Consumer Credit Act

[Dustydog]

My neighbour ordered a new kitchen including installation and used the sellers interest free credit facility underwritten by an independent finance house. Five weeks on the installation scheduled for a week is still unfinished due to a number of parts and panels missing including fridge door and handles. The kitchen is currently unusable. It transpires the finance house paid the monies over to the supplier prior to completeion of the installation.
I know this is very wrong and suspect the FCA will take an interest.
So turning to a caravan on finance do you think it is wrong for the finance company to pay the dealer before completion of the purchase, delivery , acceptance and hand over?
This situation gives us an example of the interface. Between the Consumer Credit Act , Consumer Rights Act, and ultimately the role of the Financial Conduct Authority.
I hope the usual wise Forumites will comment for the benefit of all on here :cheer:

 

[Buckman]

My neighbour ordered a new kitchen including installation and used the sellers interest free credit facility underwritten by an independent finance house. Five weeks on the installation scheduled for a week is still unfinished due to a number of parts and panels missing including fridge door and handles. The kitchen is currently unusable. It transpires the finance house paid the monies over to the supplier prior to completeion of the installation.
I know this is very wrong and suspect the FCA will take an interest.
So turning to a caravan on finance do you think it is wrong for the finance company to pay the dealer before completion of the purchase, delivery , acceptance and hand over?
This situation gives us an example of the interface. Between the Consumer Credit Act , Consumer Rights Act, and ultimately the role of the Financial Conduct Authority.
I hope the usual wise Forumites will comment for the benefit of all on here :cheer:

The finance house owns the kitchen until the last payment is made so the onus is on the finance house to make sure that the kitchen is completed as per contract. It is of no consequence to the neighbour that the finance house paid upfront for the installation.
The neighbour needs to put it in writing, not just email although doing both is even better, to the finance house as soon as possible and send it by registered post for a signature that they are unhappy with the installation and that the finance house has broken the contract therefore there is no obligation for the neighbour to make any further payments.
This should get the attention of the finance house. Although the neighbour can state this in the letter it is always best to continue with payments. I strongly recommedn they join Which Legal Services for the correct consumer advice. The fee for a year is about £90.

 

[camel]

That's one thing about buying something on finance regardless of it being a kitchen, car, caravan is the fact that you do not own and I would think that if you did have a problem approaching the finance company as mentioned is the way to go, watching the TV programme 'Can'take pay we will take it away,, if some car or van is on finance they never touch,

 

[otherclive]

That's one thing about buying something on finance regardless of it being a kitchen, car, caravan is the fact that you do not own and I would think that if you did have a problem approaching the finance company as mentioned is the way to go, watching the TV programme 'Can'take pay we will take it away,, if some car or van is on finance they never touch,

Not quite correct. You don't own goods bought on Hire Purchase. But on other forms of finance you do. Cars on PCP may be different but things bought on credit cards, loans and other finance are owned by the buyer. Citizens Advice website spells it all out very clearly.

 

[camel]

I'm on about Finance not even mentioned CC's.

 

[otherclive]

I'm on about Finance not even mentioned CC's.

Credit Cards are finance, but based on your post what do you define as finance then?

 

[camel]

Now you are asking the obvious, why ask such a question, you tell me,

 

[Damian]

[quote="otherclive
Credit Cards are finance, but based on your post what do you define as finance then?[/quote]

Any loan which is secured against a specific item is finance, such as a secured loan to buy a car, or other named item, and that item remains the property of the finance house until the money has been repaid.
An unsecured loan is just that , a loan not against anything in particular, it may be to provide the funds for home improvements etc but is not specifically named.

 

[ProfJohnL]

It is my understanding that :-

Retail goods and services purchased using any form of credit fall under the Consumer Credit Act, and section 75 makes the finance provider carry a joint responsibility for the quality of the goods or service being purchased.

What usually happens is the finance house (FH) pays the seller for the goods, and in that respect the finance house becomes the legal owner of the goods. The customer is effectively paying the finance house, not the original seller.

