The pitfalls of relying on consumer forums for legal advice: a cautionary tale about excess mileage clauses in hire purchase agreements

Where a car finance agreement states that excess mileage charges will be payable, consumers must ensure that advice obtained from consumer rights forums is researched thoroughly and applicable to the specific terms of their agreement.

Background

Car finance agreements usually stipulate a maximum mileage which is linked to the period of the agreement and the amount paid by the customer. At the end of a hire purchase agreement, the car has a residual value which is directly affected by the miles on the clock. That is, of course, why the creditor seeks to make up for the reduction in value caused by excess mileage by applying additional charges.

As a result of a recently volatile economic climate, increased numbers of customers have decided to bring their hire purchase agreements to an end early. Although many motorists have reduced their mileage during the pandemic, a surprisingly significant minority have exceeded the maximum allowed mileage under the agreement but sought to avoid paying the associated additional contractual charges. Analysis of this phenomenon suggests that the source was a highly technical legal argument being cited on consumer forums.

Put simply, the argument is that, if a customer voluntarily brings a hire purchase agreement to an end prior to the end of the term of the agreement, the Consumer Credit Act absolves the customer of their liability to pay any further sums under the agreement. The cases of Mercedes Benz Financial Services (UK) Limited v Cahalane (Willesden County Court, 26 February 2018) and Julian Hodge Bank Limited v Hall [1997] EWCA CIV 1852 are cited on various consumer rights forums in support of this argument. However, the legal analysis applied is flawed, as confirmed in two recent unreported County Court judgments.

Analysis

In two recent County Court trials, focus fell on the timing of the application of the charges. The Act doesn’t allow creditors to apply charges after a voluntary termination. However, if the creditor’s terms and conditions expressly state that excess mileage charges will be applied immediately prior to termination, the statutory restriction doesn’t apply.

In both cases, the Judge found that the consumer defendant’s liability to pay excess mileage charges accrued immediately prior to voluntary termination and remained payable in full following termination.

In the Mercedes Benz case, referred to above, the creditor’s standard terms failed to stipulate that the excess mileage charges accrued prior to termination and so the defendant avoided payment. And, in the Julian Hodge Bank Limited case, the issue as to the timing of the liability to pay excess mileage charges was not even considered.

Commentary

Whilst consumer forums can be beneficial and increase a litigant in person’s awareness regarding their rights and knowledge of the law, these sites must be used cautiously and should not be viewed as a substitute for obtaining independent legal advice.

In both recent cases, the consumer’s reliance on flawed advice resulted in Judgments which included payment of the claimant’s costs, resulting in a significantly increased liability.