Car Hire (Consumer Protection)

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 27th November 2012 Westminster Hall

[Ian Swales (Redcar) (LD)]

It is a great honour to serve under your chairmanship, Mr Davies. I must admit that this issue was first brought to my attention not by a constituent or by a debate, but by my own experience while returning unexpectedly from holiday this year. The issues I encountered led me to do more research, and I found that consumer protection for my constituents and other customers of hire car companies is severely lacking.

My experience involved picking up a car from a well known company, having it for no more than three hours as I drove from one UK airport to another, and then returning it. There were no incidents and I caused no damage to the vehicle. A fortnight later, I was looking over my credit card bill and noticed a charge for £666.68 from the hire car company, levied the day after the hire. That was obviously charged without any warning or notice to me. To my surprise, when I looked at the small print on my hire contract, there was £800 insurance excess on hiring the car, which was never mentioned at the time. Such excesses should be made crystal clear at the time of hire, and an option should be given to reduce it through an extra premium. Some cursory research that I have conducted shows that some of the biggest car hire companies have excesses ranging from £600 to £1,000, often with reduction options that are offered only when specifically asked for.

Such excesses should be capped and the options openly advertised, which would make price comparison and consumer choice much easier. Surprise charges of hundreds of pounds are not welcome to anyone and could cause real financial problems for some. Will the Minister tell me what safeguards are currently in place to stop those excesses being charged without warning? What rules, if any, are there on how much excess a company can charge? What are the rules surrounding how much evidence the company needs to produce to prove that damage was caused and the related costs?

In my case, I found it particularly difficult to dispute the damage report as no photographic evidence was provided. Time-stamped digital photographs would be a real technical possibility nowadays. Lack of evidence combined with picking up and dropping off the car in the dark meant that I was entirely at the mercy of the company; it was its word against mine.

I requested a copy of the invoice for repairs but did not receive one. Surely, total transparency should be required when charging people for damage. Even if I had damaged the car, and accepted that there would be repair costs, I would still have liked to see an invoice; otherwise, as a consumer, I would be at the mercy of the hire car company which could charge whatever it wanted.

There is also the question of best price in these cases. It seems reasonable for car hire companies to have agreements and relationships with garages and mechanics they trust, but what checks and safeguards are in place to ensure that they are getting a competitive price for repairs? Do they receive commission from garages when they allocate repairs? There is currently no onus on them to shop around for the best deal for minor repairs, as all costs get passed on to the customer.

In my case, I objected to the charges. My first objection brought a reduction of £291.68, accompanied by some amazing gobbledygook:

“At the location the estimated cost of repair was £658.34 including the damage administration fee of £41.67. As per our pricing schedule the cost of the repair is £366.67 therefore I have now amended your damage charge to reflect the actual cost of repair and the damage administration fee. Our pricing schedule is based on previous damage repair costs to ensure that the locally made estimate reflects the actual cost of repair irrespective of whether the damage is immediately repaired or not.”

[Dr William McCrea (South Antrim) (DUP)]

Did the company outline what damage was done to the car? The hon. Gentleman did not see an invoice, but did the company tell him what damage he had actually done?

[Ian Swales]

When I first complained, I was told over the phone that there was a dent and some scratches to the front of the car. There was no other evidence of what happened.

The starting figure in the explanation was different from what the company actually charged me. Even the refund did not quite balance with the explanation. Although I was refunded an exact amount, it left a suspiciously round figure of exactly £375 as my remaining charge. Again, that process could be a lot more transparent.

I am sure that colleagues will be pleased to hear that when I objected further I received a full refund. In a letter, a senior manager said:

“Having reviewed the vehicle condition report and the damage documents I am unable to uphold the charge.”

That obviously prompts the question: why did the company immediately charge more than £600 for damage in the first place if records were so poor? What is to stop companies charging consumers in the hope that it will not be noticed, not followed up, or that an initial refund of some of the money will suffice? Does that not imply that there may be a widespread scam going on whereby some hire car companies are simply seeing what they can get away with?

I have used my particular example to highlight the broader issues, but I know that my experiences will not be dissimilar to those of many other people. The British Vehicle Rental and Leasing Association saw a 54% increase in complaints against rental companies between 2010 and 2011. In looking at lessons learned, it says:

“Rental companies should take steps to help customers better understand their obligations under the rental agreement.”

It continues:

“Rental companies must ensure their staff follow the correct procedures and maintain accurate records so they can contest any disputes that may arise.”

In February 2010, the Office of Fair Trading published the results of an investigation into consumer contracts. It included research into five areas, one of which was car rentals. It highlighted various issues, including whether customers had adequate opportunity to read contracts and understand the implications of the contract; the visibility of additional charges; and whether customers understood the implications of waivers in the contract and pre-authorisations on their credit cards.

One key point was that people were put off by small font sizes and poor quality paper. People also had an understandable belief—a touching faith, in fact—that staff would highlight important points. No one could recall the detail of any extra charges for which they might be liable, and the OFT was critical of the way in which information was made available to help customers with their buying decision.

When Which?Money examined car rental terms and prices for a week’s hire, it found that costs for operational extras, high excesses and hidden shortfalls in cover were “commonplace”. It also said:

“While most car rental firms offer excess waiver policies, to reduce or eliminate the cost if you have an accident in your hire car, we found numerous underlying restrictions in the small print that could make you assume you’re insured when you’re not.”

That really compounds the felony. If I had been unhappy about my high excess and paid a premium to lower or take away the excess, Which? found that even that premium may not have actually bought me the cover that I expected. It also found that third-party excess reimbursement insurance policies suffered from the same shortcomings—that is, buying policies not from the hire car company.

There are many consumer protection issues here that the Minister should address. Key features of a rental agreement should be clearly summarised and not left buried in the small print. Car hire companies should clearly display the insurance excess included in their contracts in their advertising and at the point of hire. Customers should be given options to bring the excess down to levels they can afford, with policies that actually work. These extra premium options should also be clearly advertised in advance. Car hire companies should not be allowed to make charges for damages without notifying the hirer.

With digital photography and video now being ubiquitous, consideration should be given to having time-stamped photographic evidence to support damage claims. The hirer who is expected to pay for damage should receive a copy of the repair invoice, and consideration should be given to how hirers can benefit from the most competitive repair costs.

I thank the Minister for listening to my speech today, and I look forward to hearing her feedback and information about what plans the Department may have in place to ensure that there is more protection for consumers in the future.