08-11-2007
Flexible friends can go on holiday
Credit card providers are expected to explore the benefits of insuring against the consequences of extended liability after a recent House of Lords’ decision on the liability of credit cards abroad.
The House of Lords’ decision gives consumers protection that their credit card transactions will be protected abroad. Card issuers, rather than individual cardholders, will be responsible for dealing with irrecoverable losses.
As a result of the decision banks and credit card companies are now expected to spread the losses across the public at large rather than individual cardholders.
“Section 75 of Consumer Credit Act 1974 creates joint and several liabilities between the supplier of the goods and the credit card provider. The effect of this case is that if a customer purchased goods or services using his credit card outside the UK, any claim in either contract or misrepresentation against the supplier, creates a like claim against the credit card company,” said Partner Joanne Davis, head of BPE Solicitors’ Credit and Asset Finance team.
The only limitation put on the liability of the card issuer is that the agreement has to be a UK credit agreement, signed in the UK.
“The decision did not come as a surprise as it is extremely rare that consumer protection will be removed. However if the decision had gone the other way, individual cardholders could have faced irrecoverable losses as their ability to bring a supplier based outside the UK before a UK court would have been extremely slim. Even if they were successful to obtain a judgment it may have been unenforceable.
“This monumental decision is not good news for banks and credit card companies and many will be exploring the possibility of insuring against the consequences of a now extended liability, particularly as S75 of the Consumer Credit Act 1974 is already wide enough in scope,” added Joanne, recently named specialist litigator of the year in the national industry awards.
The House of Lords’ decision gives consumers protection that their credit card transactions will be protected abroad. Card issuers, rather than individual cardholders, will be responsible for dealing with irrecoverable losses.
As a result of the decision banks and credit card companies are now expected to spread the losses across the public at large rather than individual cardholders.
“Section 75 of Consumer Credit Act 1974 creates joint and several liabilities between the supplier of the goods and the credit card provider. The effect of this case is that if a customer purchased goods or services using his credit card outside the UK, any claim in either contract or misrepresentation against the supplier, creates a like claim against the credit card company,” said Partner Joanne Davis, head of BPE Solicitors’ Credit and Asset Finance team.
The only limitation put on the liability of the card issuer is that the agreement has to be a UK credit agreement, signed in the UK.
“The decision did not come as a surprise as it is extremely rare that consumer protection will be removed. However if the decision had gone the other way, individual cardholders could have faced irrecoverable losses as their ability to bring a supplier based outside the UK before a UK court would have been extremely slim. Even if they were successful to obtain a judgment it may have been unenforceable.
“This monumental decision is not good news for banks and credit card companies and many will be exploring the possibility of insuring against the consequences of a now extended liability, particularly as S75 of the Consumer Credit Act 1974 is already wide enough in scope,” added Joanne, recently named specialist litigator of the year in the national industry awards.
