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On the face of it, disposing of a truck you can no longer afford via a vehicle transfer agency could be a good idea — but as some hauliers have found to their cost, some deals are much too good to be true. • A new breed of leasing firm has emerged which promises to relieve hardpressed hauliers of their truck repayments — but is hard to pin down under existing law if it doesn't.
Vehicle transfer agencies originated in America and South Africa and spread to Britain around 18 months ago, where the recession gave them a ready market.
VTAs work by taking over the truck and its repayments on a hire purchase or leasing agreement. They then pass both the vehicle and debt to a third party; often someone who would be judged a poor credit risk, according to the Finance & Leasing Association, which represents more than 100 reputable finance houses.
A survey of FLA members has highlighted 42 cases of CV operators being conned by VTAs between November 1991 and February 1992. In most of the cases hauliers handed over their trucks to VTAs and later received bills from the finance house for outstanding payments.
The FLA believes that these cases are "just the tip of the iceberg" — it "strongly advises" hauliers to avoid VTAs.
"If you hit financial difficulties and cannot reach re-payments on a truck then you should go back to your original finance company — they may be able to help you," says its secretary Margaret Waldren. "You have a contract with them which you cannot get out of without their agreement. And you have to remember that if you pass the payments on to somebody else without the finance firm knowing you are still liable for them,"
IN TROUBLE
Finance houses can accommodate hauliers in trouble in a number of ways, says Alexander Weissleder, managing director of Mercedes-Benz Finance.
He says that if an operator wants to keep his truck, he can extend the time of the repayments or reduce their value; if an operator wants to get rid of a vehicle he can terminate the agreement by selling the vehicle through its dealer network.
But for many hauliers that advice comes too late. One Suffolk-based driver was tempted to buy a vehicle from a VTA because of the low initial outlay. He ended up losing around £9,000 and any chance of setting up his own business.
"We knew other people who had done it and had no problems," says the driver's wife. "We were tempted by the deposit being only a couple of thousand pounds, which wasn't as much as other places asked for."
In July last year they took over a G-reg Iveco Ford truck from an owner-driver in Loughborough — but three months later he repossessed it, having been told by his finance house that he was liable for missed payments on the truck, and that he had no right to transfer them.
The Loughborough operator, who entered the agreement to free him to buy another truck, says the VTA did not tell him that he needed to ask permission from his finance house to transfer the payments.
"1 left everything to them," he says. "They are meant to be the experts, after all. I didn't want to return the vehicle to the finance house because they would have sold it at an auction for half the price." He duly handed his truck to the VIA, and although he had already made about a year's repayments on it, he did not receive a penny in return because of vehicle depreciation.
The Suffolk driver, who claims he had been meeting the payments, was given another truck from the VTA — but that was repossessed too. He was left with £7,000 of debts for deposits, repairs and tax, and was unemployed for around eight weeks. He is still fighting to get his money back and the police are now involved.
But there is not a lot a haulier in his position can do, says the Institute of Trading Standards Administration. It says the weapons used by trading standards officers against rogue traders are ineffective in such cases.
The 1974 Consumer Credit Act protects only partnerships or sole traders for deals up to £15,000 — and most CV contracts will exceed this figure. Its other weapon, the 1973 Fair Trading Act, applies only to products bought by consumers and not businesses.
"Firms using VTAs are on their own," says Eric Melrose, chairman of the institute's consumer credit sub-committee and director of consumer protection and trading standards for Grampian Regional Council. He reckons the haulier's only hope lies in a prosecution for fraud. But this would entail proving the VTA took the vehicle with no intention of keeping up the payments, and that would not be easy, he says.
Steven Greenfield from Suffolk County Council agrees: "You are in a legal minefield if you haven't told the original finance house you want to transfer the repayments and if you tread in the wrong place you will blow your own foot off."
He recommends that a haulier having difficulties should collect all his paperwork and get advice from either a solicitor or the local trading standards officer.
Trading Standards can refer cases to the Office of Fair Trading, which investigates if the VTA is operating legally. This partnership is being taken further, with the two parties pressing Government to widen the power of the Consumer Credit Act in a bid to give them more control over VTAs.
TRADING PRACTICES
"The act was designed before there were such things as VTAs so it is not as easy for us to control them as it is banks and building societies," says Greenfield. "It is a case where trading practices have advanced before the law."
But this will not be a permanent problem. Already most national newspapers have agreed to the FLA's request not to carry adverts for VTAs, and the OFT is investigating "a number" of complaints on them.
"They will die when the recession ends because there will no longer be a place for them," says Greenfield.
0 by Juliet Parish