Will the decision of Office of Fair Trading v Lloyds Bank open the floodgates for compensation claims for accidents abroad against credit card suppliers?
In light of the position of Office of Fair Trading v Lloyds Bank  [1 All ER 2005], a holidaymaker may pursue a compensation claim against his or her credit card supplier in the UK, if an accident occurs during the course of part of the holiday which was paid for by credit card.
This principle only extends to the holidaymaker who paid for the holiday on their credit card. It will not, for example, therefore be possible for family members to claim against the credit card supplier for injuries and losses resulting from an accident abroad - it is instead only the card holder who may make a claim.
This principle also extends to excursions which are paid for by credit card whilst on holiday, even though the transaction occurs abroad, provided the cost of the excursion exceeds £100.
Section 75 of the Consumer Credit Act 1974 allows a consumer to pursue a compensation claim against the credit card company for breaches by a supplier in respect of a breach of contract. By way of an example, if an English holidaymaker paid for his accommodation at a hotel, and then suffered injury at that hotel, then the credit card holder is, in principle, able to pursue a claim against the credit card supplier in the English courts. However, it will evidently be very difficult for credit card companies to defend these types of claims because they will usually have no real relationship with the supplier (ie the hotel), and it is therefore unlikely that they will be able to obtain any evidence to rebut the credit cardholder's allegations of negligence against the supplier.
Prior to the case of Office of Fair Trading v Lloyds Bank  [1 All ER 2005], it was not clear whether it was possible for a consumer to pursue a claim against a credit card company for a breach by a supplier, for those cases when the relevant transaction occurred abroad. This point was ultimately decided by the House of Lords, which concluded that Section 75 of the Consumer Credit Act 1974 was not limited to domestic supply transactions. The House of Lords recognised that the effect of this ruling would be to 'impose irrecoverable losses on card issuers', but considered that the card issuers were better able to bear those losses than card holders.
Despite the insurers' concerns, we have to date only handled a few cases involving claims against credit card suppliers as a consequence of an accident abroad. For those claimants who are lucky enough to benefit from the recent House of Lords' decision, it is something of a 'lucky jackpot', because it is very difficult for the credit card supplier to defend the case due to the evidential difficulties it faces with its suppliers.
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