Voluntary Termination of Car Finance

[DJ-1988]

Re: Voluntary Termination of Car Finance

It seems they may have got the wrong end of the stick and completely ignored section 173. Here's what is says, key points highlighted in red:



In plain English, it is simply saying that where a debtor has terminated under s.99 of the Act and their liability is restricted to that amount, any terms within the contract is void and unenforceable which attempts to impose further liability above the amount paid. Statute law prevails over contract law.

An authoritative book, Goode on Consumer Credit Law and Practice says the following:
S.100 CCA 1974


There is also an example and further explanations in the Law Society book on Consumer Credit, I have a copy of the relevant sections will upload later when I have the chance. However they simply have no leg to stand on really in reclaiming the amount back. There is already case law out there which confirms liability is restricted. This is why lenders wanted this clause removed and almost did!

Having re-read the email they sent me, apart from them bringing something completely irrelevant into it (I didn't mention the fact I paid over 50% of the agreement), aren't they saying that the excess mileage charge was accrued before the termination of the agreement, therefore falling into section 99, subsection 2 making it a liability, thus getting around the clause stating there is nothing further to pay?

[R0b]

Re: Voluntary Termination of Car Finance

Having re-read the email they sent me, apart from them bringing something completely irrelevant into it (I didn't mention the fact I paid over 50% of the agreement), aren't they saying that the excess mileage charge was accrued before the termination of the agreement, therefore falling into section 99, subsection 2 making it a liability, thus getting around the clause stating there is nothing further to pay?

I don't want to be too technical so will try to put in layman's terms ... The word accrue to me in this case would mean regular payments or something done but not yet invoiced. So if for example, a delivery fee was charged on top of your finance amount, this would be something that has been accrued but not yet invoiced. If you failed to make a monthly payment of £200 and were given notice of default and you then decided to terminate your agreement, knowing you've already paid over 50% the £200 would be something that has been accrued prior to the termination.

In my eyes the excess mileage wouldn't have accrued until after the termination of the agreement and not prior to it? Why? because they didn't inform you or invoice you until after you handed the car back, therefore s173 CCA kicks in. However, in theory if the finance co decided to check the mileage after each year, found you to be over the mileage and then invoiced you for it, that would be something that has been accrued prior to termination. Also, what if you have 2 cars within the household, 3 months left of the agreement and then you decide not to use it anymore as the mileage is close to the agreement amount? The lender wont know what the mileage is until they receive the car and therefore cannot be deemed to have accrued until they are in receipt. Suppose the point I'm trying to make is that s.173 prevents them enforcing a term where the debtor exercised his right to terminate which is capped at a certain amount.

Obviously these guys who you are writing to are unlikely to be legally trained so they're probably just spouting out what they have been told or what they think, which is back up by the fact they have told you that the 50% is irrelevant, well that is not true is it because the effect of you VT'ing restricts your liability to the 50% or whatever you have paid and no more.

Rover Finance v Siddons 2002: County court case where the judge held that the debtor's liability is restricted to 50% when the agreement is terminated.

First Response Finance Limited v Donnelly 2006: Facts are not relevant to your case but this is where First Response issued default notice, then terminated the agreement after failed payment and recovered the full sum. Defendant argued that she was entitled to cap of 50% under s.99 CCA but the judge disagreed and confirmed that the 50% cap extended only in circumstances where the debtor has terminated the agreement.

These cases are only county court and are not binding, the Rover case is probably considered bad law in terms of the judgment but the point raised in both Rover and First Response is that where the debtor exercises rights under S.99 then that liability will be capped at 50% or whatever they have paid over this amount, they cannot incur any further liability.

I am sure that if this went higher up the courts, the decision would be something as follows:

Where the creditor terminates the agreement due to non payment after following all notices such as default (note that a debtor could still VT once received a default notice and then pay up to the 50% mark) then the creditor will be entitled to the full amount remaining on the contract including any excess mileage charges as if the contract had been fully performed.

Where the debtor has terminated under s.99 then liability is restricted to what is set out in s.99 and s.100 of the CCA 1974. Again, I suspect the court would say what I have said above in relation to accrual prior to termination because the excess mileage wont be known until after termination of the agreement. Excess mileage could be argued that the car is not in a reasonable condition but they would need a dam good argument and plenty of evidence.

