PSA VT excess mileage and damages a little help please

[sihartley]

Hi I am hoping to get a little advice on what the next step to take is please?
So far the notice VT was sent and accepted.
The car was dropped at a local auction site for inspection. I received a copy of the report which highlighted two smart repaired alloys and a small dent ( not visible on photos that small). I had exceeded the mileage allowance by 20 k over the almost three years.
I received several letters the first stating that the damage was outside of fair wear and tear and a charge of £168 would be added. No images or breakdown were supplied. It also requested £1008 for excess mileage.
I sent the reply template letter stating costs were unrecoverable under the CCA and that as I had paid £97 over the 50% required to VT that would cover any alleged damage. I asked for a specific breakdown with supporting images to compare with my own CAP assesment and images. To date I have not received this.
Over the last couple of weeks we keep getting demands for payment account in arrears etc.
Today I received the attached letter.
What I would like to know is what is my next step from here?
Also in the original agreement the excess mileage charges are different to what PSA are asking for strangely they are actually asking for lower.
Any help would be appreciated.
Thanks Lauren

[R0b]

Make a formal complaint to the FOS?

You'll then get a template letter saying that they are looking into all cases of excess mileage and will get back to you when they have made a decision.

Alternatively, you can pay up on the excess mileage charges or just ignore everything and see what happens.

I have an example complaint template lying around somewhere I will hunt around and see if I can find it.

[R0b]

Here's an example you can send to the FOS by email.

[sihartley]

Thanks fort he fast response. That template would be greatly appreciated if you can find it.
They appear to contradict themselves in the letters I get. Would it be worth pointing the contradictions out in My complaint? I guess they aim to confuse people, and almost bamboozle them into paying up.
I’m quite happy to humour them for now see how it plays out!
thanks again Lauren

[R0b]

See above post.

You will need to delete whatever isn't applicable to your complaint.

[sihartley]

Thanks again for that. I had literally clicked post and seen your reply. That’s brilliant thank you. I’ll keep the forum informed of any developments.

[sihartley]

i have a copy of the template emailed to the FOS. Is there any benefit or need of informing PSA finance i have filed a complaint against them? thanks

[R0b]

Probably best to notify them so that they are on notice of what you've done. The FOS may take some time to get in touch with them and if they do anything that harms you in the meantime, they can't argue that they weren't aware.

Of course you don't have to notify them, but then you can't have your cake and eat it.

[sihartley]

Good morning Rob. The latest developments are I have informed PSA of my complaint to the Fos. I am still waiting for the Fos to respond to my complaint. Today I received the letter from PSA passing the case to a third party collection agency.
Is there anyway of checking the status of my complaint to the Fos? It said in the response email it could be up to 10 days but it’s way over that now. Also am I correct in thinking I don’t have to Enter into correspondence with any third party agency, as I have no contract with them? Thanks

[sihartley]

Just a quick update for the forum.
After 2 years of PSA sending letters trying to recover the excess mileage and the financial ombudsman looking into my case I have finally received an outcome.
PSA have no case any markers will be removed from credit score account is now closed. If I had paid they would have owed me back plus 8% interest. Stick with it guys don't be bullied by these car finance companies you can win.
Thanks alot to Rob and everyone who gave advice on here.

[R0b]

Thanks for the update. Would you mind sharing the FOS' decision as it sees they are not keeping their decisions consistent and I'm curious what these decisions are based on.

[sw28]

Hi There,

Unlike the poster above, the FOS seems to be inconsistent with my decision (see FOS response below, partly redacted...). I'd issued all of Rob's template letters to BMW FS nearly 18 months ago and then lodge the complaint with the FOS.

Any ideas or help of how to rebut the decision made by the FOS would be greatly appreciated. I have until the 7th July to respond. Thanks in advance. S.
Complaint

Mr S complains that they have been charged for excess mileage when they exercised their right to voluntary termination to end their vehicle finance agreement.



Background



In March 2017 Mr S acquired a vehicle that was financed by a hire purchase agreement with BMW Financial Services (GB) Limited (“BMW”).



The agreement Mr S entered into with BMW set out that Mr S’s maximum total mileage was 32000 miles and their annual mileage was 8000 miles, and if these were exceeded, the excess mileage charge would be 5.55p per extra mile travelled.



