Firms face deluge of car returns after ruling
FINANCE companies could face a deluge of hire-purchase cars being handed back to them after a High Court ruling yesterday.
The court ruled that a consumer does not need to have made half of the repayments before firms will accept a car back and end the agreement, without requiring the person to make any more payments.
With a hire purchase, you do not own the car until all the repayments are made. Up to now, people were not able to terminate the agreement until they had made at least half of the payments.
If you have not made half the payments but give back the car, the finance company can sell the car, using this money to pay off some of the debt; but the consumer still has to keep paying until the entire debt is paid.
Justice Michael Hanna yesterday ruled in a case where Michelle Gabriel and her mother Noreen Gabriel, of Togher in Co Cork, had sought to return a 2006 Renault Clio to GE Money.
The finance house had ignored Michelle Gabriel's letter when she wanted to hand the car back and terminate the agreement as Ms Gabriel had not yet made half the hire purchase payments. The agreement, to buy a 2006 Renault Clio, provided that the total cost was to be €18,151, inclusive of the €3,200 cost of credit.
Michelle was the active hirer of the car and between her and her mother, they paid an initial deposit along with €349 per month until 2009 when Michelle ran into financial difficulties.
The case was appealed to ombudsman Bill Prasifka, who came down on GE Money's side.
State budgeting service, the Money Advice and Budgeting Service (MABS) and the Free Legal Advice Centres (FLAC), supported Michelle Gabriel in appealing Mr Prasifka's decision to the High Court.
She approached MABS, which advised her to notify GE Money that she wished to avail of her entitlement to terminate the hire-purchase agreement in accordance with Section 63 of the Consumer Credit Act 1995, the judge said. She did so on August 21, 2009, but GE, which received her letter, did not acknowledge it and a month later the company sent her a final notice seeking €718 in late payments. By then, a total of €7,019 had been paid off on the car.
The Gabriels complained to the ombudsman, who said they had not complied with an obligation under the Consumer Credit Act, to pay off half of the agreement, €9,077, before they could terminate it.
Yesterday, Mr Justice Hanna said the ombudsman had fallen into significant error.
The ombudsman had found this provision constituted a pre-requisite of termination of the hire purchase agreement, he said.
That was, in the judge's opinion, not correct. The finance firm was entitled, through separate proceedings, to have all liabilities met by the hirer, he said.
But to insert a pre-condition that those liabilities must first be discharged before the agreement was terminated would amount to "an effective amendment" of the legislation. This was something neither the ombudsman nor the court was entitled to do.
He found for the Gabriels and said Michelle's August 21, 2009, letter terminated the agreement.
FLAC director Noeline Blackwell said the ruling could have huge implications for cash-strapped consumers who wanted to get out of hire-purchase agreements.