Car deposit - what's my legal position

liquidbutindebt

Hi all, need some advice before I make a legal claim against a car dealer. This is the history...

- Used an online credit broker to find a good deal on a new car
- Agreed with broker to go ahead with finance
- Had finance agreed (a Personal Contract Purchase/Balloon arrangement) by finance company. Agreement to be completed within 3 months
- Ordered car from dealer (referred to me by credit broker) and placed £500 deposit (debit card) over phone in August
- Visited dealer and placed remainder of deposit, £2500, in person and signed order form. Again paid by debit card
- Informed by dealer car would arrive mid-late October
- Car arrived at dealer late September
- Dealer invoices finance company who then says the agreement has lapsed and they need to re-approve
- Finance company did not approve finance second time around

Without the finance I am unable to purchase the vehicle. My understanding is that this is a transaction regulated by the Consumer Credit Act and is a debtor-creditor-supplier agreement and so my deposit is fully refundable. Dealer is currently refusing to refund the deposit based on the fact that the standard order form/contract states that the deposit is non-refundable.

Does anyone know my legal position on this or have a similar experience?

Thanks and regards,

LBID

Hintza

When I saw this title, I thought here we go again someone trying to wriggle out of a deposit.

I don't know is the quick answer, but I can understand the dealer trying to wriggle. You are going to have to read the small print on your contract for the finance but I think a trip to CAB might be in order. Surely the finance company was informed of when the car was due for delivery at time of purchase?

You haven't just changed your mind have you?

liquidbutindebt

No, I can assure you I haven't changed my mind. The finance company have simply refused to approve finance second time around, therefore making it impossible for me to complete the transaction. If they had approved I would have completed the purchase as expected. I would finance it in an alternative way but I can't find any deals that are as good as the one agreed at the time.

Hintza

OK.......what does your paperwork say? Surely when the agreement was made the dealer supplied all the necessary details redelivery etc? Is the finance company in breach of contract? Were there any stipulations on how long their offer was open for?

I suspect the dealer is the innocent party here so your fight will be with the finance company. The trouble is the world has changed so much since August.

Hope you get it sorted out.

DealDrivers_company_representative

There's a couple of bits not sounding quite right here: it would be unusual for a credit agreement to offer a 3mth take-up period, they are usually offered for around 4 weeks from date of quote by third-party funders, as the finance market changes so often it is rare to hold an APR and residual value open for so long. Are you sure it didn't say 'valid for 28 days' somewhere on it?
Also, was the dealer and finance company (who knew each other) both totally clear the car had to be ordered and was many weeks away, and did any of your finance paperwork imply you may need to re-check apr's etc nearer the time your transaction was due?

If the finance company had to withdraw any outstanding finance quotes while they recaluclated their apr's and residual values in the light of the economic changes then your broker should have told you that the finance would need to be re-checked due to those circumstances, and the fact you hadn't yet taken up the loan.

The problem here is that a third party finance co' was used rather than the car manuf'rs own finance scheme, so the dealer and the finance have no relation to each other whatsoever and the dealer cannot influence the decision of a third-party finance company.

The major issue I can see is that you not only paid the standard ordering deposit for the car (£500), but also handed over the full remaining deposit amount (another £2500) based on the overall deposit you'd presumably stated you'd be using when the PCP was calculated? That remaining deposit amount didn't need to be handed over until the total transaction between funder and dealer was being completed just prior delivery, when the dealer would be asking for all remaining monies to balance his books before handing the keys over...i.e. any remaining deposit from you to balance against what the funder was about to pay him for the loaned-part of the car price.

Was there some pressure from one party to ask you to hand over the full £3000 way in advance for some reason? Did anyone advise you to re-check your finance was still approved closer to delivery date?

Lemonade_Pockets

+1. But its a little bit of a grey area as you used a broker.

Was the order form made out to you or the broker? Also did it state a cash balance or a balance to finance?

In the T+C's it might say something along the lines of "In the event of the customer cancelling the order, the dealer reserves the right recover any reasonable cost's incurred from the deposit paid". If it does get the dealer to provide you with a breakdown of how £3000 in costs ordering you a new car. As this will be useful if you have to take it further.

