Introduction
Credit hire has long been one of the most disputed areas within motor claims, creating friction between insurers, credit hire organisations and, ultimately, motorists caught in the middle.
For decades, voluntary agreements such as the General Terms of Agreement (GTA) have attempted to reduce disputes surrounding issues such as daily hire rates, length of hire and additional charges. However, despite ongoing updates, disagreements have continued and many unresolved claims have ultimately progressed to litigation.
With the introduction of Phase 2 of the GTA Alternative Dispute Resolution (ADR) scheme expected in September 2026, the industry may now have an opportunity to reduce unnecessary litigation and create a more efficient way of resolving lower-value disputes.
The challenges within credit hire claims
Credit hire allows a non-fault motorist to obtain a replacement vehicle without paying upfront, with the credit hire organisation later seeking recovery of the costs from the at-fault insurer.
However, disputes frequently arise over:
- whether the hire rate charged is reasonable;
- the length of time a replacement vehicle was required;
- whether the claimant acted reasonably to minimise costs;
- additional charges and penalties.
Where claims fall outside the GTA framework, parties often rely on common law principles, which can result in lengthy negotiations and, in some cases, court proceedings.
A new approach through GTA ADR
The GTA framework has continued to evolve, introducing measures designed to improve transparency and reduce disputes.
Following a successful pilot scheme in 2025, Phase 2 of GTA ADR is expected to introduce binding arbitration for voluntary GTA members dealing with unresolved credit hire invoices under £10,000.
Rather than allowing these disputes to move automatically towards county court proceedings, claims will instead remain within the GTA process and be considered by independent resolution specialists.
The aim is to provide:
- quicker outcomes;
- greater consistency;
- reduced costs;
- less pressure on the civil courts.
Reducing pressure on the courts
The civil justice system continues to experience significant delays, with county court claims taking considerably longer to resolve than in previous years.
An effective ADR process could help remove a large volume of lower-value disputes from the court system, allowing judicial resources to focus on more complex matters.
For motorists, ADR may also provide a simpler experience by avoiding the need for detailed financial disclosure and attendance at court.
Changing behaviours through financial incentives
One of the key changes introduced through ADR is that consequences can apply to either party depending on their conduct before the dispute reaches arbitration.
Where an insurer has made a reasonable offer promptly and that position is supported by the ADR outcome, the settlement may be reduced and the hire company may become responsible for the ADR fee.
Conversely, where an insurer has failed to engage appropriately and the hire company’s position is upheld, an uplift may be applied and the insurer may become responsible for the arbitration costs.
These measures are intended to encourage both sides to provide information early, negotiate fairly and avoid unnecessary escalation.
The importance of early information sharing
For ADR to succeed, both insurers and credit hire organisations will need to focus on transparency and early engagement.
Clear information provided at the beginning of a claim can help resolve issues before they become disputes.
Technology will also play an important role, supporting the preparation, negotiation and referral of cases through the ADR process.
However, while technology can improve efficiency, the success of ADR will ultimately depend on the willingness of all parties to adopt consistent and reasonable behaviours.
What does this mean for legal professionals?
For lawyers involved in motor claims, the introduction of ADR is likely to change how lower-value credit hire disputes are managed.
Many disputes may now be resolved through the online ADR process, while litigation will remain necessary for more complex cases involving:
- higher-value claims;
- allegations of fraud;
- multi-vehicle accidents;
- linked personal injury claims.
This may allow legal professionals to focus their time and expertise on cases where legal intervention is most valuable.
Early disclosure will also become increasingly important, helping parties understand the strength of their position before costs are unnecessarily incurred.
The impact on personal injury and ATE insurance
For firms handling personal injury claims, reducing avoidable credit hire litigation could help streamline case management and improve efficiency.
ATE insurance continues to play an important role in protecting claimants from the financial risks associated with litigation, particularly where claims involve complex issues, expert evidence or disputes over costs.
A more efficient dispute resolution process may help ensure that legal resources and funding are focused on cases requiring genuine legal determination.
Conclusion
The introduction of GTA ADR Phase 2 represents a significant development for the credit hire sector.
While ADR will not remove every dispute, it provides an opportunity to improve communication, encourage early settlement and reduce unnecessary pressure on the courts.
The success of the scheme will depend on all parties engaging constructively and providing clear information from the earliest stage of the claims process.
If successful, GTA ADR could mark a turning point in resolving credit hire disputes and creating a more efficient claims journey for insurers, legal professionals and motorists alike.
We are pleased to say our Claimsafe ATE policies cover claims for credit hire or credit repair and if you would like to speak to us or obtain further information then please call 0870 766 9997, or emailinfo@boxlegal.co.uk.