As it is still a retail sale, the finance house has to carry the same obligations to the customer under the CRA, hence the sections 75 clause. It is usually the case that title to the goods resides with the finance house until the entire debt is cleared. This in theory allows in the event the customer defaults, the finance house can recover the goods and sell them at any time to offset the outstanding charges.

Finance houses are sensitive to problems with goods payed for through their funds, becasue they effectively carry the value of the goods as part of their assets, and anything that devalues those goods such as faults or failures means that the value they have on their books may be higher than the assets actual worth. That is a criminal offence to over value assets, it is false accounting, and is treated very seriously by the fraud office.

As a consequence, if goods subject to a finance package are not to contract or fail prematurely especially where you may be entitled to reject the goods, you should advise the finance house. However in the event of failure of the goods you do not have an automatic right to cease payment of the charges unless that is specifically stated in the contract or has been agreed (usually in writing) with the finance house.

 

[Raywood]

Nothing to usefully add except beware, as the act only applies to transactions up to £30,000. It may sound a lot but a new Buccaneer or Alaria for example would exceed this.

 

[Buckman]

Nothing to usefully add except beware, as the act only applies to transactions up to £30,000. It may sound a lot but a new Buccaneer or Alaria for example would exceed this.

Very true, but what some dealers do is juggle the figures. They are selling the new caravan for £33,000 and offer you a trade in of £13500 for your caravan which you then accept and an order is placed. On the day you collect the new caravan it is actually priced at £29500 and the trade in is now only £10000.
In effect because they have juggled the figures for reasons of VAT, you are now cvoered under S75 if you paid a deposit using a CC. This scenario happens a lot and is not a one off.

 

[ProfJohnL]

Nothing to usefully add except beware, as the act only applies to transactions up to £30,000. It may sound a lot but a new Buccaneer or Alaria for example would exceed this.

Very true, but what some dealers do is juggle the figures. They are selling the new caravan for £33,000 and offer you a trade in of £13500 for your caravan which you then accept and an order is placed. On the day you collect the new caravan it is actually priced at £29500 and the trade in is now only £10000.
In effect because they have juggled the figures for reasons of VAT, you are now cvoered under S75 if you paid a deposit using a CC. This scenario happens a lot and is not a one off.

That seems a very shady and dangerous game your dealer is playing, becasue your order will carry the original values, and that forms your contract..

Even though Section 75 may be limited to 30K, contract law would still apply to the goods worth more than 30K and the same basic requirements will apply, but your access to them would will be through different legislation, or a higher court.

 

[Buckman]

Nothing to usefully add except beware, as the act only applies to transactions up to £30,000. It may sound a lot but a new Buccaneer or Alaria for example would exceed this.

Very true, but what some dealers do is juggle the figures. They are selling the new caravan for £33,000 and offer you a trade in of £13500 for your caravan which you then accept and an order is placed. On the day you collect the new caravan it is actually priced at £29500 and the trade in is now only £10000.
In effect because they have juggled the figures for reasons of VAT, you are now cvoered under S75 if you paid a deposit using a CC. This scenario happens a lot and is not a one off.

That seems a very shady and dangerous game your dealer is playing, becasue your order will carry the original values, and that forms your contract..

Even though Section 75 may be limited to 30K, contract law would still apply to the goods worth more than 30K and the same basic requirements will apply, but your access to them would will be through different legislation, or a higher court.

Why does it seem a very shady and dangerous game as it is perfectly legal? The value of an order can be changed at any time and if you purchase the goods at £29500 instead of £33k S75 would stil apply as I would think the final invocie over rides any previous order values. Remember that one of the reasons goods exceed £30k is because of VAT and techniclaly the actual value of the goods is probably a lot less than £30k.

 

[ProfJohnL]

Once a contract sum is agreed, that is the value that tax man would be interested in. There would have to be justifiable reasons for it to be altered.

 

[Dustydog]

Once a contract sum is agreed, that is the value that tax man would be interested in. There would have to be justifiable reasons for it to be altered.

