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Lloyds Bank Hire Purchase Finance - Section 75 Rights?

TangoWagon
Posts: 3 Newbie

Hi,
I've searched the forum and elsewhere and couldn't find anything covering this. Bit of a grey area for me.
Scenario where by a Hire Purchase agreement has been made directly with Lloyds Bank whilst purchasing a vehicle from a used car dealer. The dealer has not arranged the finance or been involved in that at all, but on successful completion Lloyds Bank have transferred the funds directly to the car dealer.
Does Section 75 apply in this scenario?
TIA
I've searched the forum and elsewhere and couldn't find anything covering this. Bit of a grey area for me.
Scenario where by a Hire Purchase agreement has been made directly with Lloyds Bank whilst purchasing a vehicle from a used car dealer. The dealer has not arranged the finance or been involved in that at all, but on successful completion Lloyds Bank have transferred the funds directly to the car dealer.
Does Section 75 apply in this scenario?
TIA
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Comments
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TangoWagon said:Hi,
I've searched the forum and elsewhere and couldn't find anything covering this. Bit of a grey area for me.
Scenario where by a Hire Purchase agreement has been made directly with Lloyds Bank whilst purchasing a vehicle from a used car dealer. The dealer has not arranged the finance or been involved in that at all, but on successful completion Lloyds Bank have transferred the funds directly to the car dealer.
Does Section 75 apply in this scenario?
TIA
Who's named as the buyer on the contract of sale? You or the bank?0 -
Can you explain why this seems to be a grey area for you?
It sounds to be a normal HP deal. LBG purchased the vehicle from the dealer and are now leasing the vehicle, which they own, to their customer. At the end of the hire period Lloyds will offer to sell the vehicle to the customer for a nominal sum.
You are very cautious about details. Is this a B2B deal, such as a plumber buying a van for work, or a consumer deal?
s75 or s75a protection only applies to consumer contracts as defined in the Consumer Credit Act 19740 -
For s75 to apply, there has to be a debtor-creditor-supplier arrangement or DCS for short, so long as it falls within the meaning of section 12(b) or 12(c).
A DCS is defined in s12 of the CCA 1974 as:(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.
We can rule out (c) as the credit isn't unrestricted since it is used for a specific purpose to pay for the car. Therefore we look at what section 11(1)(b) says:
(1) A restricted-use credit agreement is a regulated consumer credit agreement -
(b) to finance a transaction between the debtor and a person (the “supplier ”) other than the creditor
From the above, it would appear the answer is no since the HP agreement would be between yourself and Lloyds on the basis that Lloyds purchased from the dealer who in turn hired the vehicle out to yourself under the HP agreement. The finance was therefore used in a transaction between you and the creditor. If the agreement between you and Lloyds was a fixed sum loan agreement, then s75 would be in scope as the transaction would have financed the purchase of the vehicle between yourself and the dealer.
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DullGreyGuy said:How much is the vehicle? Total price paid, not just the amount financed?
Who's named as the buyer on the contract of sale? You or the bank?
I don't know who is named as the buyer. I'm trying to help a relative with an issue, I will find out!Alderbank said:Can you explain why this seems to be a grey area for you?
It sounds to be a normal HP deal. LBG purchased the vehicle from the dealer and are now leasing the vehicle, which they own, to their customer. At the end of the hire period Lloyds will offer to sell the vehicle to the customer for a nominal sum.
You are very cautious about details. Is this a B2B deal, such as a plumber buying a van for work, or a consumer deal?
s75 or s75a protection only applies to consumer contracts as defined in the Consumer Credit Act 1974
It's a B2C transaction. No business use what so ever. S75 is definitely applicable if the DCS link is there. I wasn't sure if the bank transfer from lender to dealer was enough to make the link, or if it qualifies as a credit agreement at point of sale for the purposes of S75. If the bank owns the vehicle and is hiring it to the consumer (this is the bit I hadn't quite appreciated enough) then it definitely sounds like S75 protection is available.A_Geordie said:From the above, it would appear the answer is no since the HP agreement would be between yourself and Lloyds on the basis that Lloyds purchased from the dealer who in turn hired the vehicle out to yourself under the HP agreement. The finance was therefore used in a transaction between you and the creditor. If the agreement between you and Lloyds was a fixed sum loan agreement, then s75 would be in scope as the transaction would have financed the purchase of the vehicle between yourself and the dealer.
I am now a little confused again. Let me add some context.
The vehicle was purchased in October 2024 with the HP agreement from Lloyds Bank. In that time the vehicle has been returned to the dealer on four occasions for diagnostic and repair work, three of which were for engine management faults. The car is still exhibiting EML faults today, enters limp mode etc and will soon be in for its fifth diagnostic / repair attempt.
