Fleet News

Lords ruling could cost credit hire firms £200m

CREDIT hire companies face losses of £200 million after a landmark House of Lords legal ruling said thousands of bills sent to insurers need not be paid. Insurance firms claim the windfall could lead to lower premium costs for fleets, but many credit hire firms face an uncertain future as they consider how to replace the lost income.

The ruling puts in jeopardy the future of thousands of cars either owned by the hire companies or supplied on rental agreements from alternative sources. Credit hire firms provide assistance to third party victims of car accidents by offering them a replacement vehicle and then billing the at-fault driver's insurance company. Insurers, concerned at the high charges being imposed by some credit hire companies - prices of £100 a day are sometimes quoted - challenged the validity of many hire agreements, claiming they fell foul of the Consumer Credit Act 1974 and were unenforcable because of the way contracts had been written. The value of claims affected was estimated at £200 million.

Five Lords of Appeal considering the case of Dimond v Lovell dismissed an appeal from credit hire firm 1st Automotive that all bills were legitimate. However the Lords agreed that the credit hire industry itself was a legitimate business and provided a worthwhile service. Several of the judges said charges should match the 'spot rate' quoted by daily rental companies in a move which will severely restrict the profits of credit hirers.

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