Office of Fair Trading v Lloyds TSB Bank plc and others

The House of Lords held that section 75(1) of the Consumer Credit Act 1974, which gives a debtor a like claim against the creditor for misrepresentation or breach of contract by the supplier in respect of a transaction financed by the agreement, is not limited to supply transactions carried out within the United Kingdom. The court rejected arguments that the presumption against extra‑territoriality, the limited operation of the statutory indemnity in section 75(2) or cancellation provisions in sections 67–74 implied such a territorial restriction. The statutory wording of section 75(1) is unqualified and, read with the definitions in sections 11 and 12, applies to transactions financed by United Kingdom credit agreements even if the supply transaction is performed abroad and governed by foreign law. The Court relied on the consumer‑protection purpose of the Act as informed by the Crowther Report and the adaptability of modern network arrangements (VISA/MasterCard) to the concept of "arrangements" in section 12(b).

Background and parties:

• The appellant credit card issuers (including Lloyds TSB and Tesco Personal Finance) appealed decisions at first instance and in the Court of Appeal which had held that section 75(1) of the Consumer Credit Act 1974 can apply to foreign supply transactions. The respondent was the Office of Fair Trading acting in the interests of consumers.

Nature of the dispute and relief sought:

• The central question was whether a "transaction financed by the agreement" within section 75(1) includes supply transactions which take place abroad and are governed by foreign law. The card issuers sought a ruling that section 75(1) is limited to domestic supply transactions; the Office of Fair Trading sought a ruling that section 75(1) applies to overseas transactions so long as the credit agreement is a United Kingdom credit agreement.

Procedural history:

• First instance: judgment of Gloster J ([2005] 1 All ER 843) accepted a territorial limitation. Court of Appeal: (Waller, Smith and Moore‑Bick LJJ) [2007] QB 1 rejected that limitation. The appeal to the House of Lords followed (appeal from [2006] EWCA Civ 268).

Issues before the House:

• Whether section 75(1) has extra‑territorial effect such that it covers supply transactions abroad;
• whether the presumption against extra‑territoriality, the statutory indemnity in section 75(2), or the cooling‑off and cancellation provisions (sections 67–74) imply a territorial limitation of section 75(1);
• how the modern four‑party card schemes (VISA/MasterCard) affect the meaning of "arrangements" in section 12(b) and the scope of section 75(1).

Court's reasoning and conclusion:

• The Lords held that the ordinary presumption against extra‑territoriality did not displace the unqualified language of section 75(1) because the provision governs the relationship between debtor and United Kingdom creditor and does not directly impose liabilities on foreign suppliers.
• Section 75(2)'s limited scope (an indemnity available "subject to any agreement between them") and section 75(5) did not justify implying a limitation into section 75(1); subsection (2) is a default internal provision regulating creditor‑supplier relations and its limited enforceability abroad does not defeat the consumer protection policy embodied in subsection (1).
• The Crowther Report and the consumer‑protection purpose of the Act supported a construction that places the risk, in respect of transactions linked to United Kingdom credit agreements, on the creditor rather than the individual debtor, including where the supply transaction is abroad.
• The cooling‑off and cancellation provisions are ancillary and potentially inapplicable in some overseas cases, but that occasional inapplicability is insufficient to alter the central, unqualified effect of section 75(1).

Outcome: the appeal was dismissed; section 75(1) applies to transactions financed by United Kingdom credit agreements even where the underlying supply transaction takes place abroad and is governed by foreign law, subject only to the territorial limitation that the credit agreement itself be a United Kingdom credit agreement.

Appeal dismissed. The House held that section 75(1) of the Consumer Credit Act 1974 applies to transactions financed by United Kingdom credit agreements even where the supply transaction occurs abroad and is governed by foreign law. The statutory wording is unqualified and its consumer‑protection purpose, informed by the Crowther Report, and the modern operations of card networks mean that limitations in section 75(2) or the cancellation provisions do not imply a territorial restriction on section 75(1).

Appeal from the Court of Appeal [2006] EWCA Civ 268. First instance judgment of Gloster J [2005] 1 All ER 843 (accepted a territorial limitation). Court of Appeal (Waller, Smith and Moore‑Bick LJJ) [2007] QB 1 rejected that limitation. House of Lords [2007] UKHL 48 dismissed the appellants' appeal.