[zacky boy]

Re: Voluntary Termination of Car Finance

Hi am about to enter into a voluntary termination of car finance. I am sure I meet all the criteria. I have tried to find the letter template you posted, without any success. I am new to this forum, and have yet to find my way round. is there any info on how to bring up the letter template. regards zacky boy

[R0b]

Re: Voluntary Termination of Car Finance

Hi am about to enter into a voluntary termination of car finance. I am sure I meet all the criteria. I have tried to find the letter template you posted, without any success. I am new to this forum, and have yet to find my way round. is there any info on how to bring up the letter template. regards zacky boy

Dear Sirs,

Re: Voluntary Termination of Agreement

Agreement number:
Make/Model:

I am writing to notify you that I wish to invoke my statutory right to voluntarily terminate the Agreement in accordance with section 99 of the Consumer Credit Act 1974 with immediate effect.

Please note that I shall allow 14/21 days form the date of this letter to enable you to collect the vehicle before I intend to cancel any insurance and tax on the vehicle. If you have failed to collect the vehicle by [14/21 days from letter], any liabilities incurred shall be borne by you.

Please confirm by return of your receipt of this letter and I would be grateful if you could contact me on [NUMBER] to arrange collection of the vehicle.

Yours faithfully,

NAME

----

Something short and simple above, tweak as you wish

[DJ-1988]

Re: Voluntary Termination of Car Finance

I don't want to be too technical so will try to put in layman's terms ... The word accrue to me in this case would mean regular payments or something done but not yet invoiced. So if for example, a delivery fee was charged on top of your finance amount, this would be something that has been accrued but not yet invoiced. If you failed to make a monthly payment of £200 and were given notice of default and you then decided to terminate your agreement, knowing you've already paid over 50% the £200 would be something that has been accrued prior to the termination.

In my eyes the excess mileage wouldn't have accrued until after the termination of the agreement and not prior to it? Why? because they didn't inform you or invoice you until after you handed the car back, therefore s173 CCA kicks in. However, in theory if the finance co decided to check the mileage after each year, found you to be over the mileage and then invoiced you for it, that would be something that has been accrued prior to termination. Also, what if you have 2 cars within the household, 3 months left of the agreement and then you decide not to use it anymore as the mileage is close to the agreement amount? The lender wont know what the mileage is until they receive the car and therefore cannot be deemed to have accrued until they are in receipt. Suppose the point I'm trying to make is that s.173 prevents them enforcing a term where the debtor exercised his right to terminate which is capped at a certain amount.

Obviously these guys who you are writing to are unlikely to be legally trained so they're probably just spouting out what they have been told or what they think, which is back up by the fact they have told you that the 50% is irrelevant, well that is not true is it because the effect of you VT'ing restricts your liability to the 50% or whatever you have paid and no more.

Rover Finance v Siddons 2002: County court case where the judge held that the debtor's liability is restricted to 50% when the agreement is terminated.

First Response Finance Limited v Donnelly 2006: Facts are not relevant to your case but this is where First Response issued default notice, then terminated the agreement after failed payment and recovered the full sum. Defendant argued that she was entitled to cap of 50% under s.99 CCA but the judge disagreed and confirmed that the 50% cap extended only in circumstances where the debtor has terminated the agreement.

These cases are only county court and are not binding, the Rover case is probably considered bad law in terms of the judgment but the point raised in both Rover and First Response is that where the debtor exercises rights under S.99 then that liability will be capped at 50% or whatever they have paid over this amount, they cannot incur any further liability.

I am sure that if this went higher up the courts, the decision would be something as follows:

Where the creditor terminates the agreement due to non payment after following all notices such as default (note that a debtor could still VT once received a default notice and then pay up to the 50% mark) then the creditor will be entitled to the full amount remaining on the contract including any excess mileage charges as if the contract had been fully performed.

Where the debtor has terminated under s.99 then liability is restricted to what is set out in s.99 and s.100 of the CCA 1974. Again, I suspect the court would say what I have said above in relation to accrual prior to termination because the excess mileage wont be known until after termination of the agreement. Excess mileage could be argued that the car is not in a reasonable condition but they would need a dam good argument and plenty of evidence.

