Credit Card Holder Loses Appeal To Have Debt Cancelled

[Reck B]

Just received this.

HSBC Bank Plc –v- Patrick Brophy [2011]

Would you credit that? The Court of Appeal upholds High Court’s Decision in Respect of the Enforceability of a Credit Card Agreement

The Background

In March 1994, HFC Bank Limited (“the Bank”) sent Mr. Brophy (“the Debtor”) an application form for a credit card, regulated by the Consumer Credit Act 1974 (“the Act”). The Debtor completed the application form and credit agreement and returned it to the Bank, requesting he be issued with a credit card.

On the back of the form were some terms and conditions, clause 3 of which stated:

“3. Credit Limit Your credit limit will be determined by us from time to time and notified to you.”

The Bank executed the agreement and issued the credit card to the Debtor. In January 2009 the Bank terminated the agreement. The balance due and outstanding under the agreement was £12,413.63. The Bank’s parent company, HSBC, brought an action for a money judgment against the Debtor and it succeeded.

In the High Court, Mr Justice Flaux dismissed the Debtor’s appeal against the first instance decision. The Debtor brought a further appeal and the matter went before the Court of Appeal in February 2011.

The Issues

The Debtor contended that the credit agreement was unenforceable for either or both of the following reasons:

1. There was no agreement in writing sufficient to satisfy the requirements of the Act and Regulations made under it. The form that the Debtor signed and returned was merely an invitation to treat, or at most an agreement to enter into a prospective regulated agreement, which is itself void by virtue of section 59 of the Act;

2. The agreement did not contain the terms prescribed by regulation 6 and schedule 6 of the Consumer Credit (Agreements) Regulations 1983 (“the Agreements Regs”) as required by s.61 of the Act. It was alleged that the agreement failed to provide “A term stating the credit limit or the manner in which it will be determined or that there is no credit limit” as required by paragraph 3 of Schedule 6 to the Agreements Regs.

As the above term is a ‘prescribed term’ for the purposes of the Act, the agreement was irredeemably unenforceable by virtue of section 127(3) of the Act (this section has since been repealed in relation to agreements made after 6 April 2007 by the Consumer Credit Act 2006).

The Judgment

Lord Justice Moore-Bick delivered the judgment of the Court of Appeal and determined the above issues, as follows:

1. Whichever way the argument is put, it must fail. The form signed by the Debtor was an application form for running account credit, which clearly stated that the Debtor should not sign it unless he was willing to be bound by its terms and conditions.

This meant that:

a. It could not therefore be a mere invitation to treat on his part, which might lead the bank to make him an offer of credit; and

b. Nor could it contain an agreement of any kind until it was countersigned by the Bank. The Bank accepted the Debtor’s offer by counter-signing the form, at which point the agreement became ‘executed’ for the purposes of section 61 of the Act.

It followed from the above that section 59 had no application to the facts. The judge noted that section 59 was concerned with agreements, which purport to bind a person to enter into a prospective regulated agreement. For example, an agreement for the sale of goods under which the buyer agrees to enter into a credit agreement with a finance house to enable him to pay the price. The present facts concerned an offer that may, or may not, mature into a binding agreement.

2. The Judge held that the purpose of Section 61 of the Act and Regulation 6 of the Agreements Regs was to ensure that a term fixing the credit limit in one of the ways described in paragraph 3 is set out in the agreement. It is not; however, intended to dictate to the parties what that term is to be. The phrase “the manner in which it will be determined” is deliberately wide, so as to include any arrangements for the determination of the credit limit agreed between the parties, where there is neither a fixed credit limit nor the absence of any credit limit.

The parties were free to agree that the Bank was to determine the credit limit from time to time and notify the Debtor of its amount. There was no need for the Bank to state the credit limit offered to the Debtor in the application form, as by signing and returning the application form, the Debtor agreed to accept whatever credit limit the Bank would allow him.

It was held that the credit agreement satisfied the requirements of the Act and the appeal was dismissed.

