Judge Finds £8,000 Debt Unenforceable

A county court judge has made a ruling that could see thousands of borrowers being able to cancel their loan and/or credit card repayments.

The ruling by Judge Jacqueline Smart at South Shields county court stated that the MBNA credit card company cannot demand the repayment of a customer’s debt.

MBNA tried to force Lynne Thorius to repay the £8,000 she owed on her card.

But the Judge decided that Ms Thorius had been sold payment protection insurance in an unfair manner.

‘Massive ramifications for consumers’

The claims management firm Cartel Client Review, based in Manchester, and the solicitors Consumer Credit Litigation Solicitors worked on the claim on behalf of Ms Thorius.

Carl Wright of Cartel Client Review, said the court decision was a landmark judgement.

“This will have massive ramifications for consumers up and down the country,” he said.

However MBNA have downplayed the importance of the court decision.

“The judgement went against MBNA for a number of reasons,” a representative said.

“In principle, because the deputy district judge felt that MBNA had not on this occasion provided the appropriate documents to the customer and as such was not able to rely on the clauses MBNA would ordinarily seek to rely on in these cases,” she explained.

“The case is a county court case and each case is decided on its own merits and on the factual circumstances of each case. This does not set any legal precedent,” said MBNA.

Secret Credit Card Commissions

The credit card at the centre f the case was branded with the Sunderland football club logo and was sold to Ms Thorius in the football club shop in 2002.

The PPI (Payment  Protection Insurance) policy was sold at the same time, to pay off Ms Thorius’ account if she was made redundant or fell ill at any time.

But, crucially, MBNA had not disclosed that they would be receiving regular commission payments from the insurance provider ITT London & Edinburgh, a subsidiary of the Aviva insurance group.

Ms Thorius barrister put across a strong argument that Judge Smart agreed with, that this “secret” commission meant the credit card agreement was unfair and therefore in breach of the Consumer Credit Act 1974.

This detail could potentially undermine hundreds possibly thousands of other credit agreements where PPI has been sold by the lender along with a loan.

These include other personal loans, car finance deals, secured loans, unsecured loans and even mortgages.

“This practice is believed to be widespread and formed part of the Competition Commission’s decision to prohibit the co-sale of PPI with credit in its report published on 29/1/09,” Ms Thorius’s barrister noted.

“This point is likely to affect many thousands of individuals within England and Wales,” he added.

Repayments And Refunds

the debt on the credit card was deemed unenforceable by Judge Smart because MBNA could not provide a copy of the original loan agreement, which is a requirement of the Consumer Credit Act.

MBNA’s claim for the repayment of the outstanding money on the credit card was declined.

The Judge also ordered the MBNA to either repay Ms Thorius’s PPI premiums and interest, or repay the value of the commissions it had received which has been undisclosed so far .

The PPI premiums were rising each month the card debts increased to reach a figure of £2,500.

Unenforceable Credit Agreement Companies

The unenforceable credit agreement industry that has emerged in the past few years has been highly controversial.

Many firms advertise, encouraging consumers to come forward to write off their credit card and loan debts.

Firms have been warned not to make exaggerated claims about their ability to get debts written off by the regulatory authorities, such as the Office of Fair Trading (OFT), Ministry of Justice (which regulates claims management firms) and the Solicitors Regulation Authority.

Since April 2007 more than 100 of these companies, or those advertising for people to pursue personal injury claims, have been closed by the OFT.

However the South Shields ruling looks to present a new and genuine line of attack for claims firms.

“We have been using this argument for some time but lenders have been settling outside the courts to avoid publicity,” said Mr Wright of Cartel.

MBNA’s application for appeal was rejected, but they may now apply to a higher court for permission to appeal.

Only when the higher courts have reached a decision on this matter will the legal implications and effects on both lenders and borrowers be clear.

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