The Staffordshire-based firm has been forced into receivership by car insurance companies refusing to cover the cost of cars it had provided. The insurers argued that the claims for car hire were inflated and pointed to a number of court cases which had ruled them invalid.
As a result of the receivership, several thousand Accident Aftercare customers could face paying not only the cost of the cars provided for them but also substantial legal costs. These costs were incurred, in the customers' own names, as Accident Aftercare attempted to force the insurance companies to pay for the car hire.
Now those costs will fall on the customers. The insurers may also claim their legal costs from the individuals concerned.
Brian Moore, a solicitor specialising in car insurance at the law firm Edward Lewis, said: 'The brochures issued by Accident Aftercare quite clearly stated that the car hire was free.
'I've handled scores of cases of Accident Aftercare customers where proceedings have been brought in their names without them having any real knowledge of the potential costs involved.' Mr Moore believes customers could each face as much as pounds 6,000 in legal costs and pounds 2,000 in car hire costs.
It may well be months before some of the customers understand the implications of the costs they face personally.
John Wheatley, a partner with KPMG Peat Marwick, who are receivers for Accident Aftercare, says he faces 'a mountain of paperwork' involving thousands of customers.
Other credit car hire firms are also thought to be in danger of going into receivership due to the squeeze being put on their cash flows by the insurance companies' tough line. 'Accident Aftercare is not an isolated incident. There are many other companies which operate similar schemes with similar potential pitfalls,' Mr Moore said.
Industry sources say the credit car hire business mushroomed over the past few years as car manufacturers were forced by the recession to sell large numbers of vehicles to car rental firms at very low prices.
This created surplus capacity for the car rental companies which offloaded some of their fleet to the credit hire firms. These firms have been adding a 40 to 50 per cent mark-up on the cost of rental.
Simon Newman, of the uninsured loss- recovery specialists, the Legal Protection Group, welcomed the imminent demise of credit hire firms. 'They are service companies with no assets - built on puff,' he said.
'They tend to exist in someone's front room equipped with just three or four phones simply doing deals with car rental companies - the value they add is minimal. Their existence is parasitic and no one is going to mourn their demise.'
One of the tasks for the receivers will be to assess the amount Accident Aftercare owes the car rental companies for the vehicles they provided. It is believed some companies could be owed several hundred thousand pounds.Reuse content