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Stuart J
Stuart J, Solicitor
Category: UK Law
Satisfied Customers: 22624
Experience:  PGD Law. 20 years legal profession, 6 as partner in High Street practice
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*Tom Graham*I have taken a car insurance policy on 04/04/13

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*Tom Graham* I have taken a car insurance policy on 04/04/13 from a broker, premium was £6,000. I paid deposit of £1,489, on the 7/05 direct debit was taken from my account from a finance company of £524 and on 4/6/13 £517. The finance company has not sent me any finance agreement or any direct debt guarantee. on the 24/June I sent a letter to the broker saying please cancel my insurance with effect from 1/7/13 any refund me the deposit after deducting cancellation fees ( I was told over the phone when I took the policy that in case of cancellation 30% of the deposit will be deducted) in July I called them to ask when I will get the refund, they said your insurance still ongoing, so they said you have to put it in writing again, I forwarded a copy of the cancellation notice again by email, and made me sign a document saying that I no longer have the certificate of insurance before they cancelled it, eventually was cancelled on 27/7/13.


Now they are saying because you cancelled you have to pay £3500, total what I paid since I took the policy is £1489 ( deposit )+ 2 direct debts of £1,041, total ( £2,530 ) now they asking me for £970


As they have breached the Verbal agreement of the cancellation fees I have called my bank and told them I am disputing those 2 direct debts, they said we will refund the money within 1 working day and will sort it out with finance company.


Please note I have not signed any agreements or anything, what does the law says? Did I commit any offence?

Submitted: 4 years ago.
Category: UK Law
Expert:  Stuart J replied 4 years ago.
have you signed nothing whatsoever?
I am off-line shortly until later but will pick this up then. Thank you
Customer: replied 4 years ago.
I have not signed anything whatsoever, the finance company told me we have sent you the agreement twice, but I have not received them.

Based on their information when I took the policy about the cancellation and 30% deduction, I believe they owe me around a £1000, thats why I called the bank and told them yo recall the direct debts which the bank will refund to my account on Monday
If the bank will honestly refund the money on Monday, what can the broker, insurance company or finance company do?

Expert:  Stuart J replied 4 years ago.
That me tell you the situation with insurance.
You are taking out a policy for 12 months. If you cancel it, you get a small amount back even if you cancel it early on. It appears that you were told that you would get a refund of 30% of the deposit which seems most odd.
So you take out a policy for 12 months for which the premium is 6000 quid.
You owe 6000 quid for the insurance and you will get 30% back whenever you cancel it which appears to be about 500 quid. So regardless of when you cancel, this policy is going to cost you £5500 on the facts you have given me.
You then took a finance agreement loan for £6000 where you agreed to pay an amount of money every month to repay the £6000 which had been spent on the policy.
You are faced with continuing to pay the finance of £6000 until the end of the term although you will get a small amount of rebate back.
You might not like it and I am sure you do not and most people do not understand it but that is the situation. You do not take out a 12 month policy which is in 12 monthly chunks. You take out a 12 month policy in one 12 month chunk. You owe the money for the 12 month chunk which is the finance.
It is a sad fact that motor insurance, cancelled early gives a negligible rebate.
If you don’t continue to pay, they can take you to court but it would be small claims court and they may not bother.
You have a possible defence in that they misrepresented if you were told that you could cancel at any time, not pay any more, and still get one third back.
No, you did not commit any criminal offence although there is a civil law argument to be had.
If the bank get the money back from the finance company, the finance company will sue you for it.
I’m sorry, I appreciate that this is not the answer you wanted but there is no point in me misleading you. The question you have asked is very common and it is likely that they will allege that you misunderstood it rather than they did not tell you.
You do have one thing in your favour and that is that under the Consumer Credit Act you should have been given the right to cancel the finance and that does give you the right to cancel the finance but it does mean that you are left arguing with the insurance company over the premium.
There is another issue and that is that you took the policy out at the beginning of April and you cancelled it at the end of June. You therefore had the policy on risk for almost 3 months and even on a pro rata basis you owe £1500.
If they do issue Small Claims Court proceedings, you are obviously faced with defending them.
I am off-line now until later this evening if you need me to follow anything up.
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Customer: replied 4 years ago.
I was told in case of cancellation that they Will DEDUCT 30% as a broker from the deposit and refund me the rest.
I did not sign agreement with the finance company, how can they sue me if I didn't enter an agreement with them?
I called the finance company today and told them to I have a dispute with the broker about a refund and also told them you did not have my permission to take any money, so please refund the money, they said sort it out with the broker, I said ok I will get the money through my bank as I didn't agree to you to take payments from my account

