The Society of Motor Manufacturers and Traders has written to the Department of Trade and Industry pressing for a clause to restrict Voluntary Terminations under the revised Consumer Credit Act (CCA).
As AM reported last month (April 23), the Government is reviewing the CCA, with ministers preparing a white paper for discussion in the autumn. However, the proposed amendments do not currently refer to VTs – and that's the problem.
The SMMT claims some dealers are encouraging motorists to terminate their finance agreements early and then selling a new car with a replacement credit plan. It says up to 70,000 cars a year are subject to VTs, which can affect residual values and trap some consumers into a credit agreement with a higher annual percentage rate.
Now SMMT chief executive Christopher Macgowan has written to Gerry Sutcliffe MP, parliamentary under-secretary of state for employment relations, competition and consumers at the DTI, calling for a restriction on the use of VTs.
“We are concerned there is systematic abuse of the legislation and that this is leading to an increase in the overall cost of finance for the majority of consumers,” says Macgowan in the letter. “It also places companies providing credit through hire purchase arrangements at a significant commercial disadvantage because these restrictions do not apply to other forms of lending.”
He wants a consultation period over the summer during which the VT case can be debated.