Article

Documentation Fee Costs

04-Jan-2019

When you go to the Greengrocer to buy apples and the sales assistant tells you Apples are 75 pence per pound, yet when you got to the checkout the Pound of Apples has risen to £2.20 would you be happy paying it?

Or would you expect the price you were originally quoted to include the business overheads and profit etc?

 

 

Well, not it seems in the world of Contracts.

More and more Finance and Service Suppliers apply spurious contract charges under the guise of ‘administration costs’

In the Office Equipment industry ‘documentation’ fees of £200 and more to start, £50 per year to ‘administer’ and between £200 and £500 to exit an agreement are routinely being charged by Leasing and some Servicing Companies.

Documentation fees can add £1,000 or more to a 5 years lease, double if there is a service and maintenance contract alongside the lease!!

There are circumstances where the provider might incur additional administration costs; you missing a payment or changing the method of payment for example, however, these are generally provided for and charges listed separately within the contract document.

It is difficult to know exactly how these spurious charges come into being but for the Office equipment industry, we believe the seed was planted as far back as the 1980’s when leasing companies approached their larger partners with the idea of having their own customised leasing documents.

This provided for the Leasing agreement to be in the seller’s livery, giving the impression that the seller was financing the agreement and perhaps giving you the customer the belief that they were larger or perhaps more financially sound than they might have actually been. It was in the small print where it became clear a third-party finance company were the real owners of the agreement.

Although prestigious, the drawback was if the lease company rejected the deal, the seller had to find alternative funding which would mean getting new documents signed allowing you the customer time to change your mind or worse still a competitor to come up with a possibly better deal.

It was not long before a generic document appeared, one which would appear to be owned by the selling company yet able to be sold on the open market to virtually any finance company allowing the seller to get himself the best alternative deal.

The problem with a ‘One size fits all’ document, is it must cater for a multitude of lenders from the mainstream to the less than desirable ones and therefor combine the best and worst in terms.

To appear a little more competitive, the ‘less than desirables’ would substitute some of the interest with additional fees, documentation and admin charges for example.

Not long after these documents reached mainstream lenders, they took advantage of the free money these charges generated and soon had admin and document fees written into their own terms and conditions, all be it at the time, a lot less expensive than those of today.

Then of course, seeing how easy it is for financiers to make free money, some suppliers have chosen to add documentation fees to their Service and maintenance agreements, hitting you with a double blow and making a complete nonsense of the service and running costs they originally quoted you.

To be clear, these charges are so vitally important to a finance company’s survival that most mainstream lenders happily split the fees with the selling agent.

It is worth bearing in mind that this is a buyers’ market and to secure your business the Supplier and the lease company will forego these outrageous charges if you object and refuse to pay them, however, you do have to be firm and you do have to have it agreed before you sign the agreements.

You must be prepared to walk away and most importantly of all, you really must ensure you have confirmation from the contract owner that the fees are removed, or have it written on the actual contract document before you sign.

Sadly once the agreement has started, too many organisations will refuse to accept any agreed amendments unless they are noted on the actual agreement document.

Micro print is a great hiding place for hideous terms, if you need help understanding the terms and conditions contained in Micro print, contact us and for as little as £140 you could have a pre-purchase contract review which will highlight these and any other ludicrous terms and the effect they could have on your business.

 

Our ongoing care package would ensure everything expected is delivered and working.

When you need peace of mind, 'Check with Chas' before you sign could save you thousands of pounds. cwc@faircontracts.co.uk

Check with Chas is Fair Contract Associates review service, an expert eye when you need it.

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