A judge has ruled in a landmark case that £8,000 worth of credit card debt could be written-off, after payment protection insurance (PPI) had been wrongly sold.
The claim was made by Lynne Thorius against MBNA, after she was charged thousands of pounds in PPI premiums on the Sunderland FC credit card she had applied for.
The credit card giant tried to force Ms Thorius to repay the £8,000 of credit card debt owed, but the Judge decided that an unfair relationship had existed between Ms Thorius and MBNA because of the way the lender had sold the card insurance.
Crucial to the prosecution’s argument was that Ms Thorius had not been told that MBNA would regularly receive commission payments from the insurance provider ITT London & Edinburgh, a subsidiary of the Aviva insurance group.
Judge Smart ruled that this “secret” commission meant the credit card agreement was unfair and therefore in breach of the Consumer Credit Act.
This point could potentially undermine many other agreements where PPI has been sold and open the floodgates for millions more people who are struggling to get out of debt after being mis-sold similar insurance products alongside personal loans, car finance deals and even mortgages.
Judge Smart also agreed with Ms Thorius’s lawyer that the credit card debt on Ms Thorius’s account was unenforceable because MBNA could not provide a copy of the original loan agreement, which is also a requirement under the Consumer Credit Act.
Judge Jacqueline Smart at South Shields county court ruled that the company should either pay Ms Thorius’s PPI premiums and interest back to her, or the value of the commissions it had received which so far has been undisclosed.
Ivan Cooper, Chairman at debt management specialists Chiltern, said: “This could open floodgates for millions more people who are struggling to get out of debt after being mis-sold similar insurance products.
“However consumers should always seek impartial debt advice first and shouldn’t just think that they don’t need to pay for their credit card debts and other balances.
“This case is a county court case so does not set any legal precedent. Each case is decided on its own individual merits and on the factual circumstances within it.”