Hire car customers taken for a ride

Hire car companies are often accused of misleading customers over costs and potential charges, and one of the country’s biggest operators has been found guilty of doing just that.

Europcar Australia will be forced to pay a penalty of $100,000 after the competition watchdog convinced the Federal Court that the group misled customers in its 2013 rental agreement.

The Australian Competition and Consumer Commission (ACCC) alleged the Europcar policy was “unfair” and carried false representations about the potential liability for consumers in the event that a hired vehicle was damaged.

The Federal Court found that various terms in Europcar’s standard rental agreement were unfair because they held consumers liable for vehicle loss or damage, regardless of whether the consumer was at fault. Other terms were also found to be unfair because consumers were liable for vehicle loss or damage when they breached the rental agreement, no matter how trivial the breach or whether it had any connection to the loss or damage caused.

The court also found that, from December 2013 to July 2014, Europcar made false or misleading representations on its website that consumers’ liability for vehicle accident damage would be limited to a “Damage Liability Fee” of $3,650, or less if the consumer purchased Europcar’s ‘extra cover’ products. In fact, under Europcar’s standard rental agreement, consumers’ liability was not limited to these amounts in cases of overhead, underbody or water damage, even when ‘extra cover’ products were purchased.

Warning to hire car operators

ACCC Deputy Chair, Dr Michael Schaper, praised the court’s decision as an important one for consumers. He said: “It makes it clear to car rental companies that they cannot simply rely on contractual terms to hold consumers liable for any and all damage that may occur during a rental period, regardless of the circumstances. Terms in standard form rental agreements must be fair.”

Europcar has amended its standard rental agreement to remove the unfair terms. The misleading statements have also been removed from the company’s website.

Europcar Managing Director Australia and New Zealand, Ron Santiago, said he welcomed the findings of the Federal Court in relation to the ACCC action.

“We are encouraged by the court judgement which acknowledged our high level of cooperation with the ACCC and agreement from both parties that the conduct was not deliberate and corrected as soon as we were advised by the ACCC,” he said. “We are always working to make the experience of our customers better and to protect them before, during and after their trip. And we have always and will continue to have a very productive and collaborative relationship with the ACCC with a view to achieving the best possible outcome for our customers, a view reflected in today’s judgement.

You can read Europcar’s full response here.

This case is part of a wider ACCC review of the vehicle rental industry in Australia, with the watchdog investigating various consumer issues, including misleading vehicle rental pricing and charging, and unfair contract terms. Recently, Hertz Australia came under the spotlight when the ACCC examined its vehicle damage charging processes.

From 2013 to August 2015, Hertz represented to some of its customers that the vehicle they had hired was damaged during their rental period, when in fact the damage was pre-existing. Hertz incorrectly invoiced and charged these customers for the vehicle damage.

Hertz also represented to some customers that the amount they were charged to repair certain vehicle damage was Hertz’s actual repair cost, when in fact Hertz received repair discounts that it did not pass on to customers.

Hertz acknowledged that its conduct was likely to have contravened the Australian Consumer Law prohibitions on misleading or deceptive conduct and false or misleading representations. In response it will contact and refund customers who were charged for pre-existing damage or overcharged for vehicle repairs, and will take other steps to address the ACCC’s concerns.

“This case serves as a message to vehicle rental companies that they must have robust compliance procedures in place to ensure they do not contravene the Australian Consumer Law by incorrectly charging customers for damage they are not responsible for,” said Dr Schaper said.

“Vehicle rental companies must also ensure that they are transparent and accurate in communicating with their customers about the charges they are applying for vehicle rentals and repairs.”

Dent to consumer confidence

Europcar and Hertz received the lowest customer satisfaction scores in Canstar Blue’s 2015 review of hire car operators. They both got ratings of three stars out of five in relation to cost and fee transparency, as well as overall customer satisfaction. Avis was the highest rated car rental company on both counts.

Canstar Blue’s survey of more than 700 motorists – who had hired a rental car in Australia during the previous year – revealed that more than half (57%) have found advertised costs misleading, while almost one in four (23%) have disputed additional charges after returning a vehicle.

In an effort to avoid disputes, 81% of motorists said they always thoroughly inspect their hire vehicle before driving away, and 37% back this up by taking pictures.

Just 16% of respondents said they had dented or crashed a hire car.

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