Consumer claims against credit card companies

The right of action against UK credit card providers in section 75 of the Consumer Credit Act 1974 is particularly useful in claims where an action (including injuries resulting from breach of contract) against the primary tortfeasor may be unattractive due to insolvency, jurisdictional issues or other problems with potential enforcement.

Conditions

The rules only apply in certain circumstances. The goods or service which caused the financial loss must have been paid for with an UK issued credit card, not a debit card. Some clients may be confused about whether they have a credit or debit card and this needs to be checked as, for instance, Visa cards could be either.

There is also a minimum purchase price of £100 and a maximum of £30,000 (Section 75(3)(b)). Accordingly, if the goods or service which caused the loss cost less ?than the minimum, or more than the maximum, threshold then there is no claim under the Act. These thresholds apply to ?the costs of the services, rather than the value of the claim.

The value of the claim will be determined by the law of the contract, which in the context of services purchased overseas will often be the local law.

The claimant will also need to prove breach of contract and/or misrepresentation by the supplier, under the law of the contract (again often local law). So, if the service was for example the rental of a hire car, there may well be a good claim against the credit card company if the car had a mechanical fault that caused the accident, in breach of the implied standard of the contract, but not if the accident was caused by the negligent driving of a third party.

Grey areas

Then there are uncertainties. When the service is purchased, by credit card, from a travel agent, it is currently unclear whether the agent is the "supplier" of the service and hence whether the claim falls within the CCA. Credit card companies have fought hard to limit the operation of section 75 to this type of claim, arguing that payment made to a travel agent should be regarded as payment for services as to a middleman only. From the consumer's perspective, ?they are paying by credit (to the travel agent) for the price of a package or other contract to be provided by the tour operator, and as such a like claim should exist if there is a breach of this contract. This remains a grey area of law.

The credit card company's liability is the same as that of the supplier and hence, in addition to any local law of the contract, in some cases you may need to consider the impact of international conventions, for instance relating to travel by air, sea, rail and coach.

It is also uncertain whether anyone other than the cardholder can make a CCA claim, so there is a risk that other members of the same family or group may be unable to claim for their own loss if they did not purchase it, by UK credit card, themselves. Furthermore, it may not be sufficient for the purposes of the CCA 1974 that the purchaser is an additional cardholder on the account. This may be the case when a spouse is issued with an additional card to draw funds from his/her partner's account, or an employee with a company credit card (see Hare, 'Credit Cards and Connected Lender Liability', Lloyd's Maritime and Commercial Law Quarterly [2008], page 334). The individual liable on the credit card is not the cardholder but the account holder, and commentators have suggested that this may render the person a stranger to the credit agreement, outside of the definition of a debtor within the meaning of the CCA 1974 (see Goode, 'Consumer Credit Law and Practice', IC-435, Issue 35). This is also the view the Financial Ombudsman has taken in dealing with such cases (Disputes involving Section 75 of the Consumer Credit Act 1974 - case study 62/02, www.financial-ombudsman.org.uk/publications/, Ombudsman news, issue 62).

Qualifying provisions

Section 75(a) appears to be a set of qualifying provisions to section 75, although the Act is less than clear ?about the relationship between the two sections. However, section 75(a) seeks ?to set a relatively low threshold for attempting to make contact with the actual supplier of the goods and services in ?pre-action correspondence.

An attempt should be made but once undertaken, unless the supplier is actually offering a reasonable settlement, then it would not appear to pose any significant impediment to the section 75 claim against the credit card supplier. The credit card supplier will commonly join the supplier to the proceedings in any event under section 75(2) and section 75(a)(1). This is worth bearing in mind when attempting to enter into any pre-action settlement negotiations with both the supplier and the credit card company, as a three-way settlement meeting or mediation may be appropriate.

Scale not anticipated

A leading authority on the matter is OFT v Lloyds TSB Bank Plc [2007] UKHL 48. The case established that a UK-based credit card company can be liable for contractual losses or a misrepresentation resulting from overseas transactions, even though the scale of such transactions may not have been contemplated at the time the Act was drafted back in 1974.

Lord Mance, dismissing the appeal, stated: "there is nothing in the 1974 Act to introduce or require any further limitation in the territorial scope of section 75(1), other than that the credit agreement must be a United Kingdom credit agreement. I therefore reject the appellant card issuers' submission that section 75(1) is limited in application to domestic supply transactions and so inapplicable to overseas supply transactions, however defined."

There are very few reported personal injury claims of this type but Grove v Amex Europe Limited, 28 April 2003, (Wandsworth County Court, before HHJ Behar) is one. Anecdotally it would appear that in the county courts, judgment is frequently entered against credit card companies and cases usually then settle.