Cheers for this Rob, it is extremely helpful. Sorry for the delay, I have been quite busy so have only just had chance to review it. I have also written a reply. Could you have a look and let me know if I am right with how I word things, before I send it back to them.

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I write with reference to your email dated 8^th December 2015.
Reading through your last email, I feel you have missed the point of my previous letter. I was not disputing anything to do with paying in excess of over 50% of the agreement, as I am aware this would not be taken into account with regards to any liability.

I was in fact drawing your attention to Section 173 of the CCA, which states the following:

“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.”

This means that when I terminated under Section 99 of the CCA, my liability is restricted to that amount (which in this case is 50% of the agreement, as stated in section 99). Any terms within the contract which attempts to impose further liability above the amount paid is void and unenforceable. As this is a statute law, it prevails over contract law.

An example of case law of this coming into effect is Rover Finance v Siddons 2002, where the judge held that the debtor’s liablity is restricted to 50% when an agreement is terminated under Section 99 of the CCA.

With this in mind, I again politely request that you confirm this matter is now closed.

Kind Regards,

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Again, many thanks for your help, it is greatly appreciated. From what you are saying RMS are just trying it on to recoup as much money as possible from me.

[R0b]

Re: Voluntary Termination of Car Finance

Cheers for this Rob, it is extremely helpful. Sorry for the delay, I have been quite busy so have only just had chance to review it. I have also written a reply. Could you have a look and let me know if I am right with how I word things, before I send it back to them.

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

I write with reference to your email dated 8^th December 2015.
Reading through your last email, I feel you have missed the point of my previous letter. I was not disputing anything to do with paying in excess of over 50% of the agreement, as I am aware this would not be taken into account with regards to any liability.

I was in fact drawing your attention to Section 173 of the CCA, which states the following:

“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.”

This means that when I terminated under Section 99 of the CCA, my liability is restricted to that amount (which in this case is 50% of the agreement, as stated in section 99). Any terms within the contract which attempts to impose further liability above the amount paid is void and unenforceable. As this is a statute law, it prevails over contract law.

An example of case law of this coming into effect is Rover Finance v Siddons 2002, where the judge held that the debtor’s liablity is restricted to 50% when an agreement is terminated under Section 99 of the CCA.

With this in mind, I again politely request that you confirm this matter is now closed.

Kind Regards,

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

Again, many thanks for your help, it is greatly appreciated. From what you are saying RMS are just trying it on to recoup as much money as possible from me.

That's fine, send it off and see what they say

[DJ-1988]

Re: Voluntary Termination of Car Finance

That's fine, send it off and see what they say

They're quick on the ball when it's via email it seems. I have just received a response:

Section 99.2 below states ‘Termination of an agreement under subsection (1) does not affect any liability under the agreement which has accrued before the termination.

Also in case Rover Finance v Siddons 2002, the judge rules that the copy of the agreement was very poor. Also the vehicle was repossessed and not voluntary terminated as in your case.

So, Section 100 subsection (4) of the CCA applies, as it stipulates that ‘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.’ This is further extended in section 101 subsection (2) Whereby “Termination of an agreement under subsection (1) does not affect any liability under the agreement which has accrued before the termination” . Any sums due to under that agreement that is accrued during the period of said agreement and fall due during the Voluntary Termination process is to be paid in excess or the 50% Value.

You are focusing on only 1 section, section 173, when several sections of the CCA override one or the other.

[R0b]

Re: Voluntary Termination of Car Finance

Their interpretation of s.173 is poor and is quite clear that aside from taking reasonable care of the goods, they cannot impose additional liability. Therefore if they intend to rely on you failing to take reasonable care, then they need to provide evidence as to why the goods have not reasonably been taken care of.

First Response v Donnely confirmed by the judge that where the debtor terminates liability restricted to s.99 and in any event regardless of who terminated first the judge still clarified that if a debtor terminates the agreement liability is restricted, if liability wasn't restricted then lenders wouldn't have lobbied for the removal of it.

The attachment on this post should answer the accrual before termination and also that they should provide evidence as to why you failed to take care of the goods.

They may wish to seek legal advice as the person responding to you has no clue!

EDIT: @DJ-1988 sorry uploaded now

[DJ-1988]

Re: Voluntary Termination of Car Finance

Their interpretation of s.173 is poor and is quite clear that aside from taking reasonable care of the goods, they cannot impose additional liability. Therefore if they intend to rely on you failing to take reasonable care, then they need to provide evidence as to why the goods have not reasonably been taken care of.

