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SMMT urges ending of voluntary termination credit clause

Motor finance companies are losing an estimated £83 million per year in a voluntary termination clause in hire purchase and conditional sale agreements.

The SMMT and the Finance & Leasing Association (FLA) are pushing for a change to the current law as the DTI begins consulting on the future of the clause in certain finance agreements.

At the moment, a customer can hand back the goods to a finance company without further liability if 50% of the total amount due has been paid. Due to used car depreciation, and growing abuse of the current system, many motor finance companies are said to be suffering serious losses.

The SMMT says the DTI currently has three options; to do nothing and retain current provisions, to amend the current provisions to allow creditors to recover a higher amount due under finance agreements and finally, to remove the voluntary terminations provision altogether.

The SMMT believes that voluntary termination is no longer necessary due to the greater protection that customers have. A new system would also make it easier for customers to compare finance offers and ultimately make hire purchase and conditional sale agreements more competitive and more readily available.

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