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.
Most asset finance agreements contain an express provision that any equipment added to the asset financed by the lessee automatically belongs to the financier. This reflects the common law doctrine of accession, by which the rights of the original owner of the added equipment are extinguished.
We recently successfully represented Ferrari Financial Services GMBH in roundly defeating a claim by administrators who sought to interfere with Ferrari’s right to possession of a vehicle worth in the region of £7 Million.
The FCA has indicated that it intends to increase the limit of an award which can be made by the Financial Ombudsman Service under its compulsory jurisdiction scheme from £150,000 to £350,000.
We were surprised to come across a situation recently in which an asset financier (who we were not advising) sought to rely upon a declaration contained within its standard terms and conditions to the effect that the assets on finance had been delivered, were of satisfactory quality and were fit for their purpose.
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.
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.
The FCA has published new versions of the information sheets that consumer credit firms must use to accompany arrears and default notices. Firms are required to use the new versions from 27 July 2018.
The Joint Money Laundering Steering Group (JMLSG) has published a revised version of the Asset Finance sectors in Part II of its guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry.
“We are not looking for perfection. We do not have thousands of inspectors going out and checking people’s homework. What we do have are millions of people that have new rights and they can make a complaint against a company to our office”.
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