Also just for info it is normal for Car finance companies to garauntee loans for 90 day's to allow for the cars to be built. I know Ford and Renault's respective finance companies operate on this basis. But on that point if you ordered it in Aug and were able to take delivery in Sep surely that is 60days??? So the finance company has gone back on their word!!!!

liquidbutindebt

Actually I think I have some of the dates wrong! The finance offer was definitely 90 days, but I ordered the car in July and it didn't arrive at the dealer until late November. It was definitely over the 90 days.

I don't think this has anything to do with the order itself. It has more to do with CCA 1974 and right to cancel. It is quite clear that negotiations prior to signing a credit agreement are held in the same regard with respect to right to cancel as those after signing. i.e. any party in a debtor-creditor-supplier arrangement has a right to cancel until the transaction has completed fully including any related transactions (my deposit?). The deposit is so large (in terms of transaction percentage) as to constitute a part payment. I believe this is also relevant.

I'm not sure the fact I used a broker has any consequence other than that I can reclaim the brokerage fee from them also.

Lemonade_Pockets

If the order form from the dealer was made out to you and its for a cash sale. I think you are pretty much screwed in terms of recovering the money from the dealer. (unless you can find an angle surrounding the T+C's i previously mentioned).

On re- reading your information you have no claim against the broker as all he did was refer you to the dealer. You also have no claim against the finance company as the period exceeded 90 days.

If the order form made reference to the finance then IMO it gets a lot more complicated as in my view this means that the dealer has accepted that the deal is subject to finance. If this is the case i don't know what the solution is.

Hintza

OP I'm getting more confused here the dates are now miles apart from what you initially said and you are quoting the CCA and the right to cancel how is that relevant?

LinasPilibaitisisbatman

I dont think you have any right against the finance company, they stated it was valid for 90 days and you exceeded it thus what they did was in their right.

Your contract with the dealer is seperated but he is able to recover his losses from your deposit, considering he is now stuck with your car and will have to sell it at a loss I dont think you have much hope there

You really need to seek alternate finance ASAP I reckon

liquidbutindebt

OK, here is the situation with regard to the Consumer Credit Act 1973. This is going to be a long post and is my interpretation as a lay person. I will try to point out what I think is the relevant information that applies to my situation. The first principle to establish is whether the Act applies at all. This is covered in section 56 where it talks about antecedent negotiations, or basically, negotiations entered into prior to the signing of an actual agreement.

"56. Antecedent negotiations -
(1) In this Act “antecedent negotiations” means any negotiations with the debtor or hirer —
(a) conducted by the creditor or owner in relation to the making of any regulated agreement, or
(b) conducted by a credit-broker in relation to goods sold or proposed to be sold by the credit-broker to the creditor before forming the subject-matter of a debtor-creditor-supplier agreement within section 12(a), or
(c) conducted by the supplier in relation to a transaction financed or proposed to be financed by a debtor-creditor-supplier agreement within section 12(b) or (c), and “negotiator” means the person by whom negotiations are so conducted with the debtor or hirer."

Section 56(1)c is what I'm interested in, the debtor-creditor-supplier agreement and shows that antecedent negotiations for this kind of agreement are covered by the Act. The Office of Fair Trading have a handy leaflet with a flowchart that shows you whether an agreement is of this kind. As mentioned in 56(1)c, the relevant definition is in 12(b), we will come back to this in a moment.

The next relevent section is the right to withdraw from a prospective agreement. This is covered in section 57 of the Act.

"57. Withdrawal from prospective agreement. -
(1) The withdrawal of a party from a prospective regulated agreement shall operate to apply this Part to the agreement, any linked transaction and any other thing done in anticipation of the making of the agreement as it would apply if the agreement were made and then cancelled under section 69.
(2) The giving to a party of a written or oral notice which, however expressed, indicates the intention of the other party to withdraw from a prospective regulated agreement operates as a withdrawal from it.
(3) Each of the following shall be deemed to be the agent of the creditor or owner for the purpose of receiving a notice under subsection (2)—
(a) a credit-broker or supplier who is the negotiator in antecedent negotiations, and
(b) any person who, in the course of a business carried on by him, acts on behalf of the debtor or hirer in any negotiations for the agreement.
(4) Where the agreement, if made, would not be a cancellable agreement, subsection (1) shall nevertheless apply as if the contrary were the case."

Basically, 57(1) states that if a party withdraws from a prospective agreement then it should be dealt with as if it were cancelled under section 69. The rest of the text is talking about how notice is received. As this can be done any time, and the finance company have already withdrawn, this has already been satisfied. So, section 69. This is a complicated beast, here it is followed by my interpretation.

