An interesting ruling in the High Court yesterday could make it easier for car owners to terminate their hire purchase agreements but don't expect to get away scot free!
In a previous article Motorcheck outlined the possibility of terminating a hire purchase agreement under the 'half rule' but when Michelle and Noreen Gabriel from Togher, in Cork attempted to return their Renault Clio to GE Money the company refused to take the car back until half the full four-year value of the hire purchase was paid.
By all accounts the finance house ignored Michelle Gabriel's letter in which she stated that she wanted to hand the car back and terminate the agreement. Their reason being that as Ms Gabriel had not yet made half the hire purchase payments she was not entitled to hand the car back.
This differs from our understanding of the half rule. We believed that an individual was entitled to hand the car back at any time provided either;
- half the hire purchase amount was already repaid or
- the customer returned the car with a payment that when added to the amount already paid would be equal to or greater than half of the hire purchase amount
The Gabriel's 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. At the time GE Money refused to take her car back they had already made repayments totaling €7,019. Just €2,058 shy of the half way mark.
Believing that they were entitled to return the car the Gabriel's sent their case to the ombudsman, Mr. Bill Prasifka.
Mr. Prasifka believing that 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 made his decision in favour of GE Money.
However, MABS (the Money Advice and Budgeting Service ) and the Free Legal Advice Centres (FLAC), supported Michelle Gabriel in appealing Mr Prasifka's decision to the High Court .
Mr. Justice Hanna ruled that Ms. Gabriel was entitled to terminate the agreement. He said that Mr. Prasifka had fallen into significant error when he decided that all liabilities must be discharged before an individual may terminate their hire purchase agreement.
Will this help other consumers?
Today's independent carries the headline "Firms face deluge of car returns after ruling" and FLAC director Noeline Blackwell, director general of the Free Legal Aid Centre, is quoted in the Examiner as saying -
– Noeline Blackwell, Free Legal Aid Centre
It is worth noting though that the judge also said the finance firm was entitled, through separate proceedings, to have all liabilities met by the hirer. This means that the finance house can follow the hirer for the difference between the amount already paid and half of the hire purchase price.
Yesterday's ruling means that a finance house can't ignore a termination letter and must accept the car thus terminating your agreement. This will have the effect of ending your monthly repayments but you will still be liable for half of the hire purchase amount.
If you are thinking of returning a car you can no longer afford the repayments on read our previous article first. It is crucial that you follow the steps outlined to return under the half rule. If you sign anything that could construe your termination as a voluntary surrender it could cost you a whole lot more.