MBNA told show must go on……..but gave up anyway

A follow up to my post last month on here.

MBNA were defeated on an application for summary judgment by my client who was represented by arguably one of the leading barristers in consumer law – Paul Brant of Oriel Chambers.

Well after the hearing, MBNA filed notice of discontinuance. The sceptic in me says they didnt want the issue about interest to come out at trial as it would be horrendously damaging but of course that is just my thoughts.

Anyway, im going to point out the interest issue here, so such is life 🙂

The client had a Bank of Scotland Credit card which was opened in 1994.

The terms of the original card provided that interest was simple interest. The terms did not provide an unfettered right to introduce new terms when the creditor felt like it.

The terms only provided a very narrow right to vary interest rates, but not the manner which interest was charged.

However, MBNA took over the card in around 2006, like they did with millions of others from the Bank of Scotland. So, MBNA without further thought it seems slapped new terms on the table and bound our client to them………or atleast they thought they did.

We disagreed. We pleaded that the Claimant was not entitled to compound interest and MBNA in their reply admitted that we were right bout the original terms of agreement, but it seemed MBNA were arguing they could vary the terms relying on their right to vary the RATE of interest.

We referred to Goode the leading authority on CCA work.

Paragraph 35.1 Goode Consumer Credit: Law and Practice refers when it is stated “Many variation clauses are drawn in very general terms, but the creditor should not assume that that these confer on him an unlimited power to alter the contract terms. A variation clause will, like the rest of the contract, be construed contra preferendem, and in the absence of clear language the court is unlikely to treat the clause as empowering the creditor to modify the contract in some fundamental manner outside the reasonable contemplation of the parties.’

Our view is that it is entirely correct, that the Creditor could not twist a clause to suit itself. Furthermore, the issue on compound interest has been to the Court of Appeal already in the matter of Armstrong v American Express. And in that case Amex had to reduce the balance from a compounded rate to a simple rate as their terms did not allow for compounded interest.

In our clients case, MBNA had been charging compounded interest over 6 years, so arguably there was a huge refund due our client which would of extinguished the debt in any event, that is certainly my own opinion.

Anyway, we will never know who was right and who was wrong…………

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About paul @ watsons solicitors
Member of Chartered Institute of Legal Executives and a litigator for one of the leading firms of solicitors in Consumer Credit Act litigation. I was the fee earner in the landmark ruling of Harrison v Link Financial Limited and many other County Court decisions.

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