Cap on credit hire charges in doubt

The proposed cap for credit hire charges is now in doubt as the Competition and Markets Authority (CMA) reveals that limiting recoverable charges is outside of its powers.

In what was widely seen as a victory for the insurance industry, the CMA had proposed to cap recoverable credit hire charges at about half the current rate available in the ABI’s General Terms of Agreement.

But this proposal has been scrapped as the watchdog does not have the power to limit recoverable charges available under tort law.

In a statement released this week, CMA group chairman Alasdair Smith said that the proposed remedy for limiting credit hire charges was once again under consultation as the CMA looks for other ways of capping credit hire charges.

One new proposal put forward by the CMA is that instead of capping the amount recoverable by an insurer, the price charged to the customer could be capped instead.

“By capping the contractual liability of the claimant for the vehicle, the amount that the replacement vehicle provider (or a solicitor) would be able to claim in tort on behalf of the claimant would also be capped,” Smith wrote.

Alternatively, the CMA may scrap the proposed cap, and instead encourage increased use of bilateral agreements and for the ABI to adopt elements of the initial cap proposal within the existing GTA protocol.

Smith wrote: “In this scenario, we would still be keen to do what we could to encourage market practices that reduce friction between at-fault insurers and parties representing non-fault claimants, in order to reduce the detriment that flows from the provisional adverse effect on competition we have identified.”

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