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Showing posts with label consumer credit. Show all posts
Showing posts with label consumer credit. Show all posts

Friday, 14 April 2017

FCA investigates 'irresponsible' car loans

The Financial Conduct Authority is investigating the car loans market, concerned that borrowers do not have to show that they can afford repayments. Basic credit checks may be supplemented by the sort of tests usually associated with mortgages, if the FCA considers it necessary. The amount being borrowed to finance new cars has trebled over the past eight years. The FCA's statement is in its business plan for 2017-18 - on page 74, if you are interested enough.

The Telegraph reports that the Bank of England is concerned that the trend could precipitate a financial crash if not brought under control. The paper also reports that an investigation performed by its journalists revealed that sales people were encouraging customers to spend their entire disposable income on 'pay monthly' deals for cars worth more than they earned in a year. Experia also warn that their data suggest that households with 'stressed' incomes account for a large part of the growth in 'pay monthly' car purchases.

In 2014 the FCA made affordability checks for mortgages more stringent, requiring more information about spending, amid fears that borrowers were over-stretching themselves to get on the housing ladder, and the same sort of checks might now be extended to car loans. The FCA notes that there may be 'a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance industry.'

See also Motor Trader's report, which in turn refers to an interesting posting on the Bank of England's "Bank Underground" blog (who'd have thought?) about the motor finance scene.

'via Blog this'

Thursday, 11 February 2016

NFDA accuses FCA of being too expensive and complicated | Motor Trader

Motor Trader  reports that the National Franchised Dealers Association has told the Chancellor of the Exchequer in its budget submission that the Financial Conduct Authority is “financially burdensome and complicated” for dealers. It says that the new Authority charges dealers five times as much as the OFT used to charge, and in addition it is not as helpful either in person or in its published guidance, so dealers are also obliged to incur costs seeking professional assistance.

Monday, 9 February 2015

Motor Law Conference 2015 - 26 February at the RAC

The annual Motor Law Conference brings together industry leaders and delegates in discussion on all the current legal issues and provides an excellent opportunity for networking with industry colleagues.

Key areas for discussion this year will include the latest developments concerning the block exemption in the context of the Commission's CARS 2020 project: the recent report on access to repair and maintenance information: and how the proposed Transatlantic Trade and Investment Partnership will affect the industry. We will also look at developments in intellectual property law of significance for the motor industry and collective redress, and there will be updates on consumer credit law and consumer law.

As usual our team of expert speakers, under our regular chairman, David Evans, will consider how the motor industry is adapting or should adapt to deal with the challenges presented. The conference again provided the ideal opportunity for delegates, lawyers and non-lawyers alike, to meet colleagues and join in the debate.

You can download a booking form from here. Further details including the programme are on the Motor Law website here.

Monday, 6 October 2014

The Consumer Credit (Information Requirements and Duration of Licences and Charges) (Amendment) Regulations 2014

The Consumer Credit (Information Requirements and Duration of Licences and Charges) (Amendment) Regulations 2014 concern only 'green deal' schemes where energy-efficiency improvements are made to a property and the occupier pays in instalments, so this note is to let you know that you don't need to be familiar with them.

Sunday, 22 December 2013

OFT suspends credit licence of Shropshire-based motor dealer  - The Office of Fair Trading

