Steiner v National Westminster Bank plc [2022] EWHC 2519 (KB)

Section 75 is the most powerful consumer remedy in the Consumer Credit Act, and one of the easiest to lose on a technicality. Steiner shows how: route the card payment through a trustee rather than the supplier, and the debtor-creditor-supplier link that s75 depends on is simply absent.

Why This Case Matters

Section 75 of the Consumer Credit Act 1974 makes a credit card issuer jointly and severally liable with the supplier for misrepresentation and breach of contract. It is the most powerful consumer remedy in the Act, and it is used constantly, against holiday clubs, timeshare operators, home improvement firms, vehicle dealers and failed suppliers of every kind.

But s75 only bites where the credit was provided under a debtor-creditor-supplier agreement. Steiner is the leading modern authority on when that link is broken, and it shows how easily a payment routed through a third party can break it.

The Statutory Framework

Section 75(1) provides that where the debtor under a debtor-creditor-supplier agreement falling within s12(b), or (c) has a claim against the supplier for misrepresentation or breach of contract, the debtor has a like claim against the creditor.

The chain therefore has four links, and all four must hold:

1. A regulated consumer credit agreement: a credit card qualifies.
2. A debtor-creditor-supplier agreement within s12(b): that is, made by the creditor under pre-existing arrangements, or in contemplation of future arrangements, between the creditor and the supplier.
3. A claim against the supplier for misrepresentation or breach of contract.
4. The financial limits: the cash price of the item must fall within the statutory range.

The second link is where Steiner operates. “Arrangements” must exist between the creditor and the supplier: meaning the supplier under the contract giving rise to the claim.

The Facts

Mr Steiner purchased a timeshare-style product from a company referred to as CLC for £14,000, paying with his National Westminster credit card.

The payment, however, was not made to CLC. It was made in the first instance to a separate trustee company, FNTC, which held the money under the structure the product used.

The claim brought was in respect of the agreement to purchase the product from CLC. So the contract complained of was with CLC; the card payment went to FNTC.

Claims were advanced under s75, and the case also engaged ss56 and 140A of the Act.

The Ratio Decidendi

Why the identity of the payee is decisive

Section 12(b) is concerned with the relationship between the creditor and the supplier. Where the card acquiring arrangements connect the creditor to a payee who is not the counterparty to the impugned contract, the statutory link is simply absent. It does not matter that the consumer thought they were paying the supplier, or that the money ultimately reached the supplier, or that the structure was designed by the supplier.

The result can look harsh, and it frequently is. But it follows from the statutory language, which builds the remedy on a defined commercial relationship rather than on the consumer’s perception.

Obiter and the Other Routes

• Section 56 and deemed agency. The case engaged s56, which deems certain antecedent negotiations to have been conducted by the negotiator as agent for the creditor. That is a separate route with its own conditions and it does not depend on the s12(b) link in the same way. Our guide to s56 antecedent negotiations sets out the limbs.
• Section 140A and unfair relationships. The unfair relationship jurisdiction is wider than s75 and asks whether the relationship between creditor and debtor was unfair, having regard to all relevant matters. Under Plevin the burden of showing the relationship was not unfair sits with the creditor. Where the s75 link is broken, s140A is frequently the better claim.
• The scope of “arrangements”. The court’s analysis of what can constitute arrangements, and of four-party card structures generally, is closely tied to the facts. Later cases with different payment structures should be analysed on their own terms rather than by assuming Steiner decides them.
• Associated company structures. The judgment does not lay down a rule for every case in which payment is routed away from the contracting party. Whether the recipient can properly be characterised as the supplier remains a question of fact and of contractual analysis.

Practitioner Application

Before pleading s75

• Establish who was actually paid. Get the card statement, the merchant descriptor and the acquirer records. The merchant name on the statement is the starting point and is frequently not the contracting party.
• Establish who the contract was with. The claim must be against the supplier under the contract complained of. Where documentation names several entities (a marketing company, a club, a trustee, an overseas parent) identify which one owed the obligation that was breached.
• Check the financial limits by reference to the cash price of the item, not the amount charged to the card.
• Watch for pre-payments and deposits paid to third parties, and for structures where the card payment funds a trust or escrow.

When the s75 link is broken

• Plead s140A. The unfair relationship jurisdiction does not depend on the s12(b) link, the burden is reversed by s140B(9), and the court may have regard to all relevant matters including anything done or not done by or on behalf of the creditor.
• Consider s56. Deemed agency can attach responsibility for pre-contract statements to the creditor by a different route.
• Consider chargeback under the card scheme rules, which is a contractual remedy with its own time limits and is not confined by s12(b).
• Consider the Financial Ombudsman Service. The FOS applies a fair and reasonable standard and is not bound to the strict statutory analysis, so a claim that fails on s75 technicalities may still succeed there. Our resource on FOS complaints covers the trade-offs, including the monetary limits and time bars.
• Address limitation early on any route.

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