I have to disagree Prof.
HMRC are only interested in the final invoice which is of course the ‘tax point’ and the date from which vat becomes payable. An order is not a document relevant to the authorities as it is not a legal transaction but only an intention.

 

[Buckman]

Once a contract sum is agreed, that is the value that tax man would be interested in. There would have to be justifiable reasons for it to be altered.

I am sorry but your statement is incorrect as when you place an order you are not payigh VAT at that point as pointed out in another post. In addition, most order contracts in the T&Cs do state that there may be a variation in price. It would be very foolish of a business not to include that in its T&Cs.

 

[otherclive]

Once a contract sum is agreed, that is the value that tax man would be interested in. There would have to be justifiable reasons for it to be altered.

I am sorry but your statement is incorrect as when you place an order you are not payigh VAT at that point as pointed out in another post. In addition, most order contracts in the T&Cs do state that there may be a variation in price. It would be very foolish of a business not to include that in its T&Cs.

When we bought our present van as pre-owned the salesman did the same thing. The Final sales invoice didn't line up with the original purchase agreement, but the overall price to me was the same. Same for the car too.

 

[Raywood]

I do agree that it is a dubious practice but in effect it would seem that both parties are agreeing to vary the contract. Providing that both parties agree then I cannot see tbat there is any problem legally but as far as I know it has never been tested in court. At the end of the day the vendor pays the VAT so they take any risk involved if the tax man challenges the sale.

 

[Dustydog]

The Government make the rules. The phrase I used earlier, ‘tax Point” is the key point and undeniable.
https://www.gov.uk/vat-record-keeping/time-of-supply-or-tax-point

 

[chrisn7]

Isn't there a potential issue here for the purchaser if things don't work out and the van is rejected? In the OPs example would the purchaser only receive the £10,000 accepted trade in price, when it was actually worth £13,500 as initially agreed?

 

[ProfJohnL]

Isn't there a potential issue here for the purchaser if things don't work out and the van is rejected? In the OPs example would the purchaser only receive the £10,000 accepted trade in price, when it was actually worth £13,500 as initially agreed?

An interesting point, but ignoring the tax point issue at the moment, legally the value of the goods is determined by what the customer paid, both in cash and goods if a PX is involved. Apparently if a full refund were to be made, the dealer is only obliged to refund the cash as cash, and the goods involved as a part exchange. If the goods have been otherwise sold on or disposed of by the dealer, I'm not certain if the dealer is obliged to refund the value of the goods used as PX.

 

[Dustydog]

Isn't there a potential issue here for the purchaser if things don't work out and the van is rejected? In the OPs example would the purchaser only receive the £10,000 accepted trade in price, when it was actually worth £13,500 as initially agreed?

An interesting point, but ignoring the tax point issue at the moment, legally the value of the goods is determined by what the customer paid, both in cash and goods if a PX is involved. Apparently if a full refund were to be made, the dealer is only obliged to refund the cash as cash, and the goods involved as a part exchange. If the goods have been otherwise sold on or disposed of by the dealer, I'm not certain if the dealer is obliged to refund the value of the goods used as PX.

The SoGA and subsequent CRA are both very clear here Prof. I agree with you.
You should receive a full refund of the total transaction value.
You are entitled to the return of your traded in vehicle, but if that is no longer possible you should be given its value as agreed at the point of sale deal. Ie cash or finance plus
Px = total purchase price. The seller cannot wriggle :cheer:

 

[Raywood]

I agree with the Prof here. The claim would be the invoice value including any allowance for a trade in.

 

[ThePlotter]

If the finance house pays before completion then they take a risk usually a satisfaction note signed by the customer is required before payment.
If there are problems then the finance house should be contacted under Section 75,additionally if the deposit was paid by credit card (a minimum of £100 paid on card) then the card company is jointly and severally liable under the act to get it sorted ,so always pay at least £100 on your card to give extra protection.
I worked in the finance industry for most of my working life but now retired but don't think the rules have changed.