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Those who provide goods and services to consumers on credit will need to assess the implications of the recent House of Lords decision in the case of Dimond v Lovell.
The case concerned the provision of credit hire. This is a multimillion pound business developed to enable a driver whose car is damaged through no fault of their own to hire a temporary car on credit. The cost is then recovered from the damages awarded against the third party.
While many credit hire firms recognised that their agreements were potentially regulated consumer hire agreements, under the Consumer Credit Act 1974, and accordingly limited the period of hire to three months, many overlooked the fact that independently this service was the provision of credit.
Dimond v Lovell has removed any doubt that such agreements are also regulated consumer credit agreements and, unless exempted, must comply with the act or be unenforcable without an order of the court.
Before Dimond v Lovell the provision of credit was often thought of in narrow terms.
But many businesses may give credit to consumers in sums not exceeding £25,000 for the services or goods they provide without necessarily appreciating that they do so.
Also, the majority have held that the recoverable loss in claims for hire excludes any uplift which represents "additional benefits" provided by credit hire companies.
Therefore, only the pure hire element, equivalent to a "spot" hire rate, will be recoverable from the third party. Thus the financial incentive for companies to provide credit hire may have been substantially undermined.
It remains to be seen whether any uplift is recoverable under a separate head of special damages or as costs, particularly in light of Lord Hobhouse's comment that some of the uplift may be recovered in another form.
The decision is unlikely to be the end of litigation on the provision of credit to consumers. Recoverable damages or costs are likely to remain a fertile area of debate, as will the determination of whether or not an agreement is exempt (see Zoan v Rouamba).
Hilary Heilbron QC is a barrister at Brick Court Chambers.