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Thursday, 19 May 2011

Refunding deposits - or not

What happens if a deposit has been put down but the deal does not go through? Normally, you'd expect that if it were because the customer had changed his mind he'd forfeit the deposit, and if it were because the dealer wasn't able to supply the car the deposit would be returned.
There's no law directly on the point, although where there's a credit deal involved the Consumer Credit Act does say that customer's right to withdraw includes the right to have the deposit returned. Speculators got their fingers burned back in the late eighties when the Jaguar XJ220 lost a lot of its expected value between them putting down deposits and delivery being due. Eventually 25 of them bought themselves out of their contracts for £100,000 each, including the £50,000 deposit, rather than risk the loss of some £200,000 at market prices.
The Unfair Terms in Consumer Contracts Regulations also apply, and the OFT used its powers under them back in 2001 to require a dealer to delete a clause that purported to make the deposit non-refundable in any circumstances. A year later, the OFT insisted that the RMI change its standard retail order forms which said deposits would be forfeit if the customer did not complete within 14 days of the car being ready for collection. It had to be changed to 21 days, and to permit the dealer only to retain enough to cover its costs - the rest of the deposit would have to be refunded.
This is an area where what the contract says is the crucial thing. The law does not tell you how a deposit works - although dealers must not ignore the fact that the OFT has power to require changes to be made if the contract is unreasonable.

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