Chapter 13Credit■It is unclear whether the equal liability provisions apply
to second card-holders or just to the account holder.
■The credit card companies have argued that card-
holders should be required to exhaust all remedies
against the supplier of the goods and services before
taking action against the credit card company. In
particular, it has been argued that where a holiday
tour operator goes into liquidation, holidaymakers
who have paid by credit card should have recourse to
the special fund set up by tour operators to deal with
this situation. The Director General rejected the idea
that card-holders should look first to the supplier, but
he did propose that liability be limited to the amount
of the transaction.
■There is some doubt about whether card-holders who
book a package tour with a tour operator through a
travel agent can claim the protection of s 75. Although
the Office of Fair Trading takes the view that s 75 does
apply if the travel agent is acting as the agent of the
tour operator, card-holders are advised to pay the
tour operator directly to avoid potential problems.
■It has been argued that the liability of a credit card
company ceases once the credit has been repaid. If
this were the case, card-holders who paid their credit
card bills in full each month would enjoy greatly
reduced protection.
■It has been argued that the equal liability provisions
do not apply to overseas transactions by UK card-
holders. However, in Jarrettv Barclays Bank plc
(1997), the Court of Appeal held that English courts
had jurisdiction over a transaction in which a
Barclaycard had been used to pay for a timeshare in a
Portuguese property and in the Office of Fair Trading
v Lloyds TSB Bank plc(2008) the House of Lords
confirmed that purchases made abroad using a credit
card attract the same protection as those made in the
UK under s 75 of the 1974 Act.
Loss or misuse of credit tokens
Sections 66 and 84 set out the extent of a debtor’s liabil-
ity if his credit token (i.e. credit card) is misused. Under
s 66 the debtor is not liable at all for another person’s use
of the credit token unless the debtor has previously
accepted the credit token or the use by the other person
constituted an acceptance by him. The debtor accepts
the credit token when (a) he signs it; (b) he signs a
receipt for it; or (c) it is first used, either by the debtor
himself or a person authorised to use it.
Section 84 deals with the debtor’s liability for misuse
which occurs after acceptance. The debtor should give
notice as soon as possible to the creditor (card-issuer)
that the credit token has been lost, stolen or liable to
misuse because he will not be liable for any loss arising
after notice has been received by the creditor. Notice
can be given orally but the agreement can provide that it
will not be effective unless written confirmation is
received within seven days. The extent of any liability for
misuse in the period before notice takes effect depends
on the circumstances. If the person who misuses the
token obtained possession of it with the debtor’s
consent, the debtor is liable without limit. If the debtor
did not consent (i.e. the token was lost or stolen), the
debtor’s liability is limited to £50 or the credit limit
if lower.
The Consumer Protection (Distance Selling) Regula-
tions 2000 (SI 2000/2334) introduce increased protec-
tion for consumers who use credit cards in connection
with ‘distance selling’ contracts, such as purchases made
via the Internet or by mail order. If a credit card is used
fraudulently in connection with the distance contract,
the consumer is entitled to cancel the payment, or, if
the payment has already been made, the consumer
will be entitled to a re-credit or to have all sums returned
by the card-issuer. The regulations also amend the
Consumer Credit Act 1974, so as to remove the poten-
tial liability of a card-holder for the first £50 of any
loss arising from misuse in connection with a distance
contract.Extortionate terms (ss 137–140)
Sections 137–140 contain powers for the courts to re-
open extortionate credit bargains so as to do justice
between the parties. The provisions apply to all credit,
irrespective of the amount involved. They allow an indi-
vidual debtor or surety (a person who has given security
for credit) to bring the credit bargain to the attention of
the court either in a specific action or during the course
of proceedings relating to the agreement. A credit bar-
gain is extortionate if it requires the debtor or his relat-
ives to make payments which are grossly exorbitant or
which otherwise contravene the ordinary principles of
fair dealing.
The Act is not precise about what should be regarded
as an extortionate rate of interest. Instead, it mentions
general factors which should be taken into account by
the court such as:395