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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.
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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:
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,