Conclusion

This is yet another example of the court’s unwillingness to grant debtors a windfall as a result of novel technical arguments brought in relation to the provisions of the Act and attendant Regulations. It is further good news for lenders, who might finally now be seeing an end to the media driven frenzy of consumers seeking to avoid repaying legitimate debts.

[Injin]

Just received this.

Yup. tjhe courts almost never go for clever technical arguments.

much better to just ask for some facts and watch the whole thing vanish, using the banks own words.

[Bob Loblaw]

Yup. tjhe courts almost never go for clever technical arguments.

much better to just ask for some facts and watch the whole thing vanish, using the banks own words.

Such as?

[Colin]

much better to just ask for some facts and watch the whole thing vanish, using the banks own words.

That sounds interesting! Could you elaborate?

I have a large credit card debt and fancy helping myself to another 'bankers bonus' if I can get away with it.

[bogbrush]

I have no sympathy for financial institutions who perpetrate fraud.

I also have no sympathy for people who choose to play the game for their own ends (to buy things they can't afford) and then cry foul. He asked for the credit, he enjoyed the proceeds, he must pay.

[Injin]

Such as?

It's just numbers on a screen.

offer to email in what you owe and ask for the factual difference.

[bogbrush]

It's just numbers on a screen.

offer to email in what you owe and ask for the factual difference.

I know what you mean. I know it's correct, but do you know how much you just crushed Colins hopes?

Edited March 3, 2011 by bogbrush

[Injin]

I have no sympathy for financial institutions who perpetrate fraud.

I also have no sympathy for people who choose to play the game for their own ends (to buy things they can't afford) and then cry foul. He asked for the credit, he enjoyed the proceeds, he must pay.

Dodgy logic.

He signed up to pay the bank back if they paid someone else using money they already owned. Theres a 97% chance they haven't done it using cash at all and a 100% chance they did it by selling his form to someone else without telling him.

[Injin]

I know what you mean. I know it's correct, but do you know how much you just crushed Colins hopes?

Unless they work for a bank, it's all good.

i've done it, it works. Very comical it is too.

[bogbrush]

Dodgy logic.

He signed up to pay the bank back if they paid someone else using money they already owned. Theres a 97% chance they haven't done it using cash at all and a 100% chance they did it by selling his form to someone else without telling him.

Yeah, course that's absolutely right. That's what my first sentence meant.

That doesn't change the fact that he joined the game for his own ends so I have no sympathy for him. He wasn't passive in this, he was a player.

[Injin]

Yeah, course that's absolutely right. That's what my first sentence meant.

That doesn't change the fact that he joined the game for his own ends so I have no sympathy for him. He wasn't passive in this, he was a player.

Yes, I agree with that, he's au fait with the game enough to be just taking the piss. It'd be like me going and getting in a load of credit card debt on purpose and then playng games with them now I know how it works. I could do it but it'd be spectacularly corrupt.

[Reck B]

Unless they work for a bank, it's all good.

i've done it, it works. Very comical it is too.

You've had debt written off because a bank was unable to prove your debt existed?

[Injin]

You've had debt written off because a bank was unable to prove your debt existed?

No, I've offered to email what I owed and asked what the factual difference was between my PC numbers and theirs.

Much fun. It's not, of course, the sort of thing they are taking to court.

[Reck B]

No, I've offered to email what I owed and asked what the factual difference was between my PC numbers and theirs.

Much fun. It's not, of course, the sort of thing they are taking to court.

I see.

That's a shame, I was about to make you the 2nd richest man in the UK

(behind myself, natch)

[Injin]

I see.

That's a shame, I was about to make you the 2nd richest man in the UK

(behind myself, natch)

I already have an infinity of credit in pounds, euros, dollars and so on, thanks all the same.

But then, so does everybody else. The trick is to make people think that bankers have magical, special abilities that no one else does. But ofc, anyone can extend infinite credit in PC number form, from the age of about 4 or 5.

[Reck B]

I already have an infinity of credit in pounds, euros, dollars and so on, thanks all the same.

But then, so does everybody else. The trick is to make people think that bankers have magical, special abilities that no one else does. But ofc, anyone can extend infinite credit in PC number form, from the age of about 4 or 5.

