Section 75 and car finance in the UK

What section 75 actually is

Section 75(1) of the Consumer Credit Act 1974 makes the creditor jointly and severally liable with the supplier for a claim the buyer has against that supplier for misrepresentation or breach of contract. In ordinary language: where it applies, the same claim you have against the seller can be brought against the company that provided the credit. The creditor does not have to have done anything wrong itself.

It is limited by the cash price of the thing bought. Section 75 bites where the supplier has attached a cash price of more than £100 and no more than £30,000 to the item. Those limits attach to the cash price of the item, not to how much credit was taken or how much was charged to a card.

It also needs a particular three-cornered shape: a debtor, a creditor, and a separate supplier, connected by arrangements between the creditor and that supplier. That shape is what section 12(b) and (c) of the Act describe, and section 75(1) is written to reach agreements within those paragraphs. The classic example is a credit card: the card issuer lends, a different business sells, and the two are linked by the card scheme.

Why hire purchase and PCP fall outside it

On a dealer-arranged hire purchase or PCP you are not borrowing money and then buying the car. The finance company buys the car from the dealer and supplies it to you under the finance agreement. You have possession and use of it, with an option to purchase, and you do not own it until the final payment and any option-to-purchase fee have been paid. PCP is legally a form of hire purchase, so the same analysis applies to both.

That means the creditor and the supplier are the same company. There is no separate supplier for the creditor to be jointly and severally liable with, so the agreement is not one falling within section 12(b) or (c), and section 75(1) does not reach it. This is not a loophole a lender found. It is a consequence of the structure, and the same structure is what hands you the two routes below.

A general personal loan paid into your own bank account is a different structure again, and is not a debtor-creditor-supplier agreement either. What you do with the money afterwards is not connected to the lender.

The Financial Conduct Authority's published figures put PCP at over half of agreements reported in its Cost of Living consumer credit data collection — a share within that collection, not of all motor finance agreements — and most common for new cars, while hire purchase is the most common product for used vehicles. The point here is only that the product most used-car buyers are on is exactly the product section 75 does not cover.

Route one: section 56(2) deemed agency

Section 56 of the Consumer Credit Act 1974 deals with what it calls antecedent negotiations: the discussions and statements that lead up to the agreement. Section 56(2) provides that those negotiations are "deemed to be conducted by the negotiator in the capacity of agent of the creditor" as well as in the negotiator's own capacity.

The practical effect is large. If the salesperson told you the car had a full service history, or had never been recorded as an insurance write-off, or that the recorded mileage was genuine, that statement is treated as having been made on behalf of the finance company. You do not have to trace the individual who said it, and it does not help the lender that the dealership has since closed or changed hands.

Compared with section 75, this route is not framed by the cash price of the car at all, so it does not stop at £30,000, and there is no argument to have about which paragraph of section 12 an agreement falls within.

Route two: Consumer Rights Act 2015 section 7

Section 7 of the Consumer Rights Act 2015 brings hire-purchase agreements within the goods chapter of the Act. So the statutory standards in that chapter apply to the car, including that it must be of satisfactory quality, and they apply against the trader who supplies the goods under the agreement.

On hire purchase or PCP, that trader is the finance company, because it owns the car. In practice this is the single most useful thing to know when a car bought on finance turns out to be faulty: the company you put the claim to is the one named on the finance agreement, not only the dealer whose name is above the forecourt. The finance company is a regulated firm with a complaints process, and a complaint about a regulated credit agreement or the firm that provided it can be taken to the Financial Ombudsman Service.

Where section 75 does help a car buyer

Where you are buying the car from the dealer as supplier, and the cash price of the car is more than £100 and no more than £30,000, paying part of the price on a credit card brings the card issuer in as creditor, jointly and severally liable with the dealer for a claim for misrepresentation or breach of contract.

• A car with a cash price above £30,000 is outside section 75 however it is paid for, though section 75A can apply to it (next section).
• It must be a credit card. Section 75 is a provision about credit, so a debit card does not engage it. Chargeback is a separate thing: a card scheme rule with its own conditions and time limits rather than a statutory right, and it is not section 75.
• On a dealer-arranged hire purchase or PCP the supply is by the finance company rather than the dealer, so the deemed-agency and Consumer Rights Act routes above are the ones that apply.

Above £30,000: section 75A

Section 75 stops at a cash price of £30,000. Section 75A of the Consumer Credit Act 1974 starts where section 75 stops, and gives a narrower claim against the lender for a car priced above that. It is a claim for breach of contract (it does not mention misrepresentation), and it applies to a “linked credit agreement”: a regulated consumer credit agreement that serves exclusively to finance the supply of specific goods, where the lender used the supplier’s services in preparing or making the agreement or the goods are explicitly specified in it.

