Despite a plethora of legal safeguards, car finance continues to be a minefield for the unwary and checking all documentation is essential, writes Carol Coulter, Legal Affairs Correspondent
Few advertisements for cars from major dealers these days do not carry an offer: "Finance arranged". However, the old adage, "buyer beware", should apply to this offer more than to the car, which, when sold by a reputable dealer, carries a guarantee.
When offering to arrange finance, the dealer is not doing you a favour. He (or she) is seeking to sell you another product, one which may well carry more profit for the dealer than the sale of the car itself.
The form of finance offered by a car dealer is normally a hire purchase agreement. The dealership is the agent for one or more financial institutions, and it receives commission from this institution for every loan it sells.
The Irish Financial Services Regulatory Authority has a very useful booklet on hire purchase agreements, outlining the pitfalls and problems that lie in the small print, and advising how to avoid them.
But you can be sure that this booklet is not offered to you by the car dealer to peruse prior to taking up their offer of finance.
You are unlikely to become aware of it until you encounter a problem, and by then it may be too late.
For reasons too mundane to dwell on, I recently opted to accept the offer of finance from a car dealership, assuming it would be a loan similar to a bank loan.
As I intended to repay it early I asked would there be any charges for doing so, and was told by the finance salesman: "Don't worry, it's not like the bad old days, where you have to pay all the interest." Thus reassured, I accepted the offer and returned the next day to complete the deal. A lengthy document of several pages was produced. It contained two additional charges, which I had not been told about.
One was the documentation fee and the other the completion fee, totalling €126.90. When I said I had not been told about them, the salesman agreed to waive the documentation fee, but said the completion fees could not be waived.
I was asked to sign at various points in the document. It was only as I went through it that I realised this was a hire purchase agreement, not a loan. As I intended to pay it off early, I decided to go ahead anyway. I was due to collect the car the next day.
The next day an alternative source of finance became available. I rang the car-dealer and said I wanted to cancel the agreement, and buy the car for cash. I was told it was not possible to cancel it.
I then contacted the Financial Services Regulator, who informed me that in all such agreements there was a 10-day "cooling off period", during which a person could change their mind, unless they had signed a waiver, giving up the right to do so.
I had no recollection of any waiver being mentioned. However, the salesman insisted I had signed a waiver as part of the agreement, and reiterated his refusal to cancel the agreement.
According to the IFSRA the existence of the waiver must be drawn to the attention of the borrower, and refusing to sign it cannot be a reason for refusing the loan. Neither my partner, who was present, nor I, heard any word about the waiver from the finance salesman.
I then said I wanted to repay the loan immediately. I was told that this would cost 100 days' interest. Again, this had not been mentioned during the discussion. The salesman insisted it had been.
I contacted the Financial Services Ombudsman with a view to making a complaint. However, I realised that the evidence of mis-selling a financial product rested on my word and that of my partner. It was clear that this would be flatly contradicted by the finance salesman.
I contacted the customer services division of the financial institution involved, which proved much more amenable, and persuaded the car dealership to cancel the financing agreement, so making a complaint became redundant.
Car dealers selling financial products are every bit as subject to regulation as any other seller of such products, according to the Financial Ombudsman, Joe Meade. He told The Irish Times that his office will investigate any complaint, which will involve taking evidence from all parties under oath.
Asked about the fact that, in this instance, there would have been two diametrically opposed versions of the facts, he said: "I would make a determination based on the balance of probabilities and my own judgment." He pointed to a case study on his website, where he had given the benefit of the doubt to the complainant.
If he finds there are systemic issues he can bring it to the attention of the Financial Regulator. He can also order the financial services provider to alter certain practices he considers not to be in the interests of consumers.
"I am very hot on the issue of proper information being given to people," he said. He can only act on foot of a complaint, and offers information on making a complaint on his website, financialombudsman.ie
Most people would prefer not to have to make a complaint, but to avoid the problem in the first place. A good preventive measure would be legislation requiring all those selling financial products to display prominently the booklets prepared on such products by the IFSRA. In the meantime, drop into their office on Dame St and collect one.