The agreement also set out Mr S had the right to end the agreement, and in the event they chose to do so, BMW would be entitled to return of the goods and to half the total amount payable under the agreement, which was specifically noted in the agreement as being the sum of £x thousands of pounds.



In November 2019 Mr S exercised their right under section 99 of the Consumer Credit Act (“CCA”) to voluntarily terminate the agreement with BMW. BMW sent Mr S a voluntary termination pack including a form for them to complete and return. The termination pack noted the possibility of an excess mileage charge being payable if the mile allowances had been exceeded.



Mr S proceeded with the termination and returned the vehicle to BMW. On 2x December 2019 BMW wrote to Mr S confirming that as they had exceeded their mileage allowance by x miles, they were required to pay an excess mileage charge of £1,xxx.xx.



Mr S disagrees that the excess mileage charge is due. They refer to section 100 of the CCA, which they says means that their liability under the agreement with BMW is restricted to one half of the total price payable, which in this case is £1x,xxx.xx. And, as they’ve already paid this amount in monthly repayments, and the shortfall of £1,xxx.xx when they terminated the agreement, BMW is not able to require them to pay any more. To resolve this complaint, Mr S would like the excess mileage charge to be waived.



BMW disagrees. Responding to Mr S’s complaint on xx January 2020 it stated that the excess mileage charge occurred prior to termination of the agreement and therefore Mr S remains fully liable for this charge. It also stated the finance is calculated taking into account the depreciation of a vehicle based on the annual mileage selected. As Mr S has exceeded the mileage they predicted and agreed to at the point of sale, BMW deem them not to have taken reasonable care of the vehicle.



Relevant Considerations



In determining a complaint, the Ombudsman is required to consider all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of the case. In doing so, the Ombudsman is required to take into account relevant law and regulations, regulators’ rules, guidance and standards, codes of practice and (where appropriate) what they consider to have been good industry practice at the time.



In my view the following are relevant considerations that must be taken into account in this case:



Section 99 of the CCA refers to a consumer’s right to terminate a hire purchase or conditional sale agreement by giving notice. It states:



“99. Right to terminate hire-purchase etc. agreements.

(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 of the CCA sets out the consumer’s liability on termination:



“100 Liability of debtor on termination of hire-purchase etc. agreement.



(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…”



“(3) If in any action the court is satisfied that a sum less than the amount specified in subsection (1) would be equal to the loss sustained by the creditor in consequence of the termination of the agreement by the debtor, the court may make an order for the payment of that sum in lieu of the amount specified in subsection (1).



(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…”



Section 173 of the CCA stipulates that a lender cannot rely on any provision in a credit agreement which is inconsistent with the CCA or any regulation made under the CCA:



“173. Contracting-out forbidden.



(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 of the CCA provides definitions of words and terms used in the CCA. “Total price” is defined as:



““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...”



The Consumer Credit (Agreements) Regulations



Section 60 of the CCA 1974 empowers the Treasury to make regulations as to the form and content of documents embodying regulated agreements, including regulations to ensure that the debtor is made aware of the rights and duties conferred or imposed on them by the agreement and of the protection and remedies under the CCA.



Accordingly, the Treasury made the Consumer Credit (Agreements) Regulations 2010 (the Regulations). The Regulations include the following requirements:

• Under Regulation 3(1) and Schedule 1, that the regulated agreement contain a statement explaining (1) how and when the debtor can terminate the agreement under section 99 CCA; and (2) the debtor’s maximum liability under section 100 (“the Explanatory Information”); and

• Under Reg. 3(4) and Schedule 2, a statement of the protection and remedies available under the CCA in the form of a notice, as follows:

“TERMINATION: YOUR RIGHTS

You have a right to end this agreement. To do so, you should write to the person you make your payments to. They will then be entitled to the return of the goods and to… half the total amount payable under this agreement, that is £x**. If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more.



** Creditor to insert the amount calculated in accordance with the provisions of section 100 of the Act or such lesser sum as the agreement may provide.”



(the “Termination Rights Notice”)



The wording the Regulations require creditors to use for the Termination Rights Notice is prescriptive and must be followed.



