Dealers are being warned that, even if they carry out all appropriate finance checks and take out indemnity insurance, they could still end up in court for selling cars that have outstanding finance.
The problem has come to light after a dealer bought three cars after checking with Experian for any outstanding finance.
Daniel Crompton, from Richmond Car Sales, said the checks came back showing the cars were clear of outstanding credit, but to ensure he was protected he bought additional insurance.
“We purchased a 12-month indemnity with Experian for each vehicle," he said.
The cars were sold on as normal.
Months later – after the indemnity insurance had expired – Lombard registered its interest in the cars, despite agreed procedures between the Finance and Leasing Association (FLA) and its members stating that finance providers should register their interest within a day of a finance deal being agreed.
“FLA full members should record registrations within 24 hours of agreements going live on their systems,” it says in the duties and responsibilities section of the Recommended Best Practice for Asset Registration
“FLA members should aim to meet standards endorsed by the Motor Finance and Asset Finance Division Management Committees and undertake to ensure that their systems and documentation will meet the specifications set out in this document… FLA full members and the Agencies should abide by this Recommended Best Practice.”
However, this best practice is not binding and so Lombard was able to register its interest and seek redress for its loss.
"This is an isolated case. We have strict measures in place to ensure all deals are captured on the HPI system. Registration with HPI is entirely voluntary but at Lombard we have an automated system that ensures each deal is captured on the HPI system on a daily basis,” explained a spokesman.
“Unfortunately in this case the vehicle information originally supplied to us was incorrect, which resulted in the wrong information being recorded on HPI. Once we understood that an error had taken place we immediately took corrective action."
Despite the error likely being down to one of Lombard’s suppliers, it is the dealer who is now facing a claim.
A spokesman for Experian agreed the dealer had done all it could have to ensure the cars did not have outstanding finance.
“Experian works closely with the automotive industry to encourage prompt and full sharing of automotive data to ensure that the interests of finance companies and dealerships are protected,” said the spokesman.
“Although it is incredibly rare for a financial interest in a vehicle not to be registered promptly, we do provide insurance to protect dealers against this risk and would advise that dealers to take up the insurance.”
A HPI spokesman added: “It is in the best interest of the finance house to provide HPI with the necessary information.
"However, in very rare occasions this information is not passed on to HPI. In order to help protect dealers HPI offers a guarantee, as an additional service to the HPI Check.
"The warranty ensures dealers are protected when buying used vehicles and covers them for any financial loss resulted to inaccurate or incomplete information HPI supplies, such as a finance house not providing HPI with full data information.
HPI takes these cases very seriously and has a dedicated team ready to investigate any concerns a dealer may have.”