A banking licence?

[Injin]

A banking licence?

I don't need a licence, but I also have the power to issue an infinite amount of banking licences.

So does everyone else over the age of about 4 or 5.

like I said, it's all about making you think you can't do stuff you very obviously can.

There are no special flowers.

[sophia]

I don't need a licence, but I also have the power to issue an infinite amount of banking licences.

So does everyone else over the age of about 4 or 5.

like I said, it's all about making you think you can't do stuff you very obviously can.

There are no special flowers.

Injin aka Frank Abagnale Jr, lol

[Injin]

Injin aka Frank Abagnale Jr, lol

Heh.

I'm not talking about forging anything, i'm saying pretty nearly everyone has the ability to do all these things (such as type numbers into a PC, or licence someone to do something) but has been convinced they are too worthless to be able to.

[Venger]

Heh.

I'm not talking about forging anything, i'm saying pretty nearly everyone has the ability to do all these things (such as type numbers into a PC, or licence someone to do something) but has been convinced they are too worthless to be able to.

I should know better. If we could all grant ourselves and other people licences, because we're 'worth it', then what's to stop some idiot issuing themselves with a gun licence or pilot's licence and causing lots of trouble. Or even a doctors licence and set up as a GP.

If we could all issue ourselves with banking licences then most people's credit wouldn't be accepted by anyone. Who is going to sell me a new car for 100000 Injin dollars?

It's never been a big secret the credit is created by the banks out of nowhere. No hidden trick which allows people to send an email back with 1000000000 typed in as payment because it was not fully explained the money might not actually exist. The credit extended and borrowed has a book value. You borrow credit from a bank or building society who have licences to lend, and spend it on whatever you like at businesses who accept that credit. They accept that credit with the reasonable expectation it will be honoured for an widely accepted exchangeable monetary value. Quid quo pro, one thing for another thing.

You spent the credit you borrowed and don't think you have to honour the debt to the licensed institution in a way, either by cash, electronic transfer from another licensed account, that is recognised as having widely accepted monetary value.

Even Branson had difficulty getting a banking licence.

http://www.guardian....nrichardbranson

[Vagabond]

I don't need a licence, but I also have the power to issue an infinite amount of banking licences.

State says you do and everyone believes them. I'm fully aware this doesn't make you wrong.

Which is a shame, I'd quite like a Harley and paying in Injin $ is far more preferable than paying in GBP.

[PopGun]

A banking licence?

You don't need a banking license of your own to 'lend money', especially PC digit currency.

If Injin wanted to open savings accounts that's different, but this isn't the case.

[okaycuckoo]

I have no sympathy for financial institutions who perpetrate fraud.

I also have no sympathy for people who choose to play the game for their own ends (to buy things they can't afford) and then cry foul. He asked for the credit, he enjoyed the proceeds, he must pay.

First question the judge asks the debtor in a case like this: Did you have the benefit of the money?

If the answer is Yes, case closed - even when there are tricky issues on enforcement.

[europbaron]

First question the judge asks the debtor in a case like this: Did you have the benefit of the money?

If the answer is Yes, case closed - even when there are tricky issues on enforcement.

Would it fair for the debtor to answer "No" to that question? They did not have the benefit of the money, they had the benefit of someone trusting the issuer of the card/credit statement. Of course, as paper money now requires similar trust, the distinction is purely technical.

I don't think I have ever received money from any of my credit card issuers. Nor have I ever given them any. I have however recieved food and fuel from suppliers who believed that they would get some numbers sent to them from my card issuer, who in turn accepted my numbers as repayment of the debt.

[Sour Mash]

I already have an infinity of credit in pounds, euros, dollars and so on, thanks all the same.

But then, so does everybody else. The trick is to make people think that bankers have magical, special abilities that no one else does. But ofc, anyone can extend infinite credit in PC number form, from the age of about 4 or 5.

Only bank credit is likely to be universally accepted and treated as per cash - especially by the courts.

Whilst you're technically correct that they haven't loaned actual money, only extended a note of credit (which anyone can do) - no court in the land is going to go "Oh, that's right. No need to pay them back".