Catch 22 car insurance

[Mr.Shanahan]

I have just VT'd my car finance and bought a new car. The insurance is over £500 cheaper through another provider so I called Hastings to enquire about cancelling.

what they are telling me is that they want to charge £55 admin fee if I wanted to cancel and.... Get this... £220 to pay off the loan they took out to pay my full years premium before they will let me cancel!!

so, for me to cancel, I will have to pay them £275, basically tying me in, because let's face it... If you pay insurance monthly, you might not have enough money in the bank to get out.

How can this be legal? Is there anything I can do?

[enquirer]

Re: Catch 22 car insurance

I... £220 to pay off the loan they took out to pay my full years premium ...

The loan that they took out?

[Mr.Shanahan]

Re: Catch 22 car insurance

Looks like there is a credit policy in my car insurance. But how can a company get a loan out in my name when I didn't want a loan? I buy car insurance and I get a loan that ties me in!!

where is the advertising standards there. And how can car insurance be a fair business if you choose to pay on a monthly basis? you have to pay for the entire year, so even if you find a better deal on the market, you can't take advantage, because it costs more to cancel!

is there a trading standard or fair trade act that prevents unfair competition?

[enquirer]

Re: Catch 22 car insurance

An admin fee on cancellation is now common, so that is probably legitimate. But if you take out an insurance policy and pay the price from your own resources, how can there be said to be any loan?

[Mr.Shanahan]

Re: Catch 22 car insurance

The loan that they took out?

Well, I didn't want a loan, I wanted car insurance

You essentially get a loan to cover the insurance policy for the year, meaning that when you cancel you have to pay off the loan.

Like I say above. Once your in, your not getting out. A bit unfair!

[Mr.Shanahan]

Re: Catch 22 car insurance

I battering on about this, but I'm reeling to the point that I'm foaming at the mouth.

wasnt PPI torn to bits because you bought a product that wasn't needed or wanted as part of the product you were actually buying?

this feels very much similar. Basically asking for me to pay for an insurance policy in full, even though its no longer needed as the insurance is covered by a loan. I no longer need the product, so why do I need to continue to pay for it in full?

[labman]

Re: Catch 22 car insurance

Hang on folks, and forgive me if I'm wrong, but I think I can see the issue here.

When you pay your car insurance in monthly premiums you take out a credit agreement with a third party company. They pay your finance company the premium and then collect the monthly installments plus interest from you. You have to sign a copy of this for the monthly finance to go ahead. In effect this is a one yeaar loan.

Obviously when you cancel, there is a sum outstanding here. The thrid party loan provider will lose interest, but there will be a settlement fee as with any finance agreement. In addition, your insurance company charges an admin fee for the cancellation.

It is all geared heavily against the consumer, and makes it hardly worth cancelling your policy. I'm in a similar situation myself and trying to decide whether to cancel or not. It seems very unfair. To us it is very unfair, but sadly I believe it is all perfectly above board.

If you find out differently, please let me know!

[Mr.Shanahan]

Re: Catch 22 car insurance

To us it is very unfair, but sadly I believe it is all perfectly above board.

agreed, but wasn't PPI perfectly legal and above board at one point. Could there be a legal argument that you have been sold insurance that doesn't suit your circumstances?

I mean, people are going to buy new cars, and the insurance industry must know that other providers offer cheaper insurance depending on the motor, so by forcing you to be bought in for the year negates my ability to get a fair deal if I do change my car.

So the 'unfair terms in consumer contracts regulations 1999' act



Regulation 5
(1)[n 3] defines the principle of unfair:
If a contractual term has not been individually negotiated[n 4] and
the term causes significant imbalance in the parties rights and obligations, then
the term is contrary to the requirement of good faith.
"Has not been individually negotiated" encompasses terms of which the consumer has not had the opportunity to mould. Terms that have been individually negotiated are outside this regulation, while other contract terms may be within the regulation.[n 5]
"Causes significant imbalance". For a term to be deemed unfair, this requires the term to be to the detriment of the consumer and benefit the seller or supplier to an excessive degree.
"Contrary to good faith". In the complex case of Director General of Fair Trading v First National Bank,[2] the bank's seemingly unfair interest term was found to be in good faith as the term guarded the bank from a possible situation of receiving no interest defeating their business objective.



Schedule 2 sets out an indicative, non-exhaustive list of terms that would be unfair.

Regulation 8.
(1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term.


So by making me have to pay off the outstanding balance tying me in, the contract is binding on me. Remember, this is an insurance policy that I'm buying. The loan is a by product.

[wales01man]

Re: Catch 22 car insurance

PPI took years of legal arguments to be declared unlawful,millions of people were affected you can start your own action?

As unfair as it is if these sums are payable they were in the smallprint which you are advised to read this before ticking that you accept and then they will insure you,if you do not tick the box online or accept the terms over the phone they wont insure you in the first place.
A lesson for all read the SMALLPRINT

[labman]

Re: Catch 22 car insurance

But it doesn't does it. It just makes it tougher financially. They all offer different deals for different circumstances. I think any grounds for action would have to be based on the reasonableness of the cancellation fee. I wouldn't want to be the one bringing a test case though; not without financial backing or a lawyer wanting to fight it and win a ground making case.

[wales01man]

Re: Catch 22 car insurance

Exactly it needs a test case as do all the fees that are charged need testing in court but no one is going to take this on its all down to money whichever way you look at it.Remember the banks fought the PPI case for years god knows how much in legal fees they paid a result for the consumer a rare one at that,then again after that the Vulture claim companies come out ripping people off by charging to do a job recovering money that most people with help from forums like LB could do themselfs

[charitynjw]

Re: Catch 22 car insurance

If it is a loan, & is payable in 12 monthly payments, it would be classed as a Consumer Credit Agreement, wouldn't it?

[labman]

Re: Catch 22 car insurance

If it is a loan, & is payable in 12 monthly payments, it would be classed as a Consumer Credit Agreement, wouldn't it?

It is, isn't it? Mine is with a company called Panacea Finance.

[des8]

Re: Catch 22 car insurance

Well then , here we go again (lol)

If you purchase and pay up front for a 12month car insurance and after say 6 months you cancel it you will only get back from the insurers about 3 months premium. If you are paying by direct debit the finance company has paid the 12 months premium for you, and any return of premium will go to them and you will have to pay the outstanding shortfall.
The finance company also look for early settlement fee (as already pointed out above)
Then you have the "broker" (sorry now a days "intermediaries). They charge an "admin" fee of up to £75.
The Insurers and finance companies I can understand, but how these intermediaries have the nerve to impose their exorbitant charges for doing almost nothing.............
To fight what seems to be a single charge of £275 will mean breaking it down into three separate compartments...... good luck.

[charitynjw]

Re: Catch 22 car insurance

So, possible 'hidden' fees?

Plus the Consumer Credit Directive warn against exorbitant fees.

& then there's the 'unfair relationship' aspect..........