Abe Smith, chief executive officer and founder of financial technology provider Dealflo, looks at how recent headlines and court cases show full and open honesty really is the best policy when describing a vehicle’s previous owner.
At the start of the new year, the headline ‘Motorists could win payouts over mis-selling of former rental cars’ appeared in The Times.
It was a story that was quickly echoed online and in other newspapers, with one calling it a “used car scandal”. At the heart of the story was an accusation that car retailers sometimes fall short of the type of transparency consumers want and expect when buying a used car.
The story related to the practice of referring to used cars sourced from rental companies and fleets as having had one previous owner. In October, the Advertising Standards Authority (ASA) ruled that dealers must clearly identify in their sales and promotional activities that such vehicles have been used for rental or business use.
In the ruling, the ASA was very clear: “If a dealer was aware that a vehicle was ex-fleet because it had previously been used for business purposes, then that was material information likely to influence a consumer’s decision to purchase it. Furthermore, if a dealer knew that such an ex-fleet vehicle was used by multiple users, then that too was material information for consumers to make an informed decision.”
This could spell trouble for the used car industry. Law firm Harcus Sinclair believes the ASA’s decision indicates that many consumers have a “viable case” for litigation. It claims that over 4,000 people have contacted the firm about the issue.
If the number of people contacting a litigation specialist is insufficient to encourage changes in the way such stock is promoted, then a case subsequent to the initial headlines may spur activity. On 19 January 2018, Gateshead Council Trading Standards announced that it had successfully prosecuted Peugeot Citroen Retail UK after its Robins and Day’s Gateshead Peugeot dealership failed to declare a used car was previously a Europcar rental vehicle. The case was brought under the Consumer Protection from Unfair Trading Regulations 2008. The company was fined £5,000 plus costs of £500. The court also ordered the company to pay the customer £1,000 in compensation.
While the ASA is encouraging all dealers to review and adjust their advertising, notably online, the threat of litigation still exists if it is deemed that dealers have breached the Consumer Protection from Unfair Trading Regulations (2008). The ASA’s ruling is unequivocal: dealers must now disclose the full history of a used vehicle before selling it, including whether it was previously used for lease, hire or fleet purposes.
Dealers should review their used vehicle purchasing processes to ensure they have its full history. Then, in their sales and promotional activities, the ASA ruling says dealers must ensure they make customers fully aware of “any vehicles that had been leased out for business purposes and used by multiple users (and which) were more likely to have been subjected to wear and tear”.
Dealflo provides market-leading agreement automation technology for financial services companies, and our experience in car finance may offer some learnings to address this challenge:
- Through automation, car finance providers can ensure that the financial agreement process is either completed compliantly, or not at all.
- Automation also allows car finance providers to collect evidence to demonstrate this compliance;
- Applying these principles to used car sales and promotional activities could ensure that dealers have the evidence to prove that their activities have been undertaken in a manner that is beyond reproach.
In the absence of an equivalent technology, used car dealers should consider developing stronger processes around control, training and record-keeping to ensure that sales and marketing activities are completed correctly, and they have the evidence to prove it.