Office of Fair Trading v Lloyds TSB Bank Plc
Court of Appeal (Civil Division)
22 March 2006
Case Analysis
[2006] EWCA Civ 268; [2007] Q.B. 1; [2006] 3 W.L.R. 452; [2006] 2 All E.R. 821; [2006] 1 All E.R. (Comm) 629; (2006) 103(14) L.S.G. 28; (2006) 156 N.L.J. 553; Times, April 7, 2006; Official Transcript
Subject: Consumer law
Other related subjects: Banking and finance
Keywords: Consumer credit agreements; Credit cards; Territorial application
Summary: Connected lender liability under the Consumer Credit Act 1974 s.75(1) attached to all transactions entered into using credit cards issued under consumer credit agreements regulated by the Act whether they took place within a three or four party structure and whether they were entered into in the United Kingdom or abroad.
Abstract: The appellant OFT appealed against the decision ([2004] EWHC 2600, [2005] 1 All E.R. 843) that certain credit card transactions entered into abroad did not attract connected lender liability under the Consumer Credit Act 1974 s.75(1) and the respondent card issuers cross appealed against the decision that liability under s.75(1) did apply to certain other transactions. The OFT brought proceedings against the representatives (L) of the credit card issuers seeking declarations that, in respect of all transactions financed by credit cards issued by L under consumer credit agreements regulated by the 1974 Act, L were subject to connected lender liability under s.75(1) so that, in cases where a lender provided credit for the purchase of goods and services pursuant to arrangements between himself and the supplier, the debtor who had a claim for misrepresentation or breach of contract against the supplier would have a remedy against the lender as well. The agreements between card issuers, cardholders and suppliers were described as a “three party structure”. Where a “merchant acquirer”, which recruited suppliers willing to accept an issuer’s card, was interposed between the card issuer and the supplier as an independent party the structure was described as a “four party structure”. The judge granted the OFT a declaration that credit card transactions entered into under a four party structure attracted connected lender liability, but dismissed its application for a declaration that a similar liability attached in respect of transactions entered into abroad, whether under a three or four party structure. The OFT contended that connected lender liability under s.75(1) arose in relation to any transaction financed by a credit card issued in the UK whether the transaction was entered into under a three or four-party structure and whether the transaction was entered into in the UK or abroad. L argued that s.75(1) did not apply to the four party structure, whether the transaction financed by the use of the card was entered into in the UK or abroad, because that structure, involving independent merchant acquirers, had been practically unknown when the Act was passed.
Appeal allowed, cross-appeal dismissed. Held, allowing the appeal and dismissing the cross appeal, that (1) although the four party structure was not common when the 1974 Act was passed it did exist and despite the change in structure there had been no significant change in the state of affairs to which the legislation was originally directed, R. (on the application of Quintavalle) v Secretary of State for Health [2003] UKHL 13, [2003] 2 A.C. 687 considered. (2) An agreement under which a card issuer made credit available to the cardholder for use in connection with transactions occurring under a four-party structure fell within s.12(b) of the Act, with the result that connected lender liability attached to transactions entered into by the cardholder pursuant to it. Where credit was provided by a credit card issuer to enable the customer to enter into a transaction under a four party structure the credit agreement was a restricted use credit agreement within the meaning of s.11(1)(b) of the Act. Whether under the three or four party structure the card could only be used to obtain goods and services from suppliers who had agreed to accept those cards and in such circumstances the agreement was not excluded from the definition of a restricted use credit agreement by s.11(3). The restricted use credit agreement had been made by the card issuer “under pre existing arrangements, or in contemplation of future arrangements, between himself and the supplier” within the meaning of s.12(b). The broad wording of s.12(b) had not been cut down by s.187(1) of the Act. Section 187 did not define the only kind of arrangements capable of falling within s.12(b). Even where merchant acquirers were involved there were arrangements in existence between the card issuer and suppliers who had agreed to accept its card. (3) The fact that more credit card transactions were carried out abroad than in 1974 did not affect the basic elements of the credit agreement. As a matter of construction, the provisions of s.75 and the rest of the Act did not compel the conclusion that s.75(1) related only to transactions in the UK, Jarrett v Barclays Bank Plc [1999] Q.B. 1 considered.
Judge: Waller LJ; Smith LJ; Moore-Bick LJ
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk