The customer, Sharon Balloo, a nurse from Essex, is thrilled. But Midland's move scuppers a potentially important court case to test the liability of credit card operators to refund cardholders for unfair or faulty purchases.
Mrs Balloo was the victim of a timeshare salesman in Tenerife who asked her to sign a string of credit card vouchers to pay the deposit on a timeshare property. The agreement, she said, was for these deposits not to be debited from her account until a timeshare property she and her family already owned was sold.
When she returned from holiday debits had already started to be taken from her account and were mounting at a frightening rate. She contacted Midland Bank to explain that there was a problem but it said that her dispute was with the timeshare operator and continued to put the bills through. Her case was highlighted in the Independent on Sunday last August.
Mrs Balloo's solicitor, Keith Baker, of the London firm Croft Baker & Co, prepared to fight the bank in court, claiming that it had a liability under Section 75 of the Consumer Credit Act to waive the payments.
This section requires that credit card operators refund customers if a retailer supplying goods or services worth more than pounds 100, bought on the card, does not deliver.
The legislation has grey areas, however, especially over purchases abroad.
Midland is not the first card operator to be caught in a wrangle over a foreign card transaction. The banks have generally resisted paying up in these cases.
Mr Baker believed Mrs Balloo's case could have resulted in a ruling on the section.
'I am pleased about the result of this dispute, for Mrs Balloo,' he said. 'But the present legal position in cases like this is deeply unsatisfactory.'
Until now the only instances where he had succeeded in getting a bank to refund money on an overseas transaction was where a timeshare company had dishonestly obtained affiliation with a credit card operator.
Banks were wary about signing up timeshare operators but some people used innocuous- looking companies as fronts.
'In one case the timeshare company bought an arts and crafts business in Kent and the vouchers were channelled through that,' said Mr Baker.
Midland said it had waived the pounds 3,000 debited from Mrs Balloo's account from the Tenerife timeshare deal because it had received a refund from the timeshare resort's Spanish bank.
Midland said the Spanish bank did not explain its reasons for refunding the money. But it added that this case did not change its general attitude to refunds for problematic overseas purchases.
The Credit Card Research Group, a trade organisation representing card operators, intends to lobby the Government for clarification of the Act.
The group has this week re-issued a warning made last summer to card holders about buying timeshare on credit cards.
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