Uneneforceable & Voidable loans

eijit

I bought a car last year with GAP insurance, and wish I'd known about this thread earlier.

I'm a bit confused because there are three parties involved: the car dealership, the AA (who the GAP insurance is with), and Barclays (with whom I have the loan).

It seems almost certain that the dealership made commission on the selling of the GAP, and nowhere in the docs that I have is this mentioned. This would make it voidable, yes?

Should I SAR the AA, hoping to get the underwriting sheet (or would it be the dealership or Barclays?)

Assuming commission has been paid, is it correct that I would be entitled to a refund of the GAP repayments that I have already made? (presumably plus the interest that I paid towards them in the loan). Who would I take this up with, the AA?

dunstonh

It seems almost certain that the dealership made commission on the selling of the GAP, and nowhere in the docs that I have is this mentioned. This would make it voidable, yes?

No

Assuming commission has been paid, is it correct that I would be entitled to a refund of the GAP repayments that I have already made?

Again, no. If you paid fee and commission and the commission wasnt disclosed then a refund of the commission should apply. If it was commission only then no.

eijit

dunstonh wrote: »

No



Again, no. If you paid fee and commission and the commission wasnt disclosed then a refund of the commission should apply. If it was commission only then no.

... on the basis that I hadn't realised that part of the fee was actually commission?

I'm even more confused now though, because your reply seems to contradict the 'voidable loans' section of the first post in this thread (sorry if that sounds ungrateful - I do appreciate you advice, just a bit confused)

dunstonh

eijit wrote: »

... on the basis that I hadn't realised that part of the fee was actually commission?

I'm even more confused now though, because your reply seems to contradict the 'voidable loans' section of the first post in this thread (sorry if that sounds ungrateful - I do appreciate you advice, just a bit confused)

Only a minority of loans have been made unenforceable. A lot of the "suggestions" are based on theory of what the courts may do, rumours and claims companies making false claims.

In relation to your claim, it appears you are looking at the secret commission loophole. Post #1 mentions "Wilson and another V Hurstanger Ltd". In that case Wilson was trying to get the loan voided but the court ruled that only the commission be refunded. This was because both a fee was charged and a commission was taken and only then because there was no commission disclosure. Had it been fee only then it would not have resulted in a ruling in their favour. Nor would it have been ruled in their favour if the commission disclosure had offset the fee or had been disclosed more with an an amount. Undisclosed commission is a grey area still as there is the expectation that if you dont pay an explicit fee then you expect the person to be paid. However, they should disclose a figure in the region they are going to get. No court has ruled in a case like that.

So, if you paid an explicit fee and the arranger also got a commission and didnt declare that then you may get somewhere getting the fee or the commission paid back to you. However, getting the loan made unenforceable is highly unlikely.

petermb_2

Let me put my five pennarth in here regarding agency law, which is the legislation being used and followed in Hurstanger v Wilson. The reason that this particular cases was not deemed to be voidable is that there was some mention of commission although the amount was not disclosed. The partial disclosure prevented the fee being a "secret" commission. It is the "secret" commission that will potentially void the arrangement. This was highlighted in section 39 of Hurstanger.

Where a car loan is concerned, having had dealings with the courts where such matters were prevalent the judge was very concerned that the dealer had received a commission that was a "secret", regardless of whether a fee was paid to the "broker" or not.

dunstonh

Where a car loan is concerned, having had dealings with the courts where such matters were prevalent the judge was very concerned that the dealer had received a commission that was a "secret", regardless of whether a fee was paid to the "broker" or not.

Under common law principles of agency, a broker owes fiduciary duties to act in the client's best interests and not to put himself in a position of conflict or make a secret profit. In this case, the broker had an incentive to look for a lender who paid the best commission, rather than getting the best deal for his clients. The only way he could act without breaching his fiduciary duty would be if the borrowers had consented.

As they had paid a fee, it was fair to assume that, unless stated otherwise, that the fee was the nature of the earnings. Not a commission. That fee meant the broker was acting as agent of the borrowers. Taking a commission meant that they were getting an inducement.

If it was commission only and only and no fee paid, then the circumstances are different. If you buy a product then there has to be an assumption of profit being made if you are not paying a fee. You would have to be very naive if you think the whole thing is being provided on the basis of love.

If you look at point 34 of the case at: http://www.bailii.org/ew/cases/EWCA/Civ/2007/299.html

Certain things are clear. The defendants retained the broker to act as their agent for a substantial fee. The contract of retainer contained the usual implied terms, but the relationship created was obviously a fiduciary one. As a fiduciary the agent was required to act loyally for the defendants and not put himself into a position where he had a conflict of interest. Yet he agreed that he would be paid a commission by the other party to the transaction which his clients had retained him to procure. By doing so he obviously put himself into a position where he had a conflict of interest. The defendants were entitled to expect him to get them the best possible deal, but the broker's interest in obtaining a further commission for himself from the lender gave him an incentive to look for the lender who would give him the biggest commission.

The outcome of that case is that the broker put himself in the position of acting as agent of the client and receiving a commission that was not fully disclosed was why the court found in favour of the borrower. Had the fact the commission had been secret, then of course it would have been more serious and potentially fraud (and probably result in the loan being made unenforceable). Had a fee not been paid by the client, then the broker would not be acting as agent for the client and if tied to one lender they are acting as agent for the lender. We have yet to see any outcome published of any court case where no fee has been taken and it was commission only. That is why its a grey area.

The topic makes great discussion as it is so vague at the moment in so many areas.

eijit

This is a fascination thread.

Just to clarify, I wasn't hoping/expecting to have the whole loan wiped, it's just the GAP I'm hoping to do something about.

Looking through the paperwork that I signed last year, there's no mention of them charging me a fee for arranging the GAP insurance. Well not directly anyway. There are two boxes, one listing the cost of the GAP (about 750 pounds), and another titled 'interest and doc fees' which comes to 250 pounds. I guess it would be difficult to argue that this was a fee for them to act as broker

I'll write to them asking for a break down of the 250 pounds, but do they have any legal obligation to provide it? I don't imagine they'll want to help unless they have to.

lauraeast23

Hi homer_j

I am considering investigating whether the unsecured loan part of my Northern Rock together mortgage is enforceable.

My mortgage was taken out in August 2006, I apologise as I do not have figures here with me at work but I am pretty sure that the unsecured part was over 25k.

Any help/advice you can give would be very much appreciated

dunstonh

lauraeast23 wrote: »

Hi homer_j

I am considering investigating whether the unsecured loan part of my Northern Rock together mortgage is enforceable.

My mortgage was taken out in August 2006, I apologise as I do not have figures here with me at work but I am pretty sure that the unsecured part was over 25k.

Any help/advice you can give would be very much appreciated

Give up now. The courts have consistently been ruling against borrowers trying the unenforceable credit route. it has basically turned out to be one big scam by dodgy claims companies.

denby1361

could you tell me a company that i could give my loan agreement to look over i had over 5.000 of insurances put on it which became 10.000 with interest thanks den