Section 75 of the Consumer Credit Act 1974 allows consumers to claim refunds from their credit card company as well as from the seller of goods for misrepresentation or breach of contract. In this case the issue was whether the section could also be said to encompass transactions performed abroad. The respondents, the Office of Fair Trading, argued that it did, while the appellants, Lloyds TSB, Tesco Personal Finance Ltd and the UK credit card industry in general, maintained that it applied only to purchases made within the UK.
The credit card industry opined that if the provision was held to apply to foreign suppliers, the ensuing result would be that United Kingdom card issuers would become liable for the possible misrepresentations of some 29 million suppliers worldwide. They maintained that it was impossible for s75(2) and s75(5) to apply to foreign transactions, as the UK courts did not have jurisdiction over such matters. At first instance, the High Court agreed with the submissions of Lloyds TSB, but the Court of Appeal subsequently found against them. The matter proceeded to the House of Lords on 31st October 2007.
The Lords agreed that it was for the law to maintain a fair balance between the creditor and the debtor. Therefore in considering which of two innocent parties should bear the greater loss, it was ‘much easier for the business debtor to do so than the individual debtor.’ Credit card companies were in a much better position than the customer to recoup any monies lost because of their strong commercial and contractual influence over their suppliers. The Court also discounted the argument that UK courts had no jurisdiction regarding purchases made outside the UK. The normal territorial limitation was found to apply, meaning that the UK courts have jurisdiction where any part of the transaction takes part in the UK. This was satisfied by the fact that the issuer of the credit card was based in the UK. Lord Hope held that the wording of the statute, which applies to any ‘transaction financed by the agreement’, was meant to extend to whatever was contemplated when the statute was enacted. In his opinion, it could not definitively be said that when enacting the legislation Parliament did not envisage the possibility of its application to transactions taking place abroad.
The result of this is that for transactions between £100 and £30,000 completed abroad, consumers are now able to claim refunds from their credit card company.