The Financial Conduct Authority (FCA)



The FCA principles also apply and of particular relevance to this complaint are:



Principle 7



“A firm must pay due regard to the information needs of its clients, and communicate

information to them in a way which is clear, fair and not misleading”



The FCA’s Consumer Credit Sourcebook (CONC) rules apply. And so it’s relevant to take these into account. Of particular relevance to this complaint are:



CONC 2.3.2



A firm must explain the key features of a regulated credit agreement to enable the customer to make an informed choice as required by CONC 4.2.5 R (adequate explanations).



CONC 4.2.5



(1) Before making a regulated credit agreement the firm must:



a) provide the customer with an adequate explanation of the matters referred to in (2) in order to place the customer in a position to assess whether the agreement is adapted to the customer’s needs and financial situation;....



(2) The matters referred to in (1) (a) are:



a) the features of the agreement which may make the credit to be provided under the agreement unsuitable for particular types of use;



b) how much the customer will have to pay periodically and, where the amount can be determined, in total under the agreement;



c) the features of the agreement which may operate in a manner which would have a significant adverse effect on the customer in a way which the customer is unlikely to foresee.



The Hire Purchase Agreement



The hire purchase agreement sets out Mr S’s contractual obligations. The following are the key clauses which, in my view, need to be considered in this case.



On the first page of the agreement, under “Excess Mileage Charges” the agreement states:



“

Annual mileage	XX000 Miles
Maximum Total Mileage	XX000 Miles
Charge Per Excess Mile	5.55 Pence Per Mile

We will charge you 5.55pence for each mile in excess of the Maximum Total Mileage. If you return the Vehicle before the end of the agreement, the Total Maximum Mileage will be reduced to reflect the shorter period of hire on a pro-rata basis. Your obligation to pay any Excess Mileage Charge will accrue immediately prior to termination.”



On the second page of the agreement, (towards the bottom), the agreement states:



“Termination: Your Rights:



You have a right to end this agreement. To do so, you should write to the person you make your payments to. They will then be entitled to the return of the goods and to half the total amount payable under this agreement that is £1x,xxx.xx. If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more.



This means that you can terminate this agreement at any time before your final repayment falls due by giving us written notice. You will have to return the Vehicle and pay (i) any arrears and any other sums which have become payable under the agreement before the termination (including any Excess Mileage Charge), plus (ii) the amount (if any) by which one-half of the total amount payable exceeds the amount paid by you including the advance payment plus (iii) if you do not return the Vehicle in good repair and condition, the sum required to compensate us for this. This will be your maximum liability if you comply with these requirements.”



The Explanation Document, which Mr S signed before entering the agreement, states the following about excess mileage under “What other fees and charges will you have to pay?”:



“Excess mileage charges will be payable if you exceed the maximum contract mileage. These are shown in the Pre-contract Credit Information and the credit agreement. In the case of early termination, the maximum contract mileage will be pro-rated for the period you have held the agreement and excess mileage charges will be payable on the pro-rated figure. It is your responsibility to provide us with an accurate estimate of your predicted mileage in order to ensure that any excess mileage charge is calculated accurately.”





My Findings



The legal position



In my view, the first question here is whether charges for excess mileage are legally enforceable on voluntary termination. To answer this, the starting point is to consider what charges section 99 and section 100 of the CCA permit a creditor to charge on voluntary termination.



I note the following two starting points from my review of the sections:



(1) liabilities that accrue before termination, are deemed by section 99(2) CCA not to be affected by termination, and



(2) “total price” does not include charges for items that are payable as compensation for breaches of the agreement (this is because under section 189(1) CCA, compensation for breach of an agreement is to be excluded from the “total price”) As a consequence of this, when a business calculates the consumer’s liability under section 100(1) CCA the figure calculated is exclusive of any compensation that might also be due for breaches.



So to determine whether the charges for excess mileage are legally enforceable in Mr S’s case, I firstly need to think about when the charges were accrued under the agreement, and whether they are payable as compensation for breach of the agreement so don’t fall to be included in “total price”.



When did the excess mileage charges accrue under the agreement?



On the first page of the agreement, under the heading “Excess Mileage Charges” the agreement sets out that “any Excess Mileage Charge will accrue immediately prior to termination” (full clause set out above).



I think this wording makes it clear that the charges for excess mileage accrued before Mr S terminated the agreement, and the charges are therefore, pursuant to section 99(2) CCA, not affected by termination.



Are the charges payable as part of the “total price” or payable for breach?



