Insurers claim many of these contracts fall foul of the Consumer Credit Act 1974 and are therefore unenforceable in law. A test case, Dimond v Lovell, found in favour of credit hire firm 1st Automotive, but a Court of Appeal ruling overturned this verdict and a further appeal moved to the House of Lords and was heard last month. The debate over whether credit hire agreements are enforceable has provoked a long-running row as some insurers have been withholding payments for credit hire until they hear of the decision of the House of Lords.
Millions of pounds in rentals are at stake and the stand-off has forced some credit hire firms out of business, claiming they were being squeezed by the insurance industry. At the House of Lords, much of the three-day hearing involved an examination of the Consumer Credit Act, but industry insiders believe that the appeal might succeed, which would open the floodgates for backdated claims from insurers. A spokesman for the House of Lords Appeal Office said that judgement on the case should be published before Easter.