Don’t pay (yet)!

payment-notices

Private car parking operators are notorious for presenting customers with onerous terms and ‘payment notices’ for overstaying the purchased time.  Consumers should be aware that these practices are often illegal and the “payment notices” unenforceable.

The rule of thumb is that if the amount claimed is a “penalty” then it is unenforceable. If it is “liquidated damages” it is likely to be enforceable.

So, what’s the difference?

A penalty is a payment disproportionate to any loss that could be genuinely pre-determined. Generally, a penalty is a ‘punishment’.  Rather than covering costs, penalties are intended to enforce the law, correct behaviour and generate revenue for the state. Generally, penalties will incorporate the following:

  • An additional payment after the first (a ‘fine’ on your windshield requesting extra payment)
  • An additional detriment (the money owed is significantly more than the initial price of parking)
  • The payment does not relate directly to the loss sustained (the fine is much greater than it would cost to simply pay for a longer parking duration)

Liquidated damages are an amount usually proportional to any loss sustained. They are a way for businesses to recuperate losses caused by a breach of contract without having to substantiate those losses. They must be “a genuine pre-estimates of loss” and may comprise lost revenue and the costs of recovering it.

Recent high profile examples include  class actions against  banks and telcos for fees and charges that are disproportionate to the cost of the service.

Whenever you are charged extra money by a business by way of fines or cancellation fees; e.g. video shops, private car parks or no-show fees by salons consider whether it represents a penalty or liquidated damages before you pay!