Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Invoice

[Bravo_Mike]

I have recently gone down the path of Voluntary Termination with VWFS under the auspices of the Credit Consumer Act. The current situation is that the vehicle has been inspected and collected. An invoice for £356.40 "Vehicle refurbishment" and £748.12 "Excess Mileage" has been issued.

In response to this I used the Template for disputing excess mileage as posted by R0b on this forum on 23rd August 2017 @ 16:36:PM (Thanks R0b).

I have since received a letter stating that the contract was drawn up by Counsel and their decision is that:

"Clause 11 [Of the contract - see below] is worded to ensure that liability for the excess mileage occurs prior to termination and therefore you remain fully liable for any excess mileage which is over and above that which you had originally selected. Our agreements are drafted by Leading Counsel in consumer credit and therefore we are confident that they are not consistent with the Act.

I confirm you* complaint has not been upheld and we expect payment in accordance with our original invoice sent to you. (*again their typo)

The letter is unsigned with no name in the signature block.

So firstly, I would be grateful for advice as to whether the clause is indeed "not consistent with the Act"?

Secondly, I have not received a breakdown from VWFS regarding the damage although I have a post-inspection report from the BCA agent at the time of the inspection. (Two items I concede whereas 'stone-chips x 3' I would suggest are fair wear and tear) The 3 year old vehicle was otherwise in very good condition with all paperwork supplied.

Clause 11 is worded as follows:

11.1 If the vehicle covers more than;
- the maximum annual mileage in any succeeding period of 12 months starting from the making of this agreement and/or

- the maximum total mileage;
you will be liable to pay us excess mileage charge shown on Page 1. That liability will accrue with each mile covered by the vehicle in excess of those mileages. You must discharge that liability be* paying us on demand. (*Their Typo not mine)

11.2 If you have paid excess mileage charges in relation to the maximum annual mileage we will deduct this amount from any excess mileage charges payable in relation to the maximum total mileage.

11. If this agreement terminates early, we will reduce the maximum total mileage in the proportion which the actual period of hire bears to the period of hire originally agreed. Any excess mileage charge will be recalculated using that reduced maximum total mileage.

Any advice would be gratefully received,

B_M

[R0b]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

Hello,

From what I can digest its this part of the clause that I think they will be referring to:

That liability will accrue with each mile covered by the vehicle in excess of those mileages. You must discharge that liability be* paying us on demand.

At a glance, it would seem that this satisfies the requirement of section 99(2) in so far as liability has accrued before termination. On the other hand, there are three possibilities that could arise to counter this clause:

1. Is the clause too vague and uncertain therefore unenforceable for lack of clarity? Perhaps but I couldn't say for certain and is probably the weaker of the arguments.

2. The clause amounts to an unfair penalty. The clause may be an unfair term in that it could be construed as a penalty but that might be subject to what the excess mileage charge is. For example, if you exceed by 10,000 miles at 10p per mile, that's £1,000. But if the car still has a good retention value notwithstanding the excess mileage and that sum of money exceeds what might represent the car's reasonable valuation (in effect VWFS profiteering) then it could be deemed a penalty and unenforceable. You would have to show some kind of evidence to thise.g. car valuation websites.

3. Despite the wording of the clause, section 99(2) refers to the words 'liability accrued before termination'. The intended purpose of this clause was to prevent hirers from exercising the right to VT and then recovering sums paid over and above the 50% already paid. As the excess mileage has not yet been paid/invoiced it is not yet due because there is no demand. Furthermore, it is still a form of liquidated damages (a pre-agreed amount at the time of entering the agreement) for breach of the agreement and/or compensation which is specifically excluded under section 100 of the CCA once the VT right has been triggered.

So to summarise this point, the excess mileage charges still amounts to damages for breach of the agreement or alternatively compensation which, if not demanded before termination, means that they cannot recover the sum of money by virtue of section 100(1). These can be complex arguments for the ordinary person, but it seems like VWFS have wisely changed their terms and conditions in relation to excess mileage to try and recover that sum.

[Bravo_Mike]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

Hi R0b,

Many thanks for putting time and effort into this response. I am thinking that on this occasion it would require a significant specialist input into arguing this point. Whilst I am not particularly happy as to the way that VWFS have handled this, what would remain would be a complaint to the Ombudsman but I am guessing they would take a view on VWFS' compliance with the regulations rather than a contractual/legal viewpoint regarding liability?

I don't intend to labour this point but any advice you can offer wold be appreciated,

Regards,
M_B

[R0b]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

Hi R0b,

Many thanks for putting time and effort into this response. I am thinking that on this occasion it would require a significant specialist input into arguing this point. Whilst I am not particularly happy as to the way that VWFS have handled this, what would remain would be a complaint to the Ombudsman but I am guessing they would take a view on VWFS' compliance with the regulations rather than a contractual/legal viewpoint regarding liability?

I don't intend to labour this point but any advice you can offer wold be appreciated,

Regards,
M_B

The law on voluntary termination is pretty much all legislative so unless you can get your head around what the provisions actually say, it's always going to be a difficult task to put that argument forward. Having re-read the clause again, the wording itself seems to be a bit of a red herring and I'm not entirely convinced this changes anything at all. It's really about the substance of the clause i.e. its intended purpose and not the form i.e. what it says.

