The Office of Fair Trading published the results of its investigation into consumer contracts last week and the car rental industry came off pretty well with the OFT concluding it is an industry which generally services its customers well. The contracts that rental companies impose are generally held to be fair yet there are situations involved in the booking and collection process where circumstances lead to reduced customer understanding. We detail some of the key findings of the investigation below and believe that there are a number of key things that customers can do to avoid the pitfalls that the OFT highlighted in its case study.

• Read all of the information that you get when booking your vehicle, where possible do this online as more information is generally available and you can read this in a non-pressured environment before you travel.
• Familiarise yourself with any potential additional charges and make sure you understand under what circumstances you may incur these.
• Shop around online before you travel for car hire excess insurance, don’t leave this to a last minute purchase at the rental desk where your choice is restricted and all the relevant information on the cover you are buying may not be available
• Understand that when you pre-authorise your credit card to the rental company, they may deduct the full amount for any damage without further notice if there is any loss or damage to the vehicle. Keep all documents relating to any charges and inspect your credit card bills carefully after you travel to ensure there have not been any charges made which you are unaware of. A stand alone excess reimbursement policy will help to recoup excess charges, so look into buying a policy that protects against this. The report found that increasing amounts of customers are buying annual excess reimbursement policies which operate independently of the rental company and provide cover year round.

The investigation looked at several aspects of consumer contracts and how these operate in the car rental market which I’ve summarised below.

Key areas that relate to the UK car rental industry

The Office of Fair Trading published the results of its investigation into consumer contracts on the 24 ^th February and concluded that “Car rental as a rule does not hide nasty surprises in the small print of contracts”. Unsurprisingly this quote can be found widely repeated and reproduced by car rental companies, alongside quotes of the response by John Lewis, Chief Executive of the BVRLA (British Vehicle Rental & Leasing Association, of which we are members) who states “[this review] confirms that there were no major failings to justify OFT action against the UK car rental sector”. A slam-dunk for the industry then as it’s given a clean bill of health?

What John Lewis went on to say though is “However, it is vital that the industry continues to raise the bar and deliver a first class service”, this perhaps is an indication of some points that the OFT did identify in their report where the industry in general could improve its service to customers.

The investigation related to consumer contracts across various industries, particularly in relation to how fair they were and whether they were understood by customers. It also looked into consumer behaviour, particularly in relation to whether contracts were read at all before being agreed to, and if they were, whether the implications of the contracts are fully appreciated by the customer. Whilst the car rental industry came off better than many other industries, particularly in relation to the % of complaints it generated, the investigation did highlight several areas relating to car rental contracts which the industry should take as an opportunity for improvement.

The key areas that were highlighted were;

• Whether customers had adequate opportunity to read contracts and understand the implications of the contract
• The visibility of additional charges
• Whether customers understood the implications of waivers and pre authorisations on their credit cards

Let’s look at each of these areas in turn.

Time to read the contracts

The investigation published a case study on car hire in its appendix which found that customers who booked online had better opportunity to read contract terms when they booked online than when they booked with a rental company directly and were only presented with the contract at the rental desk. Customers who were presented with a contract at the rental desk rarely read it, mostly due to feeling tired (if they’d just had a flight for example), or rushed (due to the queues of other customers behind them). Also, the format of the information presented at the rental desk put many people off due to small font sizes and poor quality paper. As these contracts detail important things such as where you can drive the vehicle, what happens if you break down, what to do if the vehicle is stolen or involved in an accident we feel that it is important that customers are fully aware of the contract that they are agreeing to before they take the vehicle. This is an area where the industry could undoubtedly take steps itself to establish procedures to help to ensure that the customer is fully informed.