Under such an agreement you may pursue the claim against the lender if the supplier cannot be traced, has not responded after you contacted it, is insolvent, or you have taken reasonable steps to pursue the claim against the supplier without getting satisfaction. The steps need not include litigation, and accepting a replacement or other compensation from the supplier in settlement counts as satisfaction.

Section 75A does not apply where the cash value of the goods is £30,000 or less, where the credit exceeds £60,260, where the agreement is made wholly or predominantly for the debtor’s business, or where it is secured on land. Whether a particular agreement is a linked credit agreement turns on how it was arranged and what it says. On a dealer-arranged hire purchase or PCP the finance company is itself the supplier, so the deemed-agency and Consumer Rights Act routes above are the ones that apply.

The Consumer Rights Act timeline

Two periods do most of the work when a used car turns out to be faulty.

• 30 days from delivery. The short-term right to reject a faulty car runs for 30 days from delivery.
• Six months from delivery. A fault that appears within six months is presumed to have been present at delivery. The burden of proof is reversed: it is for the trader to show the car was of satisfactory quality when supplied, not for you to show it was not. Section 19(14) attaches that presumption to the right to repair or replacement and to the right to a price reduction or the final right to reject — subsections (3)(b) and (c) and (4). The 30-day short-term right to reject is subsection (3)(a) and is not on that list, so inside the 30 days the consumer still has to show the car did not conform.

Both run against the trader who supplied the goods. On a cash sale that is the dealer. On hire purchase or PCP it is the finance company that owns the car.

On finance the refund itself is smaller than the car’s price. Section 20(14) of the Consumer Rights Act 2015 provides that where the contract is a hire-purchase agreement or a conditional sales contract and it is treated as at an end before the whole of the price has been paid, the entitlement to a refund “extends only to the part of the price paid”. Rejecting a PCP or HP car therefore returns the deposit and the instalments actually made, and ends the agreement, rather than paying out the full purchase price.

The motor-vehicle carve-out in section 24(10)

This carve-out runs the other way from section 75: it favours the trader.

A refund on the final right to reject may be reduced by a deduction for use, to reflect the use the consumer has had of the goods. That deduction is normally barred where the final right to reject is exercised in the first six months. Section 24(10) of the Consumer Rights Act 2015 makes motor vehicles an exception to that bar.

So a dealer or finance company may deduct for use even inside the first six months, and it may do so only because the goods are a motor vehicle. Cars are the exception to the no-deduction rule, not an illustration of it, so a refund in the first six months is not always given in full. Note that section 24(10) is written about the final right to reject, not about the 30-day short-term right.

“Cars are the exception” is itself too broad for one class of vehicle. Section 24(13) provides that a vehicle is not a motor vehicle for the purposes of section 24(10)(a) if it is constructed or adapted for the use of a person suffering from some physical defect or disability, and so that it may only be used by one such person at any one time. A single-user adapted or wheelchair-accessible car is therefore back under the ordinary rule, and no deduction for use may be made on a final rejection inside the first six months. Section 24(12) then takes the meaning of “motor vehicle” from the Road Traffic Act 1988 in Great Britain and from the Road Traffic (Northern Ireland) Order 1995 in Northern Ireland — the same result either side, reached through different instruments.

Where these rules apply

The Consumer Credit Act 1974 and the Consumer Rights Act 2015 are United Kingdom statutes, not Great Britain-only rules in the way the MOT fee, the first-MOT age or a clean air zone are. No outcome on this page turns on whether the car was bought in England, Scotland, Wales or Northern Ireland. One definition does: section 24(12) reads “motor vehicle” from the Road Traffic Act 1988 in Great Britain and from the Road Traffic (Northern Ireland) Order 1995 in Northern Ireland. An ordinary car is a motor vehicle under both, so the carve-out lands the same way. What does differ between those jurisdictions is the court you would use and the procedure it follows, if a dispute ever got that far.

The Motor Ombudsman

The Motor Ombudsman handles disputes with businesses accredited to its codes of practice. It is free to consumers and is an alternative dispute resolution provider approved by the Chartered Trading Standards Institute; its Vehicle Sales Code received full CTSI approval in October 2016.

An outcome is binding on the business if the consumer accepts it. The consumer is not obliged to accept, and can decline and pursue the claim another way. For a complaint about the finance agreement itself, or about the firm that provided it, the Financial Ombudsman Service is the relevant scheme. The Ombudsman says you have six months from the date on the firm’s final response to bring a complaint, and it usually cannot help after that.

Not the same thing as the motor finance redress scheme

The Financial Conduct Authority's motor finance redress scheme is a separate matter. It is about how motor finance was sold and the commission arrangements within it. It is not section 75, and it does not change the analysis on this page. For its latest position, see the FCA's car finance page or am I owed car finance compensation. If you think you are owed something, contact your lender directly; the FCA says there is no need to use a claims management company.