First Response v Donnely confirmed by the judge that where the debtor terminates liability restricted to s.99 and in any event regardless of who terminated first the judge still clarified that if a debtor terminates the agreement liability is restricted, if liability wasn't restricted then lenders wouldn't have lobbied for the removal of it.

The attachment on this post should answer the accrual before termination and also that they should provide evidence as to why you failed to take care of the goods.

They may wish to seek legal advice as the person responding to you has no clue!

EDIT: @DJ-1988 sorry uploaded now

Cheers for this Rob. I will try to write something that states all this. I think they are going to argue that there is a clause in the contract which states the following:

"You may end the vehicle element of this agreement by taking the steps set out in the notice 'Termination: Your Rights' shown at the front of this agreement. You must then at your own expense return the vehicle to us along with the registration document, tax disc and MOT test certificate. You will then be liable to pay half the total amount payable under the Agreement. In the event that the vehicle has exceeded the maximum total mileage, you must pay us the Excess Mileage Charge for each mile covered in excess. See Clause 14"

They will then say that section 99 sub section 2 allows them to charge me as it is still seen as a liability.

Maybe I am over thinking, I just want to be prepared for what arguments they come back with.

[R0b]

Re: Voluntary Termination of Car Finance

Your line of defence is under s189 (definitions).

"total price" means the total sum payable by the debtor under a hire-purchase or a conditional sale agreement ... but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement

So, as per s100, you only pay the total price of one half the amount payable and any sums due in respect of the total price immediately before termination.

Again, your liability is set out under the agreement and is clear that it restricts it to 50% of the total amount payable, and does not include any damages for breach of the agreement e.g. excess mileages.

[DJ-1988]

Re: Voluntary Termination of Car Finance

Hi Rob,

I have actually looked into the Rover case more thoroughly, and after a while of scratching my head at the transcript, I actually understand it. I have written a reply, would appreciate if you could have a look over this for me and give me any pointers before I send it off (sorry, it's a long one).

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The excess mileage charge is not accrued before termination. It is accrued upon termination, therefore does not come into effect. The only liability affected by Section 99 subsection 2 of the CCA is if I was in arrears, which I was not. I have also taken reasonable care of the goods, as verified by the condition report of the vehicle.

Regarding Rover v Siddons 2002 case, it is irrelevant as to whether the copy of the agreement was poor, the Judge even clarified this in the transcript (I have copied the relevant quote below):

“Unfortunately the copy agreement is very poor and I delayed judgment in this case to enable the Claimant to produce the original finance agreement to me. This cannot be done as the original agreement was so old it has been destroyed. It is therefore almost impossible for me to read clause 6.
However, it appears to me irrespective of the detailed wording of clause 6 of the Finance Agreement that the Defendants submissions have some merit.”

It also doesn’t matter that this case was based on a repossession rather than voluntarily terminated, as this ruling was made in spite of it being a repossession, as per the transcript:

“The Defendant did not terminate under S99 (although he would have been entitled to up to the end of the agreement and certainly as at the time when the Claimant terminated). The provision under S100 therefore doesn't automatically come into play, ie the Defendant would pay ½ total price as calculated.”

The reason I have quoted this case as it shows that, even though the consumer was actually in breach of the agreement (fell behind with payments) which meant that the finance company terminated the agreement, the court ruled that the liability to the consumer was limited to 50% of the total cost of the agreement, and any clauses under the agreement that imposed additional liability was an unenforceable penalty clause.

Again, I quote the relevant section of the transcript below:

“…Substantial arrears are a repudiatory breach of the agreement and the absolute maximum which can be claimed is the sum calculated in accordance with S100(1) less payments. A minimum payment clause (which is apparently what claim 6 of the Finance Agreement is) is unenforceable as it imposes a greater penalty than that set out in S100.
The Unfair Terms in Consumer Contract Regulations include as examples clauses which impose financial penalties and which are therefore considered unfair.
Therefore in my view the debtor has discharged his liabilities to the Claimant and the claim is dismissed.”

I ask you to take this into account the above, and I again politely request that you confirm that this matter is now closed.