The visibility of additional charges

The investigation found that the detail on additional charges was normally in the small print of these contracts that it also found very few people actually read! Perhaps with this in mind it is slightly surprising that the OFT found that there was no cause for concern here? Interestingly, one of the reasons that many people didn’t read the contract that they were issued is because they believed (incorrectly) that if there was anything significant in it then the sales staff at the rental company were obliged to specifically draw it to their attention. At the moment they have no obligation to do this, and this is one step we feel that the industry could take to align its procedures to comply with what many customers already believe to be the case. Of the customers involved in the case study, none could recall the level of any of the additional charges that were detailed within the contract. Given that many contracts contain costs of up to £2,000 for excess insurance charges, additional charges for failing to fuel the car, returning it late, returning it dirty, excess mileage, and even administration charges for speeding and parking offences then failing to understand what these are before you drive away could soon turn an Economy rental vehicle into an economic disaster!!

Whether customers understood the implications of waivers and pre-authorisations on their credit cards.

This is a worrying area. The investigation found that many car rental websites did not make it clear that the customer would be required to make a credit card available for pre-authorisation prior to taking the vehicle. For most customers the first time they were made aware of this was when they turned up to collect the car. This is a time as we’ve already discussed above where the customers reported feeling tired, being keen to start their holidays and time pressured by rental staff and other customers. Here are some quotes about credit card pre-authorisation from the OFT case study

There was evidence that consumers could not, despite their best efforts, assess the full implications of waivers or credit card pre-authorisations.

Despite discussing pre-authorisation, they were unaware they may have given firms discretion to charge without notification or any possibility of challenge before paying

“Consumers also expected only to be charged for significant damage”

Customers were aware that they could buy additional excess insurance from the rental company to protect against this, but the investigation found that the level of insurance was often not clearly explained and that many customers did not understand that it did not cover all risks, leaving some types of damage to certain types of the vehicle unprotected.

The investigation was also critical of the quality of the documentation that accompanies the rental companies own waiver policies, and the way in which information was made available to help customers with their buying decision.

Consumers said their understanding of these terms was impaired because documentation was not available on websites. This meant they could not fully investigate the terms before they picked up the car. The information was therefore provided too late for consumers to fully take it into account when deciding who to purchase from

As this information was only available at pick-up, consumers were less able to shop around for the most suitable terms. In addition contracts at the hire point were usually of poor physical quality and lacked effective summaries

Sales people were sometimes unable to answer the questions consumers asked. Consumers themselves were often tired after flights or in a rush to start holidays so were keen to collect their car and as a result were more likely to accept the terms without assessing them fully.

This sample's experience implies that, in practice, consumers could be harmed by terms which are ostensibly 'up front', but which may contain complex exclusions and are provided too late for consumers to properly assess. Although consumers accepted some responsibility, for example when they didn't put effort into understanding terms and conditions, their understanding is also affected by factors that firms can influence, such as explanations from sales people and availability of documentation at the booking rather than collection stage. Furthermore, the vague and contingent nature of credit-card pre-authorisation could mean that consumers are never able to fully assess its implications.

So what can car rental customers learn from this?

The car rental industry came off pretty well in the OFT report which showed an industry which generally services its customers well. The contracts that rental companies impose are generally held to be fair yet there are situations involved in the booking and collection process where circumstances lead to reduced customer understanding. Customers should follow these steps to ensure that they are fully aware of what they’re agreeing to;

1. Read all of the information that you get when booking your vehicle, where possible do this online as more information is generally available and you can read this in a non-pressured environment before you travel.
2. Familiarise yourself with any potential additional charges and make sure you understand under what circumstances you may incur these.
3. Shop around online before you travel for car hire excess insurance, don’t leave this to a last minute purchase at the rental desk where your choice is restricted and all the relevant information on the cover you are buying may not be available
4. Understand that when you preauthorise your credit card to the rental company, they may deduct the full amount for any damage without further notice if there is any loss of damage to the vehicle. Keep all documents relating to any charges and inspect your credit card bills carefully after you travel to ensure there have not been any charges made which you are unaware of. A stand alone excess reimbursement policy will help to recoup excess charges, so look into buying a policy that protects against this. The report found that increasing amounts of customers are buying annual excess reimbursement policies which operate independently of the rental company and provide cover year round.

Useful links

Details of the OFT investigation into consumer contracts.

The OFT case study into car rental contracts

The iCarhireinsurance Car Rental Guide, which details key points you should look out for when renting a car