The OFT has suspended the credit licence of a motor dealer, issuing this press release (well, this is part of it):
The OFT has suspended the consumer credit licence of Jonathan Edward Rochford, a Shropshire-based motor dealer trading as Phoenix Car Centre.
The OFT took this step after concluding that suspending the licence is urgently necessary to protect consumers. The suspension means it is now a criminal offence for Jonathan Edward Rochford, or any other person, for example an employee, agent or company of his, to engage in any consumer credit, consumer hire or credit broking activity using his licence. This press notice has been issued to inform consumers and other consumer credit businesses. The principal place of business for Phoenix Car Centre is 9 Lake End Drive, Telford, Shropshire TF3 1NU.
Jonathan Edward Rochford has been invited to make representations to the OFT by 10 January 2014. If representations are made, the OFT's Adjudicator will take into account the representations and decide whether to confirm the suspension (with or without variation) or withdraw it.
This is an early example (perhaps the first) of the use of a power to suspend a licence immediately where there is an urgent need to do so. It's also worth including the notes to the press release - the first one is particularly interesting.
NOTES
  1. The OFT is unable at this stage to discuss the detailed reasons for its decision to suspend Jonathan Edward Rochford's licence.
  2. Jonathan Edward Rochford's consumer credit licence is suspended as of 17 December 2013.
  3. An amendment to the Consumer Credit Act 1974 came into effect on 19 February 2013 and gave the OFT the power to suspend a consumer credit licence where it appears urgently necessary to do so for the protection of consumers. 
  4. The OFT published guidance in February 2013 setting out how and when it can use the new power to suspend a credit licence. The guidance establishes that in the most serious cases, which include those where there is evidence of immediate harm, the OFT will suspend a licence with immediate effect. In other circumstances, businesses will be given an opportunity to make its case to an adjudicator before the suspension takes effect.

Here is a link to the full press release.

Friday, 1 March 2013

Motor Law conference report

We are greatly obliged to Motor Law's good friend Steve Hamilton of Auto Retail Manager for writing this report of proceedings at Motor Law's 2013 conference, and to Frank Dumbleton for the photos ...

 

Block Exemption and the car market
Joseph Vogel, a French avocat specialising in competition and distribution law, said most manufacturers appeared to be sticking with the qualitative and quantitative system that has been dominant under the existing regime – at least for now, and partly due to the fragile nature of the economy. “Manufacturers recognise that now is not the time to be making major changes,” he said.
Looking at the new clauses and obligations that were likely to feature in new dealer agreements, he said that overall there was generally less protection for retailers. For example, he said, most agreements have retained the two-year notice period, but the need to give good reasons for termination has gone.
Obligations around the transfer of contract business (i.e. if a dealer wants to sell to another dealer) have gone from most contracts – and that is a good thing, Mr Vogel said. Similarly, the possibility of opening a secondary outlet no longer exists in most contracts.
The requirement for referring to arbitrators or independent experts is no longer a condition, but remains in most contracts – albeit often limited to disputes about objectives.
Brand exclusivity can be enforced if a network has less than a 30% market share, usually for a period of up to five years.
Many networks are currently in the transition phase towards setting up a new distribution system and one way of doing that, according to Mr Vogel, is to terminate all contracts with two years’ notice, simply on the grounds of the need to adapt. Alternatively, a manufacturer could propose a new contract, or an amendment to distributors, and only terminate if there is a refusal to accept the changes.

Block Exemption and the aftermarket
Should spare parts be treated as brand-specific? That was the question posed by Marjorie Holmes of Reed Smith, and the answer will determine the nature of the contract that manufacturers can write with their dealers and repairers.
If you take the brand-specific view, she said, you have automatically defined a narrow market and inevitably the vehicle manufacturer will be deemed to have a dominant position – which automatically gives rise to competition law problems.
However, if you take a more generous view of spare parts and include all the generic manufacturers in the market as well, then the vehicle manufacturer’s position is much smaller.

Block Exemption FAQs
Barrister Jonathan Turner looked at the EC’s FAQ document on Block Exemption, noting where they go further than the competition regulations (such as the supply of parts to independent repairers), and where they are perhaps more lenient (for example on making bonuses or rebates for captive parts conditional on the sourcing of captive parts).
On the subject of supplying technical data to tool manufacturers, he said he would be nervous about restricting the supply of information about a new multi-brand tool on the market. And while the FAQs say a requirement to use specified electronic tools or equipment for servicing or repairs would be unlikely to lead to a breach of EU competition rules, Mr Turner said he was unsure about this – if it is more than five years it is probably anti-competitive, he said.
However he warned that the courts could take a different view on some issues, given that judges tend to operate based on the merits of the parties involved and not necessarily on the best interests of consumers.

