This note is not a general overview of the Regulations - it is specific to the shambles the Regulations have left us with in documenting both personal contract hire agreements and agreements under which cars are provided to employees by way of salary sacrifice schemes.
I should explain at the outset that it is the view of this firm that the provision by an employer of a car to an employee under a salary sacrifice scheme does not involve a regulated hire agreement under the Consumer Credit Act (CCA) between employer and employee. It's fair to say that not everyone understands that - or, perhaps more fairly, not everyone agrees with that - though there are indications that the FCA is itself beginning to appreciate the issue. Anyway, that issue is not relevant here - irrespective of the CCA position, it appears that both a personal contract hire agreement and the provision of a car under a salary sacrifice scheme by way of a variation to the employee's contract of employment are subject to the Regulations. At least, that's the cautious view: it's not actually 100% clear whether either or both of these arrangements actually is subject to the Regulations, but we'll ignore that and look at issues where we assume from the outset that they are so subject.
The Regulations require specific information to be given to consumers in relation to two types of contract - a sale of goods or a supply of services. While the draftsman of the Regulations has remembered that a contract for the sale of goods may also include a supply of some services, unfortunately he's forgotten (or, worse, nearly always forgotten) that a supply of services can also include a supply (but not a sale) of goods. And if those supplied goods are costly - for example, a car - the omission leads to some worrying consequences for the supplier.
The Regulations deal differently with three types of contract: an on-premises contract (say, where the consumer agrees the supply in the hire company's own premises); an off-premises contract (say, where a hire agreement or a salary sacrifice employment variation agreement after some face to face contact is signed by the hirer/employee at home); a distance contract - that is a contract with no face-to-face contact at all; maybe because it is concluded on-line. In all three cases, there is a list of information which now has to be given to the consumer. In the last two cases (off-premises contracts and distance contracts), the consumer has a cancellation right for 14 days. In a services contract, those 14 days run from the date the contract is made. He also has to have certain additional information given.
The information to be given is in itself non-controversial, though, in practice, some of it will be difficult to provide in a sensible manner in a hire agreement or salary sacrifice agreement. Examples of this are: the total price over the whole period of the agreement; the arrangements for the payment, delivery and the time by which the trader undertakes to perform the services. The former is a carry-over from a sale of goods contract; the latter, on the face of it, could involve repeating huge chunks of the arrangements for the provision of the services though, doubtless, shortcuts will be found.
The issue, though, is that it is not clear whether all the information in question only has to be given if it is not already included in the hirer's/employee's written contract - or whether, even if it is in the contract, it has to be given on a separate sheet. The Regulations simply say the information has to be given and it has to be given in a "clear and comprehensible manner". Remembering that a regulated hire agreement has to be set out in accordance with the straitjacket requirements of the Consumer Contracts (Agreements) Regulations 1983, is that "clear and comprehensible"? And, also bear in mind, that the information required by the Consumer Contracts Regulations may be scattered throughout the form of the regulated hire agreement and not all in one place. So, does the information need to be set out together to comply with the new Regulations? The draftsman has not deigned to give us an answer to these questions, so the general approach appears to be that suppliers are being advised to give a separate sheet setting out the information together but with some cross-referencing to the terms of the agreement where more detail can be found. Thus, the hapless consumer is going to be burdened with yet more paper, some of it simply duplicating information which is already set out elsewhere. But it gets worse….
The other main issues
This one only relates to regulated hire agreements and not to salary sacrifice employment variation agreements for the supply of a car - because of our view that the latter do not involve CCA regulated hire agreements. If the hire agreement is an off-premises agreement (but not a distance contract) the consumer will usually have a cancellation right under the CCA which lasts for 5 days from the date he gets his second copy of the agreement sent to him. The various copies of the agreement will have to contain specific and detailed wording to comply with the CCA regulations. There are certain statutory consequences as to what happens if he exercises that right of cancellation. But, separately, it would appear that he will also have a 14 day cancellation right under the Consumer Contracts Regulations, the consequences of which, if exercised, will be somewhat different than if he exercises the cancellation right under the CCA. How on earth is the consumer to understand this? How is the supplier supposed to try and explain it, given that it makes no sense whatever? If the hire agreement is a distance contract but not an off-premises agreement, the consumer has no right of cancellation under the CCA but does have the 14 day cancellation right under the Consumer Contracts Regulations. If the contract arises under a salary sacrifice scheme the consumer will have the 14 days cancellation right under the Consumer Contracts Regulations in both an off-premises contract and a distance contract. (Are you keeping up at the back?)
On cancellation under the Regulations, if the consumer has already paid anything under the agreement for the supply of the service, that payment has to be reimbursed to him by the same method as he made the payment in the first place. This is strictly laid down; there is no room for doing it any other way. But, in a hire agreement, any payments the consumer has made will probably have been made by direct debit and, in a salary sacrifice agreement, will probably have been made by way of deduction from salary. It is impossible, therefore, for the supplier to comply with this provision.
Lastly, we come to the quagmire of what happens if the consumer actually does cancel the agreement under the Regulations. In a sales contract, his cancellation period runs for 14 days from the date when he gets the goods and, on cancelling the contract and returning the goods, all he is required to pay is the value by which the goods have been diminished by the result of his handling of the goods (other than handling required to see if the goods are satisfactory). Now, of course, the problem with a car is that its value depreciates enormously as soon as it is registered; it has become second hand. So, if a trader is selling something valuable online or by way of an off-premises contract, how does he protect himself, as the above wording about the loss and value from the handling of the goods does not appear to cover depreciation? But I digress, as these provisions only relate to sales contracts, but they are an interesting comparison to the problems with the provisions about the cancellation of service contracts. The following are the key provisions regarding the cancellation of services contracts:-
First, the supplier is not supposed to begin the supply of the service unless the consumer specifically asks for it. It's not clear what "supply" means in relation to a contract for the supply of a vehicle. Does it mean ordering the vehicle; delivering it? This may be moot because the unintended consequence of these confusing Regulations is likely to be that suppliers will not order a car for a hire agreement or a salary sacrifice scheme until the cancellation period has expired.
If a sales contract is cancelled, the Regulations contain detailed provisions about the return of the goods to the supplier, and the condition they have to be in. Unfortunately, in relation to services contracts, the draftsman has forgotten that goods might be being supplied by way of the services contract and the Regulations say absolutely nothing about the obligation of the consumer to return the goods. He has no obligation in the Regulations to redeliver them or allow them to be collected. Presumably, however, the supplier will be able to rely on basic legal principles - that he can demand goods back if the consumer has no legal basis on which he can retain them. However, there is no equivalent provision as there is in sales contracts for the consumer to pay for any loss of value in the goods as a result of him "handling" them. All there is, is a requirement on the consumer, who has requested the supply of the service before the end of the cancellation period, to pay a proportionate amount of the total cost of the service over the period of the agreement in relation to the period for which he has actually had the service supplied to him. Presumably, this means that all the supplier gets is a proportion of a month's rent for the duration of the cancellation period, and it is not clear if that amount continues to accrue where there is a delay in returning the goods, given that there is no obligation in the regulations themselves for the consumer to return them.
Sometimes you really do despair that the only people who can possibly benefit from consumer regulation are the lawyers who have to try and work out what it all means, especially when no-one can know what it actually does mean until a judge tells us.