answer, I'm sure they are fully aware since they instigated the claim.
        There will be a day when someone pushes these into court and we get a definitive answer
        I work for Roach Pittis Solicitors. I give my free time available to helping other on the forum and would be happy to try and assist informally where needed. Any posts I make on LegalBeagles are for information and discussion purposes only and shouldn't be seen as legal advice. Any advice I provide is without liability.

        If you need to contact me please email me on Pt@roachpittis.co.uk .

        I have been involved in leading consumer credit and data protection cases including Harrison v Link Financial Limited (High Court), Grace v Blackhorse (Court of Appeal) and also Kotecha v Phoenix Recoveries (Court of Appeal) along with a number of other reported cases and often blog about all things consumer law orientated.

        You can also follow my blog on consumer credit here.

        Comment


        • #5
          Yep, I'm there will be PT.

          Still confident that the correct interpretation is the one as made out by the judge in the Mercedes case when you take everything into account but I guess we will see.

          I'm actually of the view that 99(2) is a term of art rather than the ordinary dictionary definition meaning of "accrued" otherwise the LoL under 100(1) is pretty much redundant.

          I'm surprised that if the likes of Audi and co. are that confident that the charges are enforceable, should be an easy win yet I'm not aware of any reported claims being issued but not to say there isn't.
          If you have a question about the voluntary termination process, please read this guide first, as it should have all the answers you need. Please do not hijack another person's thread as I will not respond to you
          - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
          LEGAL DISCLAIMER
          Please be aware that this is a public forum and is therefore accessible to anyone. The content I post on this forum is not intended to be legal advice nor does it establish any client-lawyer type relationship between you and me. Therefore any use of my content is at your own risk and I cannot be held responsible in any way. It is always recommended that you seek independent legal advice.

          Comment


          • #6
            Originally posted by R0b View Post
            It's a template response from Audi and their reference to leading counsel drafting the clause is just a red herring. There's a number of barristers I know who have drafted clauses and they've not been upheld in court so it really comes down to interpretation. As PT has said, even if it accrues before termination it only crystallises after the agreement has ended but that was one of the reasons made by the judge (see extract below).




            Suspect they are playing dumb with that answer, I'm sure they are fully aware since they instigated the claim.
            rob - thanks for your reply, can you advise or provide a link as to where your extract came from? I will respond to Audi advising the accrual only crystallised after the termination, however, the provision of the above extract may assist.

            Also - do you know where I can find any public information on the Mercedes case, the power of google seems to be failing me.

            Thanks for your help - will keep everyone posted. Many Thanks

            Comment


            • #7
              Check your PM.

              County Court cases aren't generally reported unless you order a transcript of the case.
              If you have a question about the voluntary termination process, please read this guide first, as it should have all the answers you need. Please do not hijack another person's thread as I will not respond to you
              - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
              LEGAL DISCLAIMER
              Please be aware that this is a public forum and is therefore accessible to anyone. The content I post on this forum is not intended to be legal advice nor does it establish any client-lawyer type relationship between you and me. Therefore any use of my content is at your own risk and I cannot be held responsible in any way. It is always recommended that you seek independent legal advice.

              Comment


              • #8
                Hi,

                Just wondering what the final outcome was or is the case still ongoing?

                I am in a similar situation with PSA Finance - Citroen.

                Comment


                • #9
                  Originally posted by Lucy101 View Post
                  Hi,

                  Just wondering what the final outcome was or is the case still ongoing?

                  I am in a similar situation with PSA Finance - Citroen.
                  Its unreported sadly and its not a judgment of a senior Court, so technically not binding on County Courts.
                  I work for Roach Pittis Solicitors. I give my free time available to helping other on the forum and would be happy to try and assist informally where needed. Any posts I make on LegalBeagles are for information and discussion purposes only and shouldn't be seen as legal advice. Any advice I provide is without liability.

                  If you need to contact me please email me on Pt@roachpittis.co.uk .

                  I have been involved in leading consumer credit and data protection cases including Harrison v Link Financial Limited (High Court), Grace v Blackhorse (Court of Appeal) and also Kotecha v Phoenix Recoveries (Court of Appeal) along with a number of other reported cases and often blog about all things consumer law orientated.

                  You can also follow my blog on consumer credit here.

                  Comment


                  • #10
                    Hi, just been reading through this thread, and was wondering if there is clarity regarding whether the excess mileage does or doesn’t need to be paid? About to go through this and not sure what my rights are.
                    many thanks

                    Comment


                    • #11
                      Hi,

                      ive just Voluntarily Terminated my PCP and BMW Finance are threatening to report to the credit reference agencies that I owe £937 for excess mileage even though my agreement is marked as satisfied on my credit report, can they still effect my credit rating or is it empty threats?

                      i look forward to hearing from someone.

                      kind regards

                      Comment


                      • #12
                        I am going through the same with BMW finance. They referred me to a debt collector who have now taken my credit score right down. On reading some of the comments on here, it looks like they’ve breached data protection! I’ll be raising that. I just want it all to be over though!

                        Comment


                        • #13
                          Hi Garyh1975 - sorry for bringing this thread back up but would really appreciate to hear where you got to with your case? I'm in a similar situation to yours, i.e. received excess mileage charge following a VT.

                          Many thanks in advance

                          Comment

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