Historical rejections, finance not romance

We have recently had a number cases of  submitted to us in relation to historical rejection claims. These are deals that were done through finance several years ago. What they all have in common is that the consumer rejected the car sometime after purchase. Sometimes the selling dealer was notified and given the chance to remedy the situation, sometimes they were not. The overriding theme however is that the finance companies have accepted the claim from the consumer and at some point ceased contact with the dealer. They have then auctioned the vehicle off (often massively undervalued) and proceeded to pursue the dealer for the difference between original price and auction price. Whilst contractually they may be in the right, procedurally we have found inconsistencies that may aid the dealer when it comes to negotiating a better settlement.

When a car dealer enters an agreement with a finance company, the contract between them will contain indemnity clauses to ensure the finance company are covered by the dealer in the event the finance company take a car back from a customer following a complaint or problem.  The clauses will say the dealer is liable in situations arising in connection with the performance or contemplated performance of the contract and shall cover loss arising out of; a breach of agreement by the dealer, any misrepresentation or statement made by the dealer and of any other act or omission by the dealer, for example.  This liability is also covered by S75 of the Consumer Credit Act 1974 which provides that suppliers and creditors are jointly and severally liable for claims in respect of a misrepresentation or breach of contract. 

As a car dealer you are liable to give a refund or a repair in accordance with the Consumer Rights Act 2015 if it is established a car has a fault, present at the point of purchase.  Ideally, if a customer makes a complaint about a car they have purchased on finance, the creditor and the supplier agree a course of action between them depending upon the liability the supplying dealer may or may not have under the provisions of the Consumer Rights Act 2015.  However, this doesn’t always happen, and finance companies have been known to make arbitrary decisions, without consultation or agreement with the dealer, sell at auction and seek to recover their losses at a later date. 

The Limitations Act provides that a claim for breach of contract can be taken up to six years after the alleged breach, so in answer to your question, yes they can do this three years after the event.  The argument often put forward is that the indemnity in the creditor/supplier contract is the ‘bottom line’, and that the supplier therefore is liable to indemnify them against any loss incurred, however, if your agreement with them specifies the conditions of the loss arising from such as the examples given earlier, you may have a defence if no breach of contract or misrepresentation occurred in the case in which they took back the car.  Therefore nothing occurred to trigger the indemnity and you have no liability to pay their shortfall.  It is also worth noting that where a finance company have accepted a rejection for example where in fact the remedy offered should have been a repair, they may have failed to mitigate their loss in such cases, certainly if a repair would have been the cheaper option. 

If you have received a letter from your finance provider regarding a deal from the past, and are unhappy with the fact they are pursuing you for a rejected deal from years ago, then please contact Lawgistics and we will be happy to help. Lawgistics Members can get advice on this and other legal matters by contacting the legal team on 01480 455500.


Authors: Polly Davies

Published: 23 Jul 2019


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