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Bringing s75 Consumer Credit Act claims against banks: is it still justifiable?

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The credit card world is now a different beast, thanks in part to Twitter

Section 75 of the Consumer Credit Act 1974 (CCA) says: if a consumer (the debtor, to use the statutory parlance) uses his credit card to pay for goods under a sales contract, and those goods are not of satisfactory quality, this is a breach of contract under sections 9 and 19 of the Consumer Rights Act 2015 (CRA). That debtor can, in addition to bringing a claim against the supplier under the CRA, bring a claim at the same time against the bank with whom he has a credit card (the creditor) under section 75 of the CCA.

The credit card provider is jointly and severally liable with the supplier for a breach of contract or misrepresentation. The goods or services purchased, however, must be of a value of over £100 and below £30,000, and the supplier and credit card provider cannot be one and the same.

In addition, the bank can be liable where the entire amount was not paid on credit card. Only a percentage need be paid on card — the rest can be paid in cash and the entirety of the purchase price (so long as it is below £30,000) can be claimed from the bank.

The justification for imposing liability on the bank

Although it is an alien thought in a post-2008-recession world, it may strike the casual observer as somewhat unfair to the bank to have liability imposed upon it by virtue of statute for a breach of contract it did not commit. While it is a valuable consumer protection, it is perhaps difficult to consider its reason for existing. And while it is nice to have a law that so evidently offers consumer protection over financial institutions’ interests, it nevertheless requires justification.

In 1971 the Crowther Committee, which had been established by the government of the day to conduct a comprehensive review of the UK’s regulation of consumer credit, published its report on the matter. The recommendations made were enacted in the CCA. Chief among these was the suggestion that credit providers be jointly and severally liable for merchants’ breaches of contract where goods were purchased with credit.

The succinct explanation for the inclusion of extended liability under section 75 is that the market of the 1970s was a very different beast to that of the 2010s.

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In the 1970s, there were only two types of credit card available in the UK. As such, credit card providers had a closer relationship with merchants, and if a credit card provider allowed their credit card to be accepted by a merchant, then it was essentially a stamp of approval from that provider to that merchant. Extended liability made sense, since it was effectively holding the bank accountable for attesting to the credibility of the merchant.

Finding a modern justification

The justification for the protection afforded by section 75 has now disappeared with a changing market. In 2017, credit cards are ubiquitous and are accepted near-universally. They are a staple of modern life, rather than a rarity. No more can the credit card provider sensibly be said to have vouched for the credibility of a particular merchant by allowing their credit to be accepted by them.

Along with the weaving of credit cards into daily consumer life as simply another means of payment as usual as cash or debit cards, consumers no longer need the signposting of a provider to vouch for the credibility of a merchant. They now have more resources at their disposal to determine that credibility for themselves. Along with relevant consumer protections codified in the CRA (and for cases arising out of events prior to 2015, the Unfair Contract Terms Act 1977 and the Sale of Goods Act 1979), consumers have an informal means of protection vested in the instantaneous communication and information dissemination of the internet. Now, brands and businesses big and small are subject to the mirth of the crowd via Twitter or online consumer forums. They are more wary than ever of the need to adhere to good business practice, lest they face the online mob if not and so suffer a potential reputational and therefore financial detriment.

Although it may be true that section 75 exists to protect the consumer in the event that the supplier is insolvent, meaning therefore that a claim under the relevant contractual legislation loses its bite in terms of recoverable damages and the threat of being ‘outed’ on Twitter is negligible, this is not a requirement of bringing a claim under it. Whatever the state of the supplier’s finances, a claim under section 75 can be brought against the creditor alongside a claim against the supplier under the CRA. Therefore, with the above-mentioned protections in mind, it seems section 75 no longer has a justification.

Nevertheless, it is politically unwise — and perhaps not justiciable in a market where ‘suppliers’ in the form of massive transnational corporations have the bargaining power — to attempt to remove this protection.

Because of this, a jurisprudential justification for this existing law needs to be found, since if a law lacks philosophical or jurisprudential, or even pragmatic, reasoning, then it lacks legitimacy. A law without legitimacy is tyrannical.

Viewing section 75 in the context of modern money

Thanks to the nature of modern money, this may not be as hard as it seems.