We've tried to exercise rights to reject the vehicle under the CRA directly with the dealer with varying levels of success. They've tried to deny that the fault was present at the time the vehicle was sold, although I believe they have contradicted themselves when they explained that the fault is symptomatic of poor maintenance.
They have reluctantly agreed to accept the vehicle back but want 40p per mile for anything clocked up between purchase date and return. We have tried to negotiate that to 15p, we would probably accept 20p. Around 2,000 miles have been clocked since purchase. I know We Buy Any Car pricing is very fast and loose, but running the car through today with the milage at purchase vs today presents a £120 differential. So £300-£400 in mileage seems fair and reasonable in my mind, but not £800. I could be wrong on that though, I don't know what is the going "reasonable" rate in these scenarios.
What I am exploring now having exhausted all goodwill with the (main) dealer, is whether my relative has any legal protections afforded to them by the HP agreement with the bank.0 -
Under the CRA they have the right to charge for "use" between the purchase and the return of the goods. The law doesn't state how this should be calculated but a price per mile doesn't seem an unreasonable basis though technically having the car available on demand even if you dont actually use it is a form of use.
https://www.financial-ombudsman.org.uk/decision/DRN-3188005.pdf You will see in the this case the dealership was trying to charge 45p/mile which the ombudsman said was unfair. They however said the dealer should give them the depreciated sales price of the now higher mileage vehicle but gave no mechanism for calculating such and this does technically fly in the face of the CRA which explicitly states use rather than depreciation - for a car it may work out not far from each other but for other items depreciation can be much higher.
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Well, my immediate thoughts are that you might be on shaky ground from a legal perspective, particularly as you admit you haven't dealt with a HP arrangement before and what you have done is a common rookie mistake by many consumers.
To clear up any confusion, s75 is not applicable. As already mentioned by Alderbank, a hire purchase arrangement is a 3-way transaction where Lloyds purchases the vehicle from the dealer and in turn hires it out to you under a financial agreement. You have no contractual relationship with the dealer in this transaction, only Lloyds.
In order to exercise your rights under the CRA, you are required to make it clear to the trader i.e. Lloyds that you wish to terminate the contract or demand a repair/replacement etc. if there are faults that exist. It's not clear whether We Buy Any Car has taken the vehicle back but if they have and you allowed them to do that, this could be considered a fundamental breach or a wrongful termination on your part because the vehicle belongs to Lloyds and the contract cannot be continued since the core subject matter of the agreement is no longer under your possession. You've also given away the vehicle without Lloyds consent and I'm pretty sure if you check your HP agreement you will find that is likely to be a material breach.
If you are yet to give the vehicle back then I suggest you go through the correct channels by talking to Lloyds, though you may have to accept that Lloyds may require you to jump through the same hoops again which I don't think you have any argument to say no, since you didn't follow the correct process in the first place.
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A_Geordie said:Well, my immediate thoughts are that you might be on shaky ground from a legal perspective, particularly as you admit you haven't dealt with a HP arrangement before and what you have done is a common rookie mistake by many consumers.
To clear up any confusion, s75 is not applicable. As already mentioned by Alderbank, a hire purchase arrangement is a 3-way transaction where Lloyds purchases the vehicle from the dealer and in turn hires it out to you under a financial agreement. You have no contractual relationship with the dealer in this transaction, only Lloyds.
In order to exercise your rights under the CRA, you are required to make it clear to the trader i.e. Lloyds that you wish to terminate the contract or demand a repair/replacement etc. if there are faults that exist. It's not clear whether We Buy Any Car has taken the vehicle back but if they have and you allowed them to do that, this could be considered a fundamental breach or a wrongful termination on your part because the vehicle belongs to Lloyds and the contract cannot be continued since the core subject matter of the agreement is no longer under your possession. You've also given away the vehicle without Lloyds consent and I'm pretty sure if you check your HP agreement you will find that is likely to be a material breach.
If you are yet to give the vehicle back then I suggest you go through the correct channels by talking to Lloyds, though you may have to accept that Lloyds may require you to jump through the same hoops again which I don't think you have any argument to say no, since you didn't follow the correct process in the first place.
This isn't my vehicle, I am helping a relative but it sounds like the correct course of action here is to contact Lloyds Bank.
Thanks for the help.0 -
Good luck.
Just know that if Lloyds did want to attempt a repair, they only have one shot at doing it and after that the right to reject exists. I presume this is still within the 6 month window from taking possession of the car? If it is past the 6 month mark, then the onus will be on the hirer to prove the fault existed at the time of possession - a consequence of going down the wrong path, unfortunately.0
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