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July 1, 2010updated 12 Apr 2017 4:22pm

Court case highlights lessors not bound by FLA rules

It recently came to light that the trade body was neither called upon to give evidence nor its guidelines heeded in a dispute between a school and a servicing company, linked to a leasing contract for photocopying equipment, which came to a UK county court in May.

By Verdict Staff

School wins right to appeal decision over lease terminations.

 

The question of what power the Finance and Leasing Association (FLA) has both to act on behalf of and bring to book lessors and their subsidiaries over their working practices has reared its head again.

It recently came to light that the trade body was neither called upon to give evidence nor its guidelines heeded in a dispute between a school and a servicing company, linked to a leasing contract for photocopying equipment, which came to a UK county court in May.

The school lost the dispute in the end – although it has now been given leave to appeal – and a judge ruled it was liable for about £20,000 (€24,169), including costs, to be paid to the lessor in not more than 14 days, after apparently attempting to cancel a service agreement ahead of the end of the term.

The dispute arose after the school, apparently being dissatisfied with service provision, chose to enter into a new contract with a different provider and later found itself being pursued for two years’ worth of service charges from the original company.

The claimant – in this case, the service company, a non-member of the FLA – claimed the school was at fault for breaking the termination clause of the contract. The judge agreed with this point of view, despite submissions from the defence that the FLA code of practice ought to come into play, which might have offered some protection to the school.

 

Rumblings in the past

In particular, the defence claimed rules surrounding exclusions of certain costs from termination figures should be followed, saying the school should not be asked for more than six months of charges – but admitted there was no reason the claimant should be bound by these rules.

There have been rumblings in the past over whether the FLA ought to do more when its members find themselves in legal disputes, as some might feel they have been left high and dry without its support.

But as the organisation itself states on its website, its remit is to “be the acknowledged and trusted representative body for the business and consumer finance industries”.

Its mission, furthermore, is to represent members’ interests to “government, regulators, the European institutions, the media and the general public” – not to courts of law.

Indeed, if it did have the recourse to appear in court on a company’s behalf, it could find itself in a decidedly sticky predicament if faced with a legal dispute between two member lessors.

On top of this, it is not, and nor has it ever been, able to issue legally binding regulations.

A spokeswoman for the FLA said: “They are not regulation in law and they are not legislation.

“In the consumer sphere, our guidelines have actually been used by the ombudsman in making a decision on a case where the lender was not even a member of ours.”

The body does do compliance visits, she added, where issues over a lessor’s practices can be flagged up and addressed, but it would be extremely unusual for it to be called upon in a legal context.

Its purpose, moreover, is to advise and to lobby – not to act as the sword and shield of the industry.

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