Say, for instance, someone spends £1,000 on their credit card. The bank does not in that instance act as an intermediary as one might imagine: debiting the consumer’s credit card account so it shows ‘– £1,000’, and meanwhile taking £1,000 from its reserves with which to pay the supplier. The process is simpler. The bank simply types ‘– £1,000’ into the consumer’s account, and it types £1,000 into existence in the supplier’s account. In loaning the money to the consumer, the bank creates new money; it does not draw from its existing stock. It types it into existence. Of course, then the consumer eventually pays off the credit card with real money and the numbers across the system balance out.

Considering this conceptualisation of the reality of credit in the modern money system — that the bank creates the money out of thin air with which to pay the merchant when the consumer uses a credit facility — it seems somewhat victimless to, as a matter of law, hold that the bank can reimburse the consumer/pay the claimant’s damages simply by removing the debt incurred through use of the credit facility.

While it may not be justifiable as a matter of fault-based reasoning to attribute liability to the credit provider in a case in which a consumer seeks damages, it can be justifiable as a matter of public policy. The bank/credit card provider is a financial institution with far deeper pockets than the consumer. It is as simple a task for the bank as typing the money back into existence in the credit account of the consumer in order to put them in the position they would have been had they not entered into the contract in the first place.

It is simply a case of the laws of our society dictating that those with the biggest shoulders bear the greatest burden, and it is a neat way of shoehorning that principle into litigation concerning extended transactions. It accounts for the complex nature of modern money and shores up the consumer’s position in the modern market place.

With this protection in place, and consumers safe in the knowledge of it, commerce will continue to run smoothly since consumers will not be warded off transactions fearing a lack of consumer protection if they are ‘fleeced’ by a liquidated merchant. Such a protection, fielded by the bank, serves as lubrication for economic growth.

William Richardson is a former paralegal who is now studying the BPTC LLM at the University of Law. He completed his law with business degree at Brighton University and then a master of laws degree at UCL.

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Please bear in mind that the authors of many Legal Cheek Journal pieces are at the beginning of their career. We'd be grateful if you could keep your comments constructive.

32 Comments

Anonymous

“Please bear in mind that the authors of many Legal Cheek Journal pieces are at the beginning of their career. We’d be grateful if you could keep your comments constructive.”

No.

Anonymous

Haha just kidding we’ll do it 😉 Thanks Katie.

Charlotte Proudman

This is terribly racist, given the disproportionate effect on persons of BME descent. Disgraceful and disgusting.

Anonymous

But in all seriousness, good piece!

Anonymous

Why is everything in italics?

Anonymous

lol i wasn’t complaining, but its just interesting. thanks for a great site 🙂 hehe

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Anonymous

Thanks Will. It reminds me of a quote from Greenday: “Its something unpredictable but in the end its right. And I hope you had the time of your life.” Peace out.

Anonymous

Haha I can totally imagine Obama reading this in a yurt. Funny picture. Thanks guys and girls.

Anonymous

Is it school holidays again? Back to school kiddies. haha lol

Anonymous

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Anonymous

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Anonymous

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Anonymous

This thread gives me hope for Britain. Thank you for brightening my day princesses 🙂

Anonymous

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Anonymous

Bro goth agan tasow, dha fleghes a’th kar,
Gwlas ker an howlsedhes, pan vro yw dha bar?
War oll an norvys ‘th on ni skollys a-les,
Mes agan kerensa yw dhis.

Anonymous

WHoa did I just step into the danger zone with this thread?? lol hehe

Scep Tick

“No more can the credit card provider sensibly be said to have vouched for the credibility of a particular merchant by allowing their credit to be accepted by them.”

Really? After all, the provider charges the merchant for the privilege of allowing it to accept credit cards.

Anonymous

Your mouth’s writing cheques that your ass can’t cash

Anonymous

WAnna say that to my face mf?

Anonymous

Someone’s bored LOL hehe

Anonymous

Thanks for this Will. What’s your thoughts on Canelo vs GGG?

Stephen Lucas

Wanna root?

Anonymous

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Anonymous

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Anonymous

Peace in the Valley. Poh Yea

Anonymous

What happened is the government was aggrieved about the high rates of interest so punished credit card providers by making them jointly liable.

Didn’t need such a long article. Plus there are lots of articles on this area of law so it’s nothing new.

Anonymous

You carrot stick.

Anonymous

Calm down, Princess.

Anonymous

I’ll be your princess tonight for £50.

Anonymous

Stop undercutting your mother’s prices.

Anonymous

Calm your tits, bitch.

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