It is necessary to decide whether the excess mileage charges are payable as compensation for breach of the agreement, on the one hand, or simply as an additional part of the price of hire on the other.



Again referring to the section headed “Excess Mileage Charges”, the agreement sets out that “We will charge you 5.55pence for each mile in excess of the Maximum Total Mileage. If you return the Vehicle before the end of the agreement, the Total Maximum Mileage will be reduced to reflect the shorter period of hire on a pro-rata basis. Your obligation to pay any Excess Mileage Charge will accrue immediately prior to termination.”



The agreement does not say anywhere that Mr S must not exceed the maximum total mileage or the maximum annual mileage. The significance of those terms seems to be to identify how far the vehicle can be driven before additional sums become payable. Similarly, the phraseology that the maximum “we will charge” is neutral, rather than prohibitive. So I consider that the agreement allows Mr S to exceed the applicable annual and/or total mileage but provides that the stated charges will be payable by them should they do so. The excess mileage charges are not, in my view, payable as compensation or damages for breach of the agreement.



As excess mileage charges are sums payable under the agreement, and are not compensation or damages for a breach of the agreement, if and when they are incurred by Mr S they will fall within the definition of “total price” under section 189. For the same reason, excess mileage charges that have accrued before a voluntary termination count towards “the sums due in respect of the total price immediately before termination” under section 100(1).



Section 173 of the CCA



Section 173 of the CCA refers to Contracting-out forbidden and essentially renders a contractual term void if it is inconsistent with the protections set out in the CCA or regulations made under the CCA. But my view is that this doesn’t apply to charges that are permitted by section 99(2) and/or section 100 unless they contravene some other protective provision.



As already referred to above, I’m satisfied that the excess mileage terms of Mr S’s agreement do accrue before termination as allowed by section 99(2) and, when they are incurred, fall within the total price of the of the agreement referred to in section 100. I’m not therefore persuaded that those sections of the CCA have been contravened such that section 173 renders the excess mileage terms of Mr S’s agreement void.



Are they payable for failure to take reasonable care of the vehicle?



I have also considered section 100(4) of the CCA. Under this section, if the debtor has failed to take “reasonable care” of the goods, the creditor is able to increase the amount owed under section 100(1) CCA in order to compensate for this breach. So for completeness, I have also considered whether in driving more miles than was allowed under the agreement, Mr S has failed to take reasonable care of the vehicle.



I note that under the agreement, charges accrued for excess mileage are dealt with separately to charges for repairing the vehicle if it is not returned in “good repair and condition”. So the agreement has separate contractual regimes for excess mileage and damage caused from lack of care for the goods. I also note the agreement does not set out that exceeding the maximum mileage will be a failure to take reasonable care of the vehicle.



In light of the terms of the agreement, it is my view that in Mr S’s case, driving more than the maximum mileage does not constitute a failure to take reasonable care of the vehicle as asserted by BMW.



What sum was due under section 100(1)?



So, before considering the impact of the Regulations and the Termination Rights Notice, my view is that the excess mileage charges accrued before Mr S terminated the agreement and when they were incurred they counted towards the total price. As such, I believe that the application of section 100(1) gives a termination liability calculated as follows:



Total price before excess mileage £2x,xxx.xx

Excess mileage £1,xxx.xx

Total price £2x,xxx.xx

X 50% = £1x,xxx.xx

(Less

(instalments previously paid by/ due from Mr S) £1x,xxx.xx

(other amounts due in respect of the total price) (£x,xxx.xx)



Total (£xxx.xx)*



* i.e. a negative figure: the calculation required by s.100(1) does not produce any payable excess.



Section 100(1) liability of Mr S £ none



Total accrued liability under s.99,

plus liability for early termination under s.100 £1,xxx.xx



So, before considering whether the Termination Rights Notice changes the position, I believe

That Mr S’s termination liability should be £1,xxx.xx.



There seem to me to be two ways in which potentially the Notice might change the position:

first, the Regulations which require the inclusion of the Notice in the agreement may amount to a protection for debtors (here, a limit on what Mr S can be required to pay) that the parties cannot contract out of; second, the Notice may be contractually binding.



So, with those issues in mind, I next turn to whether the charges calculated above are still

properly chargeable notwithstanding the Termination Rights Notice included in the agreement and the Regulations which required its inclusion in the agreement.



