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Hire Purchase Customer sues Supplier

The title of this article does not quite rise to the level of “Man Bites Dog”, but it refers to a rather unusual case which was reported recently and which provides a welcome albeit relatively unusual example of a dissatisfied customer accepting its liability under Hire Purchase Agreements and seeking its remedy against the supplier of the defective equipment.

New York Laser Clinic Limited v Naturastudios Limited [2019] EWHC 2892 (QB) involved the supply of a large quantity of laser equipment to the claimant for use in its laser hair removal business, following oral representations made by the supplier as to the performance of the equipment upon which the claimant made detailed profit projections which formed the basis of its business case put to 3 financiers.

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FCA to require improved Commission Disclosure

One of the more nebulous provisions of CONC which has led to widely different interpretations in practice has been the rule relating to the disclosure of commission found at 4.5.3 which currently provides as follows:

“A credit broker must disclose to a customer in good time before a credit agreement or a consumer hire agreement is entered into, the existence of any commission or fee or other remuneration payable to the credit broker by the lender or owner or a third party in relation to a credit agreement or a consumer hire agreement, where knowledge of the existence or amount of the commission could actually or potentially:

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FCA to ban discretionary commission models in Motor Finance

On a separate but related note, the FCA’s October 2019 report has proposed a ban on commission models within the motor finance industry where the amount received by the broker is linked to the interest rate paid by the customer where the broker has the power to set or adjust this interest rate.

The FCA refers to these as “discretionary commission models”, which have a number of variations, but in essence the empirical evidence unearthed by the FCA’s enquiries strongly suggest that these discretionary commission models significantly disadvantaged customers compared to flat fee models of remuneration. The ban will be limited to regulated consumer credit agreements and will not extend to consumer hire.

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Claims for conversion against company directors

We recently advised asset financiers as to their rights where a company which had taken numerous items of plant and machinery on Hire Purchase purported to sell the assets to a buyer in the European Union who then sold them on to a buyer in Asia.

The Hirer Company was effectively insolvent but it was clear from the investigations we carried out that the purported sale had been arranged by the sole director of the Company, and that no other individual had any real involvement in the transaction on its behalf.

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Consumer Rights Act may apply to Guarantors of Companies

The Consumer Rights Act 2015 (“CRA”) is an important piece of recent legislation which governs many contracts between traders and consumers, and implements the. EU Unfair Contract Terms Directive (93/13/EC) (“UTD”.) “Consumer” is defined in section 2 (3) of the Act as: –

“an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.”

There is as yet no direct authority on how the definition of consumer applies in the context of security documentation, but the Court of Justice of the European Union (ECJ) has set out the test in the UTD for when it applies to personal Guarantees and security agreements given by an individual to secure debts of a company In Dumitru Tarcău, Ileana Tarcău v Banca Comercială Intesa Sanpaolo România SA (C-74/15) the court held that a personal Guarantee was to be subject to the UTD because it was given by a natural person, acting outside his trade or business, and who had no functional links to the guaranteed company.

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