"69. Notice of cancellation. —
(1) If within the period specified in section 68 the debtor or hirer under a cancellable agreement serves on —
(a) the creditor or owner, or
(b) the person specified in the notice under section 64(1), or
(c) a person who (whether by virtue of subsection (6) or otherwise) is the agent of the creditor or owner,

a notice (a “notice of cancellation”) which, however expressed and whether or not conforming to the notice given under section 64(1), indicates the intention of the debtor or hirer to withdraw from the agreement, the notice shall operate —
(i) to cancel the agreement, and any linked transaction, and
(ii) to withdraw any offer by the debtor or hirer, or his relative, to enter into a linked transaction.

(2) In the case of a debtor-creditor-supplier agreement for restricted-use credit financing —
(a) the doing of work or supply of goods to meet an emergency, or
(b) the supply of goods which, before service of the notice of cancellation, had by the act of the debtor or his relative become incorporated in any land or thing not comprised in the agreement or any linked transaction,

subsection (1) shall apply with the substitution of the following for paragraph (i) —

"(i) to cancel only such provisions of the agreement and any linked transaction as—
(aa) relate to the provision of credit, or
(bb) require the debtor to pay an item in the total charge for credit, or
(cc) subject the debtor to any obligation other than to pay for the doing of the said work, or the supply of the said goods".

(3) Except so far as is otherwise provided, references in this Act to the cancellation of an agreement or transaction do not include a case within subsection (2).
(4) Except as otherwise provided by or under this Act, an agreement or transaction cancelled under subsection (1) shall be treated as if it had never been entered into.
(5) Regulations may exclude linked transactions of the prescribed description from subsection (1)(i) or (ii).
(6) Each of the following shall be deemed to be the agent of the creditor or owner for the purpose of receiving a notice of cancellation —
(a) a credit-broker or supplier who is the negotiator in antecedent negotiations, and
(b) any person who, in the course of a business carried on by him, acts on behalf of the debtor or hirer in any negotiations for the agreement.

(7) Whether or not it is actually received by him, a notice of cancellation sent by post to a person shall be deemed to be served on him at the time of posting.

Firstly, 69(1) notice does not apply as the assumption of cancellation ("made and then cancelled") has been made in section 57. Section 69(2) does apply as my agreement is a supplier-creditor-agreement for restricted use credit financing. So, it's saying we need to substitute paragraph (i) in section 69(1) with some further text. This makes it read thus:

(1) If within the period specified in section 68 the debtor or hirer under a cancellable agreement serves on —
(a) the creditor or owner, or
(b) the person specified in the notice under section 64(1), or
(c) a person who (whether by virtue of subsection (6) or otherwise) is the agent of the creditor or owner,

a notice (a “notice of cancellation”) which, however expressed and whether or not conforming to the notice given under section 64(1), indicates the intention of the debtor or hirer to withdraw from the agreement, the notice shall operate —
(i) to cancel only such provisions of the agreement and any linked transaction as—
(aa) relate to the provision of credit, or
(bb) require the debtor to pay an item in the total charge for credit, or
(cc) subject the debtor to any obligation other than to pay for the doing of the said work, or the supply of the said goods
(ii) to withdraw any offer by the debtor or hirer, or his relative, to enter into a linked transaction.

So, again with the assumption that cancellation has been made, we're only really interested in section 69(1)(i) and section 69(1)(ii). I believe they (and the subsections) both apply in my case and basically state that the agreement can be cancelled.

So, what's this about a debtor-creditor-supplier agreement for restricted-use credit financing. Well, we can investigate this further under section 11 and section 12 of the Act. Here is section 11.

"11. Restricted-use credit and unrestricted-use credit. —
(1) A restricted-use credit agreement is a regulated consumer credit agreement —
(a) to finance a transaction between the debtor and the creditor, whether forming part of that agreement or not, or
(b) to finance a transaction between the debtor and a person (the “supplier ”) other than the creditor, or
(c) to refinance any existing indebtedness of the debtor’s, whether to the creditor or another person,

and “restricted-use credit” shall be construed accordingly.

