Alf got married two years ago to Veronica. Veronica used to live in France where she still has family. They now both live in England. For the past 10 years, Alf has had a credit card with Eastern Bank plc. He uses it only for convenience and always settles his bill as soon as the monthly statement arrives. Since they married, Alf made Veronica an authorised user on his card. Last Christmas, Veronica visited her family in France. Whilst she was there, she bought 8 silver-plated dinner place mats using the credit card. Each mat cost (when converted from Euros to Stirling) £15. The total charge was therefore £120. She particularly liked the mats because of their unique pattern in that when placed together they made a picture of the Eiffel Tower, although when used separately they didn’t look out of place. The shop told Veronica that the mats were dishwasher proof. However, the first time Veronica washed them in the dishwasher the silver plating came away and she has since learned that they are not suitable for washing in a dishwasher. Unfortunately, the shop has now gone out of business.

Advise Veronica of any rights she might have against the credit card company.

Answer

This question examines your knowledge of s 75 CCA 1974. This section makes a lender liable for a seller’s misrepresentation or breach of contract. Therefore, it is essential to identify the misrepresentation or breach of contract (the promise that the mats were dishwasher proof). You should explain that where the borrower has any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the lender, who, with the supplier, shall be jointly and severally liable to the borrower.

Although we are told that the shop has now gone out of business, it is important for you to explain that as s 75 makes the lender jointly and severally liable this doesn’t really matter because the borrower is entitled to sue either or both of them.

The protection provided by s 75 applies only to “debtor-creditor-supplier agreements”; that is, where there exists some business connection between the lender and the supplier. This must fall within s 12(b) CCA 1974 which means it must be made under pre-existing arrangements or in contemplation of future arrangements between the lender and the supplier. You will also need to explain in your answer that this protection only applies in the case of a single item costing more than £100 but less than £30,000 (s 75(3)(b) CCA). One problem that this question raises is whether the purchase of the mats constituted a “single item” costing more than £100 but less than £30,000 or whether, because they were bought as a set, the court will consider the set as a single item.

The key problem in this case is that Veronica is the second cardholder. The problem with a second cardholder (the authorised user) can be simply stated. s 75 (and s 56) confer rights only on the debtor/borrower. The authorised user (typically the partner of the principal cardholder) is not liable to pay the debts incurred and they are not (in ordinary parlance anyway) the debtor/borrower. However, s 189 defines ‘debtor’ rather widely as “the individual receiving credit under a consumer credit agreement ...”.

Credit “includes a cash loan and any other form of financial accommodation” (s9 (1)). It could be argued, therefore, that the authorised user is a borrower for the purpose of s 75 (and s 56) although it could also be argued that since it is only the principal cardholder who is liable for the debts incurred, they are the person who receives the financial accommodation. There are, as yet, no decided cases on the matter and it is therefore uncertain whether or not Veronica will receive the same protection under s 75 as Alf would have as the principal cardholder.

Another problem, although one easily solved, is the fact that the purchase was a foreign transaction. After some doubt whether s 75 provided protection to creditors in respect of foreign transactions, it was held by the House of Lords in Office of Fair Trading v Lloyds TSB Bank Plc [2008] 1 AC 316 that it does subject only to the credit agreement being a UK credit agreement. This decision makes it plain that s 75 can assist a customer who makes a purchase abroad using his UK credit card. You should mention that the question does not make clear whether the credit card is a UK or French card. If it was not a UK card, then s 75 will not apply.

You should also discuss s 56 in relation to antecedent negotiations.