Kind Regards,

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[R0b]

Re: Voluntary Termination of Car Finance

To be honest, and no disrespect to what you have written but I wouldn't even bother going into great detail on the Rover case. As I said previously I would consider the judgment of Rover as bad law because the creditor terminated the agreement not the debtor and I think if similar facts went to court where the creditor terminated the agreement, I'd be inclined to say that the debtor would be liable for all outstanding balance inc. excess mileage and anything else (as similar to First Response). The focal point of Rover and First Response is that both judges acknowledged that if the debtor terminates the agreement in accordance with s.99 then liability is restricted as such (just so happened in Rover the judge accepted this point where the debtor or creditor terminated).

Anyway, here's my suggested response

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Dear Sirs,

I must respectfully disagree with your latest response.

The facts of the Rover case are irrelevant however it was highlighted in the judgment that a debtor's liability upon exercising their right to terminate in accordance with s.99 of the CCA 1974, shall be limited to 50% of the total amount payable under the agreement. This was also affirmed in the later case of First Response v Donnelly.

It seems to me that you appear to rely upon s.100(4) by failing to take reasonable care of the goods. Unfortunately you have yet to provide any substantive evidence that the car was not reasonably taken care of and I therefore request evidence which backs up your claim. Your interpretation of subsection (2) is also incorrect as liability accrued before termination only applies to missed payments. The excess mileage clause within the contract can only be invoked after I have exercised my right to terminate under s.99 of the Act and therefore could simply not have accrued prior to termination. In any event, you are prevented from relying on the excess mileage clause by virtue of s.173 which prevents imposing further liability other than 50% of the total amount payable.

I also refer you to the interpretation of definitions under the Act at s.189, namely the definition of "total price". The Act defines "total price" as "the total sum payable by the debtor under a hire-purchase or conditional sale agreement ... but excluding any sum payable as a penalty or as compensation or damages for breach of the agreement". The Act is therefore explicit insofar as liability of the debtor and confirms that the creditor cannot impose any additional sums for breach of the contract where the debtor has exercised his right to terminate. Accordingly, any charge for excess mileage is void despite your insistence that it is owed.

In light of the above, please acknowledge that this matter is now closed. If however, you continue to disagree then please treat this email as my final response and I shall not enter into any further correspondence unless you intend on issuing proceedings. I can confirm that I accept service of proceedings to the following address: [ ].

Yours faithfully,

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That would be my stance, as it will just end up like email ping pong! There's no point in arguing with someone who is going to continue to state that you owe the money regardless of what the Act says. If you are not comfortable with this then tweak as you see fit.

[DJ-1988]

Re: Voluntary Termination of Car Finance

Hi Rob,

No offence taken. I don't have any experience in law, you are obviously a lot more knowledgeable in this area than I am. I probably got carried away, because I actually understood the Rover case and could begin to relate my situation with it, in that regardless of what it says in the T&C's of the agreement, if I terminated under Section 99 my maximum liability would only be 50% of the total cost.

I will ping this off and see if anything comes back. I'm getting bored of the emails to be honest, as he clearly doesn't read what is put in them.

I have changed the end bit to read:

In light of the above, please acknowledge that this matter is now closed. In the event that you continue to disagree please treat this email as my final response and I shall enter into no further correspondence unless you intend on issuing proceedings.
If you wish to issue proceedings, please respond to this email stating you wish to do so, and I will confirm an address where I can accept service of said proceedings in return.

As we may be moving and I don't want to confirm the address unless I know proceedings are imminent, as they might get served to the wrong address. Is this ok to substitute into it?

[R0b]

Re: Voluntary Termination of Car Finance

The wording is fine, they should only be serving proceedings to your last known address which is is where the letters have been sent originally. Just be mindful though that some lenders can try to be sneaky so if you do decide to move, I would suggest you inform of your new address and use the forwarding post service from Royal Mail for the first month or so just in case something does come up that could be missed.

[DJ-1988]

Re: Voluntary Termination of Car Finance

Cheers Rob,

Have sent it to them. Will let you know of any outcome. In any case I want to document as much as possible on here to help anyone else out who may be in a similar situation. It is amazing that you spend your own time on here helping others out who may not fully understand the CCA and what protection it offers them. I am extremely thankful for your efforts so far!