Proposal for the process of assessment of genuine pre estimate of
loss
Introduction
The AOS Code of Practice states that: ‘If the parking charge that the driver is being asked to
pay is for a breach of contract or act of trespass, this charge must be based on the genuine
pre-estimate of loss that you suffer. We would not expect this amount to be more than £100.
If the charge is more than this, operators must be able to justify the amount in advance.’
It also states that ‘If prompt payment is made, you must offer a reduced payment to reflect
your reduced costs in collecting the charge. The reduction in cost should be by at least 40%
of the full charge. ‘Prompt payment’ is defined as 14 days from the date the driver or the
keeper received the notice.’
Unlike other clauses of the Code, BPA is not able to offer sanctions if this section is
breached. Competition law states that private organisations will be found to be in breach of
the law if they attempt to fix charges – only Government bodies are empowered to do this.
The investigation of an alleged breach of the Code and an application of sanctions points for
a breach of the above section of the Code will be seen as an attempt to fix charges.
However as a Code Owner, BPA is required under the terms of Consumer Protection law to
ensure that charges levied by operators that sign up to the code are fair and reasonable,
especially if that charge exceeds the recommendations laid down in the Code of Practice.
Therefore BPA has taken advice from the Office of Fair Trading on how to assess charges
levied by operators to ensure that if those charges do exceed the recommendations, they
are still fair and reasonable. The charge should be a genuine pre estimation of the loss
incurred from the breach incurred when the operator manages the enforcement operation, or
if the operator enforces through an agreed tariff, a breakdown of the costs incurred.
The criteria for assessment
In a recent investigation of the banking industry, the OFT developed a process for the
assessment of banking charges to ascertain their reasonableness. The OFT have allowed
BPA to adapt this assessment, for use with parking operators. The principles and
assessment criteria are listed below:
General principles of Fair Business Practice
When carrying out an assessment of a Parking Charge, there will be an awareness of the
following principles of fair business practice, asking if the charge satisfies the following
principles:
 That the charges should be limited to covering costs. Charges should be set out
clearly and fully as a part of the process to recover the parking charge.
 That there should be transparency in all dealings with the motorist, with early
disclosure of key terms and conditions (including rates and charges).
 That the contract terms are fair and clear, that they are in plain and intelligible
language and that they are easily understood by the motorist.
 That the operator has forbearance towards the motorist who is experiencing
difficulties, ensuring that they have sufficient opportunity to discuss their situation.
 That the operator takes proportionate action on outstanding charges, with due
consideration of all options available.
 That the operator takes reasonable steps to ensure that other intermediaries who
regularly act on your behalf do not engage in unfair business practices or act
unlawfully.

That the operator does not act in any way which is deceitful, unfair or improper,
whether unlawful or not.
Applying the test of fairness
The application of this test is based upon the view that a court is likely to regard whether a
charge is likely to enable the operator to recover more than the damages which would be
awarded at Common Law in the event that the motorist had been individually sued.
Therefore the charge should:
 Reflect a reasonable pre estimate of the limited additional administrative costs which
occur as a result of the enforcement process and which can be identified with
reasonable precision.
 Reflect a fair attribution of those costs.
 Be based on a genuine estimate of the total number of expected Parking Charge
Notices issued in a 12 month period.
 Treat costs other than those limited additional administrative costs as a general
overhead and disregard them in the calculation of the charge.
It should be stated at this point that only a Court can ultimately determine that a charge is
unfair or excessive, and would use the Unfair Terms in Consumer Contract Regulations
1999 (UTCCR) for guidance.
As mentioned before, a genuine pre estimate of loss is calculated as arising from the limited
additional administrative costs arising from the process of the charge. Costs may be
included if they are foreseeable, if they can be specifically identified and defined, and can be
reasonably attributed to the enforcement process.
These costs may include:
 Costs which are directly attributable to the enforcement action.
 Staff costs
 Premises
 Telephone
 Letters and postage
 IT systems and support
 Depreciation of assets related to the enforcement process.
 Human Resources
 Overheads that are shared with other functions of the business that has a substantial
association with carrying out the enforcement process.
 General costs associated with the membership to the independent appeals service
This is not an exhaustive list, and you may find costs presented that are similar in nature to
those mentioned above.
Costs that should not be included
Guidance from OFT considers that the following should not be included in the assessment:
 Debt Collection Agency costs – which will be recovered by the agency themselves.
 Fraudulent costs – where motorists intentionally give false information and the
operator incurs extra costs. It is not considered to be fair to pass these costs to the
general public.
 Capital costs – such as the additional costs of debt and equity financing.
 Inflated administrative costs – for example if a barrister is employed to pursue certain
charges.
 The individual costs attributed to a specific appeal that has been sent to the
Independent Appeals Service. It is not reasonable to include these specific costs as a
loss incurred through the whole operation, because it is not the intention of
Government that the motorist will pay for the appeals service.
Note: I’ve taken a middle view here: The membership fees for the service are
reasonable, but they should not include the £27 charge.
In calculating the genuine pre estimate of loss, the operator must also be aware that they
have a duty to mitigate their loss, and courts may well ask to see evidence of this. For
example, it is not acceptable to inflate administrative costs to justify genuine pre estimate of
loss. Drivers may well challenge these figures if they appear to be excessive.
Process
In order for charges to be assessed in an effective manner, a process must in place to
ensure that assessments are carried out in a consistent and effective manner. The following
flowchart illustrates that process:
Richard Hilton
Membership and Standards Manager