What do you think gonna happen in the worst scenario ?
Will I have a criminal record or CCJ if they go to court, I'm concerned only because I'm applying for naturlisation in few months
Expert:  Stuart J replied 4 years ago.
I can sum this up very easily in one sentence. If the finance company agreement is cancelled because you did not pay anything and all the money is returned to you, then you owe the insurance company the full premium for the 12 months less the rebate for early cancellation, however much that is.
If you have had 25% of the insurance that you bought (three months), I find it highly unlikely that they would give you 70% refund. If anything, I thought you would get 30% back and they would keep the rest. If you hadn’t paid it all, then you are liable to the finance company.
If you did not give the finance company the authority to take any money, then your insurance was void and you have been driving with no insurance! It’s too late for them to do anything about it now but that is the situation. It is possible to give a verbal agreement for money to be taken by direct debit which obviously you did because they had your bank details.
I think the worst case scenario and what is likely to happen is that they will chase you for the majority of the premium.
Whether they will take you to court not remains to be seen.
You will not get a criminal record even if you go to court and lose.
You will get a County Court judgement if you go to court and lose and you do not pay within the time specified in the judgement, usually 28 days. If you pay within that time, and it is treated as a dispute/won’t pay rather than cannot pay. If you go to court with a dispute and lose, and you subsequently pay the money, it would be grossly unfair the judgement was registered against you so it would not be.
Can I help further?
Customer: replied 4 years ago.

Great respond from a great professional :)

So it's not an offence to recall the direct debt?
Now they said I owe them £970, their calls are recorded can they after 1 month say they want the whole premium? I never was told these terms and conditions?
If you were in my shoes, would you recall the direct debt or leave it?
Please bear in mind that I'm only concerned about good character requirement for naturalisation so don't want CCJ or criminal records

Expert:  Stuart J replied 4 years ago.
Thank you. That is most kind.
Unless it is fraud (which it is not) or money owed to the government, then money is that you owe anybody ceased to become a criminal issue in the United Kingdom in the late 19th century, over 120 years ago. Matters like this are no longer a criminal matter. You will not end up with a criminal record under any circumstances.
It is an offence under the bills of exchange act to cancel a cheque but that is still a civil matter and not a criminal matter. Direct debits are not covered under the same legislation.
If there calls are recorded, you will have evidence of what you were told and you can ask for that.
I would be inclined, from what you have said, to cancel the direct debit and see what happens. If they start to jump up and down and cause a fuss, all they actually issue legal proceedings, you could pay them immediately what they are asking and avoid going to court at all. It just means that you would have to pay a small amount of court costs.
At the end of the day, the decision is yours.
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The thread does remain open and you can ask follow-up questions if you wish.
Customer: replied 4 years ago.
Summary of what I understood: if I recall the direct debts and they start chasing me for the money and I feel they will make a claim at the court then I just pay them to avoid attending the court, and even if I will go to the court and lose the judge will issue a CCJ and if its paid within 28 days won't show up on my records, correct?
Expert:  Stuart J replied 4 years ago.
Absolutely spot-on on all counts.

what I would do however is if you go to court and lose, I would pay it on the day in court in front of the judge and ask for confirmation that it will not show up on your credit record.

That way you are absolutely guaranteed that it will not slip through the net.
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