HP Voluntary Termination

hayward-kennedy

Hi all... first-time poster here, hoping for some great advice if possible!

I have an HP agreement for my car, and was under the impression that I could hand back the car after paying off 50% of the total. I had wanted to end the agreement a year ago, but was told about the 50% rule, so have continued paying up until I reached that figure, which was with my December 2014 payment.

Having paid that I spoke with the dealers, who advised they would send me a form which I needed to fill out to hand the car back. At this point I cancelled my Direct Debit, and waited for the form. The form never came, and after speaking to them again, they said they would re-send it. Another 2 weeks later it hadn't come. I called again and spoke to a horrible lady, who said I had to pay a 'Liability Charge', and the 'Shortfall Insurance', which came to around £552, before I could hand the car back. I advised that I couldn't afford that, and that nobody had mentioned this previously. She simply told me that if I couldn't pay that then a default would be applied to my credit file.

Now... having done some basic google searching, it seems (unless I'm mistaken) that the following is true:

1. I don't have to fill out any form, but instead send my own letter.
2. The only charges I'd be liable for (having paid over 50% of the total already), would be for unreasonable damage to the car
3. That I could pay for the damage (some sh*thead keyed the car quite badly) by instalments, just like with any other creditor, and could therefore pay what I could afford monthly.
4. That a default couldn't be applied as I haven't defaulted on anything
5. That I don't now have to pay the January instalment aswell?

Can somebody please check whether I'm correct on these points or not? And also offer advice on what I should do & say next?

Am I right in thinking I should not have to pay any 'Liability Charge' or any other nonsense like this?

Advice from anyone who knows about this type of thing would be massively appreciated. I'm planning to speak to the dealer again tomorrow, but want to make sure I'm fully clued up first! I think I need to be quoting the CCA sections 99-100?

One other thing... I've actually realised that I have paid about £400 over 50% of the total, if this makes any difference?

Thanks,

Olivia.

thebritishbloke

You shouldn't have cancelled the direct debit. You were liable to make the monthly payments until the VT was finalised with your finance company.

You should have contacted the finance company to organise VT, it's nothing to do with any dealership.

They don't have to let you pay for the damages in instalments, but usually a creditor will do this. You should use a credit card if they won't and you can't afford to pay it all of in full.

If you don't hand the car back and pay the fees, then if it's stated in your finance agreement that you would have to pay these charges, then yes they can register a default.

Have they taken the car back and finalised the VT? If not, then you need to keep paying your monthly repayments.

Doesn't matter what you've paid over the 50%, you're not entitled to any refunds etc, it's just under the CCA once you've paid off 50% of the total, you're entitled to voluntarily terminate the contract, where you hand back the car and call it even with the creditor.

I'm not sure about this liability charge and shortfall insurance. Did you take out shortfall insurance? Check your original finance documents for these terms and what they actually mean in terms of your finance agreement.

hayward-kennedy

Thanks for the response. The reason I cancelled the Direct Debit is that I had told them well before the instalment was due that I was giving the car back. I was then told by them that I had to wait for this form to be sent, which I understand now is not the case. I wish I had researched it and written to them at that point.

When you say they don't have to let you pay the damages by instalments, what if you cannot physically afford the pay it in one go... what are the options then? And I don't have a credit card.

I didn't take out any shortfall insurance, so I don't know what she was talking about there.

Would I now have to pay the January instalment, as they have taken so long with this "form"?

In terms of contacting the finance company instead of the dealership, is there any reason the dealership wouldn't have told me to do this?

chanz4

are you sure you didnt sign for GAP

nelly12

Olivia, forget about talking to the dealer about VT'ing the car you need only speak to the finance company as your agreement is with them. Be prepared for them to reject the VT though as they will view your missed payment as breaking the T's and C's of your agreement (even though you have caught up with the payment).


on a side note it's time for this antiquated law to be removed from HP agreements!

SeanG79

nelly12 wrote: »

Olivia, forget about talking to the dealer about VT'ing the car you need only speak to the finance company as your agreement is with them. Be prepared for them to reject the VT though as they will view your missed payment as breaking the T's and C's of your agreement (even though you have caught up with the payment).

They cannot reject to VT the agreement, even if there is arrears, as long as they have not issued a default notice, waited the 14 days and then terminated the agreement. (A late payment does not terminate the agreement). As long as you pay any arrears and have crossed the 50% threshold, you can exercise your right to VT.

