Sternlight v Barclays Bank Plc

For a regulated running-account credit agreement, the contractual interest rate is the stated monthly or annual rate. The APR is a statutory information requirement calculated by formula and assumptions; it is not the driver from which the contractual rate is retrospectively derived. A mismatch between the stated rate and the APR therefore does not, without more, misstate the prescribed term under paragraph 4 of Schedule 6 to the Consumer Credit Act 1974. An incorrect APR may instead constitute a Schedule 1 information breach, subject to the statutory enforcement consequences. Paragraph 4 does not require an interest rate to be expressed in both monthly and annual forms.

Five test claims were brought by credit-card holders against Barclays Bank Plc, Bank of Scotland Plc, Royal Bank of Scotland Plc, Capital One Bank (Europe) Plc and HSBC Bank Plc. The agreements were regulated running-account debtor-creditor agreements under the Consumer Credit Act 1974.

The claimants alleged that discrepancies between stated interest rates and APR figures made the agreements irredeemably unenforceable. They also advanced claims concerning the form of interest-rate disclosure, total charge for credit, pre-emptive enforcement orders and unfair relationships. Following transfer of the cases as test cases, the defendants applied to strike out the claims or obtain summary judgment.

1. Principal issue. The claims that the agreements were irredeemably unenforceable because the APR did not mathematically generate the stated monthly or annual rate were struck out. The court assumed, for the applications, that the claimants’ calculations were factually correct.
2. The contractual term required by paragraph 4 of Schedule 6 to the Consumer Credit Act 1974 was the expressly stated monthly or annual interest rate. The APR was a separate statutory construct, calculated under the Agreements Regulations and the TCC Regulations by reference to assumptions and including interest and other charges. It was an informational requirement under Schedule 1, not a prescribed contractual term under Schedule 6.
3. The presence of an APR in the agreement did not make it a contractual term or cause it to determine the applicable interest rate. Treating the APR as the driver would contradict the wording and structure of the agreements and would be unworkable where rates and charges could be varied during the life of the agreement.
4. The reasoning in Hurstanger v Wilson [2007] 1 WLR 2351 supported the distinction between core prescribed terms under Schedule 6 and information requirements under Schedule 1. The analogous reasoning in Brooks v Northern Rock was also applied: the court must start with the provision that is clearly expressed as the contractual term.
5. If the APR was misstated, the consequence would be a Schedule 1 breach, potentially affecting enforcement under section 65, but not irredeemable unenforceability under section 127(3). The claimants remained entitled to raise any APR or prejudice issue if enforcement proceedings were later brought.
6. The remaining issues were abandoned. The court nevertheless observed that paragraph 4 did not require both monthly and annual rates, that the total-charge requirement was informational, and that a claim for a pre-emptive order under section 142 required facts addressing prejudice and culpability to be pleaded. The claims were struck out.