A ruling at East Londons Clerkenwell and Shoreditch County Court in which a Harrods store card holder was absolved from repaying her 5,126 debt may have implications for other store card finance companies which supply a new card without supplying updated terms and conditions (TCs) or if these are not properly signed and agreed to.
Santander argued that GE Capital which Santander bought in 2009 was not required to update TCs when they sent out a new store card to Diana Mayhew because it was a continuing agreement. GE Capital had administered the store card for Harrods when it was sent to Ms Mayhew in 2003.
However, the new store card had a MasterCard symbol and Ms Mayhews solicitor argued that it had become a credit card and therefore a new agreement was required, including updated TCs.
Ms Mayhew activated the unsolicited card and started spending proving just how easy it is for consumers to get into debt.
"It arrived on my mat completely unsolicited - a new-style card with a Mastercard logo and a welcome letter," said Ms Mayhew.
"I would not have spent 5,000 on that card if I had not been given it - I certainly would not have applied for it."
"If you send someone a card marked 'Harrods, go spend', the temptation is massive to use it."
Judge Henrietta Manners ruled that Santander could not collect the outstanding debt because Regulation 7 of the Consumer Credit (Agreements) Regulations of 1983 required that the bank supply updated terms and conditions.
Debt Locals debt advisers see every day how easy it is for people to get into debt. For more information please visit us http://www.debtlocal.co.uk
Not everyone in debt is irresponsible - circumstances like redundancy, illness and even needing to purchase essential items for the home like a new washing machine
can easily plunge someone into debt.
Media pressure to have all the latest things can also encourage consumers to spend without even realising the mess they are getting themselves into.
In the hope that fewer consumers and families will be drawn into a spiral of debt, our advisers at Debt Local welcome the growing awareness of how some banks may have encouraged consumers to accumulate debts they did not intend and had no chance of managing.
The recent judgment involving Santander is not binding on other courts but it is a salutary lesson to banks that debt can be a double-edged sword.
At the time of writing, Santander had not yet launched an appeal.
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