Cartel investigations in the parts market
The world’s biggest ever competition law investigation is focused on the parts industry right now, Alex Haffner of SNR Denton said, involving a co-ordinated approach across different jurisdictions.  Australia is the latest country to come on board with regard to the supply of wire harnesses, and others are expected to join.
Ultimately, Mr Haffner said, it could lead to lower Original Equipment prices.
Japanese executives have already admitted that procurement processes have been rigged for more than the past ten years. Most manufacturers will have been affected, and follow-on actions for damages have already started.
In the USA for example, total fines of more than $800 million have been levied (including $471m against Yazaki) against suppliers of wire harnesses, thermal system controls, instrument panels and automotive bearings, and a number of executives have been jailed. There are also various investigations pending, in the areas of safety equipment, brakes, bearings and fuel systems.
Within the EU, no formal sanctions have yet been imposed, but formal proceedings have been instigated against some wire harness makers. There have also been some ‘dawn raids’ in relation to other car parts, including safety systems, ball bearings and thermal systems. Leon AG, for example, has confirmed that it is under investigation.
Mr Haffner suggested that, within Europe, the UK could become the forum of choice for would-be complainants – and that while the big losers in all this have been the car makers, because their procurement processes were rigged, potentially anyone who has bought a car in the past ten years could be in line for damages.
Summing up, he highlighted the risks involved in exchanging information, for example in collaborative ventures. Even bilaterally exchanged information between two suppliers could be enough for the authorities to take an interest, he said, adding that car makers would have to look at how they run their procurement processes. We could see non-price comparators like quality and innovation playing a larger role.

The return of copyright protection for car parts?

Patent attorney David Musker (Jenkins), a long-standing conference favourite, took as the title of his talk "Section 52 and all that", reviewing the history of copyright protection in designs for car parts from the Morris Marina to the recent Star Wars case in the Supreme Court (Lucasfilms v Ainsworth). Section 52 of the Copyright, Designs and Patents Act 1988 would be repealed when the Enterprise and Regulatory Reform Bill becomes law - a reform required by EU designs law. It would not mean the return of copyright to the car spares industry, because section 51 is the provision that prevents BL v Armstrong coming back to haunt us - but there is no guarantee that it will not fall victim to some similar tidying-up exercise. Meanwhile, the so-called "repair clause" (Article 110 of the Community Designs Regulation) has been considered by the courts, in BMW v Round, and found wanting, leaving the UK's "must match" clause still governing designs for replacement parts and the old Ford case still good law.

The connected car
IHS Automotive recently predicted that by the end of next year, for some of the bigger brands, “every vehicle they sell will offer some sort of connectivity” via internet screens installed on the dashboard, and looking further ahead several companies are working on driverless vehicles.
Adam Aldred of Addleshaw Goddard predicted that not only will we soon be able to stream movies from the web to the car, but that car promotions would start focusing on the apps that are available to go with certain models, for instance to aid the driver or to keep other passengers entertained. 
Given that today’s smartphones, for example, are out of date within a few months, marrying what’s happening technologically with the lifespan of the typical car will be a big challenge for manufacturers, Mr Aldred said. But rather than create an environment in which the technology could be updated for subsequent owners, he said it might be in the manufacturers’ interest for their products to become obsolete within a few years – potentially eliminating the used vehicle market.
He also said that, because of concerns about hacking, manufacturers would have to ensure that the multi-media element was separate from the vehicle’s critical systems, and that the issue of driver errors due to distractions would have to be addressed. It is a criminal offence to use a mobile phone while driving (unless it is hands-free) so where, he mused, will the law draw the line with in-vehicle infotainment?
On the subject of location-based services such as remote diagnostics/repairs provided in future by OEMs and roadside assistance operators, Mr Aldred said that data protection could be a sensitive issue.

