3rd July 2024

Hitting the brakes on admin fees

A project to address bad practices in the used car sector helped protect consumers’ pockets and keep unsafe vehicles off the roads

By JTS Staff
Journal of Trading Standards' in-house team
Once we started putting the word out though, we started receiving complaints about people being charged really excessive admin fees

Used cars routinely top surveys of the most complained-about consumer goods and, deservedly or not, the stereotypical ‘used car salesman’ has become synonymous with underhand business practices and shady dealings. The practices engaged in by the rogues — even if they do constitute a minority of the sector — are well known, with car clocking, doctored service histories and non-existent after-sales care among the tactics used to make a quick buck at the expense of consumers. But when a new practice started to come to light a few years ago, Trading Standards was quick to hit the brakes.

When he was based at Barking & Dagenham Trading Standards, Cenred Elworthy (who is now Trading Standards Manager at the Royal Borough of Greenwich) started to notice a rise in complaints about ‘administration fees’ being added to the price of used vehicles. These fees — usually ranging from around £50 to £200 — were being sneaked into sales contracts in an apparent effort to circumvent consumer protection laws.

“In London there are particular boroughs with large numbers of used car traders,” Elworthy says. “In those boroughs, there are lots of small traders dealing with things like crash repairs, or quite low-end cars being sold for £1,000 to £2,000. When you go around to industrial units, you’ll often find businesses that are just two or three guys working on one or two cars to then sell on.

“Sometimes those cars will be absolutely fine, and sometimes they’ll be absolutely terrible. It’s really about the after-care for the people who are buying them,” he adds.

When the Consumer Rights Act was introduced in 2015, new protections for consumers, including new rights to return unsatisfactory vehicles or to have them repaired by the dealer, were brought into force. That coincided with a rise in small, independent traders selling vehicles online, often from outside residential properties and with little scrutiny. Elworthy felt there was an opportunity for Trading Standards to kill two birds with one stone: to update TSOs’ knowledge of the new legislation, and to bring the growing online used car sector into compliance with the law.

“I thought the best way to train ourselves up was to go face to face with the traders and explain the new rules,” Elworthy says. “I realised when I was talking to colleagues in other London boroughs that we were quite a way ahead in terms of the advice being given to traders. We shared a lot of the guidance informally, without it being a London-wide project.

“Once we started putting the word out though, we started receiving complaints about people being charged really excessive admin fees. Under the new right to return, people would buy a used car, drive it away, work out it was terrible, then go back to the trader and say, ‘I want my money back’. Traders were allowed to make a very small deduction for the usage of the car — but if someone’s only driven it a few miles, the amount that they can claim for the loss of value is going to be very minor.”

To compensate for the hit to their pockets, traders brought in admin fees — often without making it clear to the consumer beforehand, and sometimes even over-stamping existing contracts — which they claimed they were entitled to hold on to even when the price of the vehicle had been refunded.

“The use of admin fees became really pernicious in the car trade,” says Elworthy. “When people do a search on a used car website, they might set the filter to find a car costing less than £2,000. They then go to look at it, only to be told actually it’s £1,999 plus a £100 admin fee; it’s very useful for traders because then the negotiation becomes focused on the admin fee, rather than the actual market price of the vehicle.

“It’s a bit like joining a gym — they’ll say, ‘don’t worry, we’ll knock the admin fee off for you’, and people think ‘great, I’ve saved myself £100’, without having a discussion about the vehicle’s price.”

While there isn’t an outright ban on admin fees, the law requires them to be completely transparent, and a consumer must be made aware of them before making any transactional decision.

Regal approach
As Elworthy and his colleagues began to gain a better picture of the scale and nature of the problem, they also noticed that their advice to traders had started to pay dividends, with a drop in consumer complaints relating to businesses they had spoken to.

That initiative laid the groundwork for a London Trading Standards project in 2019. With £16,000 in funding from National Trading Standards (NTS), Operation Regal was launched to tackle the supply of unsafe and substandard used vehicles in the city, as well as misleading business practices such as the use of counterfeit car stamps and service books, and the imposition of admin fees when purchasers seek refunds.

With Trading Standards teams being stretched across the capital, and with some services having just three or four TSOs (and sometimes fewer), Elworthy saw Operation Regal as a great opportunity to provide additional support and take a proactive stance to address an important area of consumer harm. Operation Regal would take a two-pronged approach: part of the focus would be on the fair trading aspects of the used car sector, with the other looking at product safety issues.

The project was signed off, with support in place from the DVLA — and then, as with so much else around that time, things were brought to a screeching halt with the arrival of the Covid pandemic.

However, says Elworthy, once things started opening up again after the lockdown, “we realised this was an ideal project to get Officers back out there; we could do things like socially distanced forecourt visits. The project had to be modified quite a bit; we did use some DVLA people and they were great, but they probably didn’t have the capacity
to assist us to the degree we were expecting when the project was initially planned. But because we had the resources from NTS, we were able to use private vehicle inspectors, and to work with traders to promote a general fair trading environment.

“Trading Standards has really strong powers to stop dangerous vehicles being sold — we can issue a notice that a car is unsafe, and we have the powers to withdraw it from sale. A lot of TSOs probably weren’t 100% up to speed with their powers as they applied to vehicles, including myself at the time. I thought there was a skillset there that could really be emphasised.”

The success of Operation Regal speaks for itself: from the initial £16,000 NTS investment, London Trading Standards calculates that a total of £882,370 in consumer detriment was prevented — £55 saved for every £1 spent.

The project reached 287 used car dealers across 17 London boroughs, and found that 26% were issuing unfair admin fees, with 27% of vehicles inspected deemed to be unsafe.

Elworthy singles out his former colleague LeAnne George, who was brought in to administer the project, for particular praise. “She did really sterling work at London Trading Standards, bringing everyone together for it,” he says. And, as one of the driving forces behind the project from its inception, Elworthy adds: “It’s something I’m quite proud to have been involved with myself.”

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