Are the charges properly chargeable, notwithstanding the Regulations?



I again set out in full the Termination Rights Notice as provided in the agreement:



“Termination: Your Rights



You have a right to terminate this agreement. To do so, you should write to the person you make your payments to. They will then be entitled to the return of the goods and to half the total amount payable under this agreement, that is £1x,xxx.xx. If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more.



This means that you can terminate this agreement at any time before your final repayment falls due by giving us written notice. You will have to return the Vehicle and pay (i) any arrears and any other sums which have become payable under the agreement before the termination (including any Excess Mileage Charge), plus (ii) the amount (if any) by which one-half of the total amount payable exceeds the amount paid by you including the advance payment plus (iii) if you do not return the Vehicle in good repair and condition, the sum required to compensate us for this. This will be your maximum liability if you comply with these requirements.”





The wording of the Termination Rights Notice (the first paragraph) is strictly prescribed by the Regulations, and I note that it would appear inconsistent with any provision for excess mileage charges not payable for failure to take reasonable care of the vehicle, because the Notice states the maximum sum payable upon voluntary termination and makes no reference to excess mileage charges increasing that sum.



However, in my view, sections 99 and 100 of the CCA specify here what can and cannot be charged. The relevant notice requirements under Regulations do not impose any cap on the liability of debtors that is not found in the CCA itself. Rather their purpose is an attempt to draw to debtors’ attention to the protections which they enjoy under the CCA. So, I think that it is section 99 and section 100 of the CCA that specify what liabilities are payable on voluntary termination, and not the prescribed contents of the notice required by the Regulations. For that reason, I consider that it is possible for a contractual term, perhaps one requiring payments for excess mileage, to require payment in excess of the sum in the Termination Rights Notice without the term being inconsistent with a provision for the protection of the debtor (within section 173(1)) and without imposing a liability that exceeds that which is specified by the CCA or Regulations (under section 173(2)). So, I don’t believe that the excess mileage charges in the agreement, if they are contractually due on a voluntary termination, amount to an attempt to contract out of the Regulations in a way that is caught and avoided by section 173.



So, whilst the Termination Rights Notice is capable of amounting to a binding contractual term under which the creditor agrees not to impose excess mileage charges on termination, this is only the case if it is not qualified or negated by the other terms of the agreement.



I have thought about whether the explicit sum set out in the Termination Rights Notice represents the true agreement between Mr S and BMW in relation to termination but having done so, I’m not persuaded it does. The second paragraph of “Termination: Your Rights” in my view is clear and unambiguous. This indicates that Mr S will need to pay any excess mileage charge, in addition to other sums that may also be due. I find it makes it clear to Mr S that excess mileage charges are payable on voluntary termination.



Regulatory considerations



I have also thought about BMW’s regulatory obligations under the Principles and CONC. I’ve not seen anything to indicate Mr S had any prior discussions with BMW or the broker about whether the excess mileage charges would be due on voluntary termination. Having considered the terms of Mr S’s agreement I’m not persuaded that BMW failed to provide adequate explanations around, amongst other things, the amounts due under the terms of the agreement.



As referred to above, I accept that the Termination: your rights section of the agreement could conflict with other terms of the agreement but as a whole, I don’t think the agreement is unclear or misleading in any way that could have prejudiced Mr S.



The Ombudsman’s fair and reasonable remit



After taking all of the relevant considerations into account, the Ombudsman is required to determine what is fair and reasonable in all the circumstances of the case. So, taking all of the above into account, I need to think about this in light of the circumstances of Mr S’s case and whether it is fair and reasonable for BMW to impose the charges for excess mileage in all the circumstances of the case.



For the reasons set out above I’m not persuaded that the provisions of the CCA would have prevented BMW from seeking payment of the excess mileage charge from Mr S upon voluntary termination, if that is what had been contractually agreed. I’m satisfied the terms and conditions of the agreement between Mr S and BMW permitted BMW applying the full excess mileage charge when Mr S voluntarily terminated the agreement.

Next steps I think this is a fair outcome in the circumstances, for the reasons I’ve explained. But if you decide that you don't accept what I’ve said, then please let me know by 7 July 2021. If I can’t resolve things then an ombudsman here can look at everything again and make a final decision. If I don’t hear from you by that date we might not be able to look at your complaint again.