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Loans & Credit

Court ruling blow for credit-card claimants

More than 100,000 claims by credit-card debtors that their contracts were unenforceable – because of a loophole in the Consumer Credit Act – have been put on hold pending settlement of a handful of selected test cases.

Judge Derek Halbert of Chester County Court froze litigation until precedents are set in the Commercial Court in London. Other courts across Britain are expected to follow suit.

Claimants are challenging agreements made before April 2007 on the grounds that they contain clauses in which important details were incorrectly drawn up.

As a result of Judge Halbert's ruling, consumers are being warned against using claims management companies, which promise borrowers the chance to write off their balances in return for a fee.

"It's understandable that people are being tempted by promises to clear debts. But this decision will wipe out any faint hope of an immediate resolution and consumers will be taking a significant risk by parting with any cash," says Daniella Lipszyc, a solicitor with the firm Ultimate Law.

Ms Lipszyc says that consumers should instead turn their attention to unfair credit card charges. "Consumers are far more likely to get money back on unfair credit card charges than see their balance wiped out," she says.

Under Office of Fair Trading guidelines, credit card firms should impose a fee of only £12 for missing a credit card repayment. However, in the past, providers have levied fees far in excess of this amount.