(2) An unrestricted-use credit agreement is a regulated consumer credit agreement not falling within subsection (1), and “unrestricted-use credit” shall be construed accordingly.
(3) An agreement does not fall within subsection (1) if the credit is in fact provided in such a way as to leave the debtor free to use it as he chooses, even though certain uses would contravene that or any other agreement.
(4) An agreement may fall within subsection (1)(b) although the identity of the supplier is unknown at the time the agreement is made."

It is pretty clear that this agreement is restricted-use. It is there to finance a transaction between a debtor (that's me) and a supplier (the dealer) other than the creditor (the finance company). Here is section 12 of the Act.

"12. Debtor-creditor supplier agreements. -
A debtor-creditor-supplier agreement is a regulated consumer credit agreement being—
(a) a restricted-use credit agreement which falls within section 11(1)(a), or
(b) a restricted-use credit agreement which falls within section 11(1)(b) and is made by the creditor under pre-existing arrangements, or in contemplation of future arrangements, between himself and the supplier, or
(c) an unrestricted-use credit agreement which is made by the creditor under pre-existing arrangements between himself and a person (the “supplier ”) other than the debtor in the knowledge that the credit is to be used to finance a transaction between the debtor and the supplier."

Again, pretty clear cut. This agreement is restricted use as identified above and is made by the creditor (finance company) in contemplation of future arrangements between himself and the supplier (dealer).

So, now we've established some good background information, what are my actual rights under cancellation for the return of monies. Well, this is convered in section 70 of the Act.

"70. Cancellation: recovery of money paid by debtor or hirer. —
(1) On the cancellation of a regulated agreement, and of any linked transaction, —
(a) any sum paid by the debtor or hirer, or his relative, under or in contemplation of the agreement or transaction, including any item in the total charge for credit, shall become repayable, and
(b) any sum, including any item in the total charge for credit, which but for the cancellation is, or would or might become, payable by the debtor or hirer, or his relative, under the agreement or transaction shall cease to be, or shall not become, so payable, and
(c) in the case of a debtor-creditor-supplier agreement falling within section 12(b), any sum paid on the debtor’s behalf by the creditor to the supplier shall become repayable to the creditor.

(2) If, under the terms of a cancelled agreement or transaction, the debtor or hirer, or his relative, is in possession of any goods, he shall have a lien on them for any sum repayable to him under subsection (1) in respect of that agreement or transaction, or any other linked transaction.
(3) A sum repayable under subsection (1) is repayable by the person to whom it was originally paid, but in the case of a debtor-creditor-supplier agreement falling within section 12(b) the creditor and the supplier shall be under a joint and several liability to repay sums paid by the debtor, or his relative, under the agreement or under a linked transaction falling within section 19(1)(b) and accordingly, in such a case, the creditor shall be entitled, in accordance with rules of court, to have the supplier made a party to any proceedings brought against the creditor to recover any such sums.
(4) Subject to any agreement between them, the creditor shall be entitled to be indemnified by the supplier for loss suffered by the creditor in satisfying his liability under subsection (3), including costs reasonably incurred by him in defending proceedings instituted by the debtor.
(5) Subsection (1) does not apply to any sum which, if not paid by a debtor, would be payable by virtue of section 71, and applies to a sum paid or payable by a debtor for the issue of a credit-token only where the credit-token has been returned to the creditor or surrendered to a supplier.
(6) If the total charge for credit includes an item in respect of a fee or commission charged by a credit-broker, the amount repayable under subsection (1) in respect of that item shall be the excess over [F1£5] of the fee or commission.
(7) If the total charge for credit includes any sum payable or paid by the debtor to a credit-broker otherwise than in respect of a fee or commission charged by him, that sum shall for the purposes of subsection (6) be treated as if it were such a fee or commission.
(8) So far only as is necessary to give effect to section 69(2), this section applies to an agreement or transaction within that subsection as it applies to a cancelled agreement or transaction."

The most important part of this is section 70(1)(a). Basically any sum paid by the debtor (that's me and my deposit) under or in contemplation of the agreement shall become repayable and under (b) anything that was due to become payable shall no longer be due. Interestingly here, as with credit card transactions, it appears that I may have recourse against the finance company as they and the dealer hold "joint and several liability".

A monster post I know, and I have read the majority of the Act (it's no thriller I can tell you) to be sure I have pulled out the relevant and applicable law, including definitions, etc. Of course, I may have this wrong, but it does seem quite clear to me (I am biased of course). There are also supporting posts on other forums that would suggest my interpretation is accurate.