The changing face of motor finance
Responsibility for the regulation of consumer credit will move from the OFT to a new regulator, the Financial Conduct Authority, from April 2014, although there will be a transition period that runs into 2016. The initial consultation runs from April to June this year.
The licensing regime will change and businesses will need to re-apply, Stephen Dawson of Shoosmiths said, adding that although there was very little detail at present the deadlines are set in stone and that the Treating Customers Fairly guidelines give a good indication of the regulator’s expectations.
He said retailers needed to look at the aspects of their business that might be affected, and at the relationship with their captive finance house. Are your policies and procedures up to date, for example?
The FCA will be a very pro-active body and will be able to move much more quickly than the OFT has in the past, Mr Dawson stressed.
He also had some good news for the industry with regard to electronic signatures on finance documents. “By 2014, every captive will be doing it,” he said. “From a legal point of view, they need to be no less effective than a handwritten signature and I am certain they pose no issue or risk.”
He said the best method of capture would be software solutions based around an electronic pad with a stylus in the showroom. Not only is it quicker and more convenient for customers, it also means a faster payout and lower costs for retailers. “It’s the future for sure,” he said.
Consumer law update
Adrian Watts of WattsLegal brought the conference to a close with an overview of some significant trends and cases in consumer law over the past 12 months.
These included FSA v Digital Satellite Warranty Co, where the Supreme Court affirmed that FSMA authorisation was required for contracts assuming ‘risk of loss attributable to insured person’ (regardless of whether it is an obligation to repair/replace or reimbursing the cost of doing so); and R v Derby Car & Van Contracts, concerning the sale of pre-registered vehicles. A car was initially registered in the name of a third party to obtain a fleet discount, but was not registered in the customer’s name until up to six months later. Because this information was not disclosed, it left the customer exposed to offences under the Vehicle Excise Act and could also prejudice any insurance claim they made.
A delegate asked whether there would be any scope in writing conditional contracts, but according to the DVLA, Mr Watts said, “de-registration is not an option”.
He also addressed the log-awaited implementation of the Consumer Rights Directive, and the Consumer Bill of Rights which will introduce individual recourse and refunds for misleading statements and high-pressure sales tactics. 
Referring to the creation of a new raft of enforcement bodies this year and next, he said a lot more people would start representing themselves in person but that they would be given less leeway in court than perhaps they are today.

Thursday, 8 November 2012

FLA publishes supplementary briefing on OFT guidance for credit brokers and intermediaries

As their press release said (back in September, when it happened):
A supplementary briefing designed to help lenders and their associates implement the Office of Fair Trading's (OFT) Guidance for Credit Brokers and Intermediaries has been published today by the Finance & Leasing Association (FLA). 
The briefing – which is designed for lenders who use intermediaries such as motor dealers, high street retailers and credit brokers – aims to assist companies in complying with the OFT’s Guidance on issues like transparency in credit advertising and disclosing the presence of commission.
The FLA has consulted finance companies, the OFT, and the National Franchised Dealers’ Association (NFDA), in developing the briefing. 
Paul Harrison, Head of Motor Finance at the FLA, said:
“The OFT’s Guidance sets out its expectations of intermediaries, including motor dealerships, when they offer credit to borrowers and so it is essential reading for all credit brokers and intermediaries. We have developed this supplementary and non-binding FLA briefing to help lenders work with their business associates to ensure compliance.”
You can download a copy here.

PS: the NFDA has also produced guidance on the topic, which is available to RMI members only. There is an information pack and also a tool kit, both tailored for the motor industry and available in web and print formats. Both demonstrate how to detect conflicts of interest when providing financial products to customers and what to information disclose about commission.