The finance company can expect you to make payment in full for the damages to the vehicle. If you cannot, they can mark your file with AR marker or can default the amount owed.

You need to notify the finance company in writing of your intention to VT, notifying a dealer cannot invoke your right to VT.

nelly12 wrote: »

on a side note it's time for this antiquated law to be removed from HP agreements!

The reason the VT option is written into contracts is to encourage finance companies to offer sensible loans, and to protect the consumer from negative equity situations where too much has been advanced. Finance companies have underwriters and access to valuation guides, etc. to assist them in determining a reasonable amount to loan, if the finance company takes a relative deposit and/or only agrees to lend a sensible amount over a sensible period, then it will not be in the customer's interest to ever VT the agreement, as they can sell the car for more than the outstanding finance - this can be exploited by the consumer, but they will have a VT marker on their file and the next finance company offering HP, can take that into account when offering the finance and can ask for a bigger deposit or shorter term to prevent a loss making scenario if the customer chose to VT

Apples2

Why don't you just reinstate the direct debit until this is sorted out? You are hardly helping your cause by deciding to stop paying.
irrespective of the outcome now you have most likely blown any chance you had of obtaining another credit agreement at a sensible rate.

hayward-kennedy

The Direct Debit was stopped as I had agreed to do so with the say-so of the finance company (turns out I was speaking to them, the dealership transferred me). They agreed that I would not have to pay again as they were sending this imaginary form "immediately".

Anyway, I spoke with them again just now. They again said the form had been sent (for the third time now) a week ago. I advised I won't be filling out any form now, but will be informing them in writing of my VT, and then it's up to them to collect the car and assess any damage. The lady kept repeating that I had to fill out their specific form as that is their "procedure". I refused and said their procedure is irrelevant to the actual regulations. She eventually agreed and said as long as the VT is accepted (I told her it has to be accepted but she wasn't having it), they would arrange for pick-up.

Regarding the January payment, she said that if they've agreed it didn't have to be paid then that's fine, but she didn't really confirm a record of that conversation, so I'm guessing that will be another battle when it gets to that stage.

Interestingly though, she didn't mention any Liability Charge or Shortfall Insurance. I got her to spell out for me what we could potentially have to pay out for. She confirmed excess mileage, damages, and potentially the January payment.

Hopefully it should be pretty painless from here on in.

PS - The comment that I had most likely "blown any chance" of credit at a sensible rate was not only a little unneccessary, but also inaccurate. Thanks for the judgemental response though

SeanG79

Unless the finance was a PCP or a HP with a balloon option with a specified annual mileage in the contract, it does not matter what mileage the vehicle has done, the Consumer Credit Act does not specify mileage, it simply states that the vehicle must be in "good" condition for a vehicle of its age and mileage.

As for the credit at a sensible rate, if you have missed a payment before the VT has been agreed, the finance company are within their rights to record this information and a late payment marker can impact on your ability to obtain future credit. If they have confirmed you don't need to make payemnt, I would request this in writing, alternatively if you see late payment markers on your credit file, you may need to send a SAR to get copies of call transcripts/their notes that confirm this.

thebritishbloke

hayward-kennedy wrote: »

PS - The comment that I had most likely "blown any chance" of credit at a sensible rate was not only a little unneccessary, but also inaccurate. Thanks for the judgemental response though

They probably thought you said that a default had been recorded, and if a default had been recorded, you would have ruined your credit.

I'd check your credit files in 2 months time and check how your HP was updated after the VT is finalised.

You made a couple of silly mistakes, but it seems to have worked itself out. As another person has commented, the "shortfall insurance" will be GAP insurance. This covers the difference between what an insurance company pays out if the vehicle is written off, and the cost of a brand new replacement. Dealers regularly dupe customers into taking this out, it's added on top of the finance and has to be paid off in full regardless of termination of the contract.

hayward-kennedy

thebritishbloke wrote: »

As another person has commented, the "shortfall insurance" will be GAP insurance. This covers the difference between what an insurance company pays out if the vehicle is written off, and the cost of a brand new replacement. Dealers regularly dupe customers into taking this out, it's added on top of the finance and has to be paid off in full regardless of termination of the contract.

I don't recall anything about any Shortfall Insurance. Would this be dealt with separately to ending the finance and sending the car back? So they couldn't stop me handing it back until this insurance is paid off, could they? Could I deal with it like a normal creditor and make monthly payments?

If they are duping people into taking it, isn't this going to end up like another PPI situation?