When you look at the first sentence of section 100(1) it says that any agreement which is terminated in accordance with section 99, the debtor shall be liable for xyz. In simple terms, think of it as a condition where you have to ask, did I comply with section 99(1)? If the answer is yes, then your liability is going to be limited according to section 100. Even if they tried to argue that section 99(2) applies I can't see how it's relevant because as soon as you terminate, section 100(1) steps in to limit that liability - that was the whole purpose of the provision and whilst the lender might complain that they suffer a detriment in terms of the devaluation of the car, it is up to Parliament to change the law on voluntary termination, not the courts.

As for the FOS, yes they seem to be on the side of the lenders these days but hopefully some cases might crop up and shed some light at some point in the future.

[Bravo_Mike]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

Hi R0b,

Again, thanks very much. Taking into consideration your comments and VWFS' demand for payment by 17/11/17, I have drafted the following letter. Would it be possible for you to review this and offer any advice as to it's suitability for this dispute please? I understand I have already asked a lot of you so understand if this is not possible.

I am writing further to your letter dated 3^rd November 2017.

Your letter which contained typographic errors and was not signed, suggested I had raised a complaint regarding the Excess Mileage Fees. You will note that my letter actually stated that the outstanding balance for excess mileage was denied, this is not a complaint, I was stating my position on the fact but I will reiterate my position for you.

Excessive Mileage
In Clause 11.1 it states that the charges apply when accrued prior to termination, however since the demand for those charge was not received prior to termination and the excess mileage had not yet been paid/invoiced, it is not yet due because there was no demand. Therefore, this is considered to be a form of liquidated damages imposed for breach of the agreement and/or compensation, which is specifically excluded under section 100 of the CCA, once the VT right has been triggered.

The excess mileage charges still amount to damages for breach of the agreement or alternative compensation where not demanded before termination in accordance with section 100(1).

Additionally, apart from the fact that the clause is particularly vague and ambiguous, I should point out that the Audi Salesman did not ask me to select mileage based upon my current or potential annual mileage, the advice was that monthly repayments are reduced where a lower mileage is selected. This was a big incentive for me to agree the selected mileage.

Refurbishment Costs
You will also note that my previous letter stated that as no evidence was provided as to how the “Refurbishment Costs” relate to the vehicle being anything other than in reasonable condition as required by the CCA. The BCA assessment was made against the BVRLA, “Fair Wear and Tear Guide” and does not actually state that reasonable care was not taken of the vehicle. As previously stated to you, the vehicle was handed back in a very good condition with extensive photographic evidence available to demonstrate the point.

Once again I must inform you that In any event, such sums you are alleging to be owed may only be recovered by a court order only and should you wish to pursue this matter in court, your application will be strongly defended.

Please confirm by return that this matter is now closed?

[R0b]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

I've uploaded a consultation document by the DTI back in 2004 when it considered removing the right to VT before the implementation of the 2006 CCA changes, though fortunately it managed to survive despite heavy lobbying from the motor finance industry. It is useful in one sense because it provides a background to the legislation in simple terms and you could argue that this is the government's understanding of how the right to VT works and what you are liable for - I've quickly written something up that you may want to slot in or adapt to suit your needs in your response.

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

I attach a copy of a 2004 consultation carried out by the Department for Trade and Industry (as it was then) on the law of voluntary termination. I would specifically draw your attention to the heading "What is Voluntary Termination" which can be found at page five of the document. You will see that the government confirms that the provisions of sections 99 and 100 of the Consumer Credit Act 1974 allow the debtor to hand back the vehicle and limit their liability to "50% of the total amount due under the agreement".

I also refer you to page six and the heading "Legislative Background" which provides further details of these provisions. The fourth bullet point explicitly states that, "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." (emphasis added). It is therefore very much clear that when sections 99 and 100 were enacted, Parliament intended that:

(1) the debtor under a hire purchase or conditional sale agreement would have an indefeasible right to terminate the agreement prior to the final payment becoming due; and
(2) the overall effect of termination means that the debtor's liability is restricted to one half of any amount due under the agreement; but
(3) any payments that have already been made, including any sums over and above one half of the total amount under the agreement, will not be recoverable - this is actually the effect of section 99(2) which you seek to rely on.

P.s. you might want to emphasis that prior to you giving notice of termination, there was no outstanding arrears or charges so you cannot see how these sums became due prior to termination - the clause they refer is only triggered on demand, and if you validly exercise your right to terminate before those sums become due, their right is lost and any demand following termination is of no effect (as per section 173 of the CCA).

[JazzJPH]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

Hi Bravo_Mike - how did you get on with this situation?

[Bravo_Mike]

Re: Voluntary Contract Termination - Subsequent Excess Mileage and Vehicle Refurb Inv

Hi JazzJPH,

I wrote back to VWFS on 17/11/17 with the arguments discussed in this thread, reiterating that there is nothing owed but I have yet to receive any response at all from them. I planned to update this thread once I heard back from them.

Regards,
B_M.

[Bravo_Mike]

Update 26/01/2018. Today I received a letter dated 17/01/2018. It was not so much a response to my reply, it is a Reminder Notice to bring my account up to date to avoid a default notice being issued!!

[Bravo_Mike]

***Update*** After hearing nothing for nearly a year, VWFS have now passed this t a debt collection agency. So do I need to respond to them or await further action that they are threatening to take against me?