Friday, 30 December 2011

US: Spot delivery and dealer's obligations

If you want to sell a car badly enough, you might do some daft things - rather like a lawyer starting work for a client without money on account, a mistake that I have made often enough. In the car trade, spot delivery (otherwise known as "yo-yo sales") is the equivalent, and it's driven in part by the phenomenon known as "buyer's remorse". It's a good idea to get the customer in the car and off down the road before they think twice.

Of course, there are legal issues to consider here - cooling-off periods where finance is involved, in particular. But Automotive News has a disconcerting story about a Florida dealer who put a customer in a used car under a conditional sale agreement, sent her on her way, then found that the finance company wouldn't do the deal. In that situation everything is supposed to be off, the car comes back to the dealer and the customer might end up with a more affordable set of wheels - but here the customer kept the car, and tried to make monthly payments to the dealer of the same amount as would have been due to the finance company. When the payments were refused, the customer sued the dealer (they do things differently in the USA, evidently) with what seems to be a kitchen sink full of claims, and the dealer counterclaimed.

Happily, for the dealer and for common sense, the court held against the customer. But it's still a remarkably risky way of doing business, even if problems can eventually be ironed out by the courts.

Saturday, 26 November 2011

Rogue salesman: where does the loss lie?

A case that's only recently come to my attention - Quinn v CC Automotive Group Ltd (t/a Carcraft) [2010] EWCA Civ 1412 (16 December 2010) - concerns the classic situation that arises when a finance agreement is not cleared on a car taken in part exchange. The buyer ends up with a new car, but still has to pay for the one he just gave away - and to make matters worse, the dealer's salesman was, as the court put it, a rogue.

The rogue, being the dealer's salesman, had express authority to do certain things on behalf of his employer: the court (both the trial judge and the Court of Appeal) was clear about that. He also had ostensible authority, so he could bind the dealer even if he had gone beyond what he was actually supposed to do. The question on appeal was whether the customer should have been put on enquiry when strange things happened - like meetings being held at a motorway service station, and being told by the salesman that part of an additional deposit that was suddenly asked for could be paid sometime later. What the salesman had done were all things that salesmen commonly do, and it was wrong for the judge to import an "inquiry" test, not to mention a reasonableness test.

In situations like this, the court has to decide which of two innocent parties bears the loss (because the rogue is unlikely to be able to compensate anyone). After an interesting review of the authorities on the point, the Court of Appeal concluded that the answer lay in the principle stated by Holt CJ in Hern v Nichols (1700) 1 Salk. 289:
Seeing somebody must be a loser, by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser, than a stranger.
That passage was described, with approval, by Diplock LJ (as he then was), in Morris v Martin (at p.733), as expressing an "old, robust and moral principle". By allowing the customer's appeal, and holding the dealer liable, the Court of Appeal considered that it was following that principle. But it's still a rough form of justice, and one that certainly requires dealers to be on their guard.

Tuesday, 13 September 2011

When is a business fit to have a consumer credit licence?

The Office of Fair Trading has drawn attention to what makes someone fit to hold a consumer credit licence, after the Consumer Credit Appeals Tribunal rejected an appeal by a company which had had its licence revoked. The appeal decision is here and the OFT's press release is here. Although the company in question was a debt collection agency, the same principles could apply to other businesses that need licences.

The OFT points out that the decision highlights the need for credit businesses to check that when communicating with their customers they are clear and transparent and do not place undue pressure on the debtor. The Tribunal considered in particular that the company was not fit to hold a licence because:

  • It  lacked sufficient skills, knowledge and experience to operate a consumer debt collection business.
  • It did not have practices or procedures to deal fairly and properly with consumers.
  • The payment demand letter was designed to look like an official or legal document, against OFT guidance.
  • The managing director described himself to debtors as a lawyer, which was intended to create a misleading impression.
  • The company was persistently obstructive in dealing with enquiries from the OFT and Trading Standards.
None of which is very reassuring in the light of the reorganisation of the apparatus of consumer protection and the abolition of the OFT.