Credit car hire companies that expected to lose hundreds of millions of pounds in unpaid bills following a court ruling have been handed a legal lifeline.
Credit hire is a service provided to the non-fault victims of accidents, offering a replacement car while their own car is being repaired. The cost of the hire is then billed to the insurance company of the at-fault driver.
Last year, a Lords of Appeal verdict allowed insurers to refuse to pay bills because the small print of some credit hire contracts failed to comply with the Consumer Credit Act 1974. As a result, credit hire firms agreed to write off tens of millions of pounds in debts and in return, insurance firms agreed to honour future claims so long as the claims were within set price limits agreed under an Association of British Insurers scheme.
But in a court of appeal hearing between Wilson and First Country Trust it was found that stopping a company from demanding payment on an agreement was contrary to the lender's human rights - even if the lender was a company - because the damage to the firm was too great a penalty for the error made in the contract.
One industry insider said: "This judgement now leaves the way open for credit hire companies to recover on previously unrecoverable debt and insurers are under pressure to pay."