Research from Keoghs has highlighted the ‘detrimental’ impact of ‘litigious’ credit hire organisations on consumers
Current cost averages in credit hire show signs of steep inflation over the past ten years, the latest research from Keoghs has found.
The research showed that the average cost of a credit hire invoice is now five times higher than in 2014 – rising £4,114 over ten years from £1,105 to £5,249 in 2024.
And, over the same period, the average daily hire rate for customers has also increased from £69 to £212.
Keoghs partner and head of credit hire Gary Herring said the scale of inflation had “significantly” outpaced direct hire costs and the consumer price index.
He explained that the level of inflation has been “driven by a highly aggressive and unregulated” non-general term agreement (GTA) section of the market, which has seen “exponential growth in recent years”.
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Keoghs further noted that it has seen evidence of credit hire organisations increasingly taking recovery action against their own customers.
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For example, one customer contacted the firm after receiving a bill for £30,000, consisting of both hire charges and solicitor’s costs.
The customer was told the vehicle was free and unless they signed the witness statement, which they previously objected to on the basis it was factually inaccurate, they would be liable for the costs due to the claim against the third party being jeopardised.
Faced with the choice between a bill for tens of thousands of pounds or committing contempt of court, the customer refused to sign.
The highest value individual credit hire claim Keoghs reported totalled £500,000.
The firm settled the claim for a fraction of the amount, after investigations revealed the daily hire rate had been uplifted £1,165 per day by the credit hire organisation (CHO) involved.
Consumer consequences
Herring highlighted that these “concerning practices”, conducted by a “minority of litigious [credit hire organisations]”, can have a significant detrimental impact on consumers and “ultimately drive up the cost of insurance premiums” for insureds generally.
“Whilst it can certainly be argued that credit hire has brought considerable benefits to consumers, we also regularly see evidence of significant detriment,” he said.
“In particular, there are behaviours propagated by a small but growing minority of the industry which few could deny have the potential to – and do – cause vulnerable consumers’ significant harm”.
Keogh’s research follows the Financial Ombudsman Service (FOS) reporting a four-fold increase in complaints relating to credit hire in July 2023.
The FOS also acknowledged that credit hire agreements remain unregulated by the Financial Conduct Authority (FCA) and outside of the FOS’ jurisdiction, as they are exempt from the Consumer Credit Act.
Herring therefore said that “the case for regulatory oversight of this section of the market has surely never been stronger”.
Data for the research was collated from Keogh’s pre-litigated outsource department, which processes around 40,000 claims per year on behalf of insurers – consisting of both GTA and non-GTA cases.
The figures were then compared to the Competition and Markets Authority’s (CMA) private investigation into the motor insurance market, which was published on 28 July 2014.
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