Store-card debts could be written off
Some customers who run up debts on their store cards could be let off repayments, following a recent court ruling.
Judge Henrietta Manners ruled at Clerkenwell and Shoreditch county court that Santander couldn't collect a Harrods store card debt of £5,126, the BBC reports.
This is because when Diana Mayhew's store card was automatically upgraded to a credit card in 2000 the terms and condition for the new card were not supplied correctly.
In court, Mayhew said she had never asked for her card to be upgraded and that it was an unnecessary temptation.
"If you send someone a card marked 'Harrods, go spend', the temptation is massive to use it. I would not have £5,000 on that card if I had not been given it, I certainly wouldn't have applied for it," she said.
Santander tried to collect the debt as it said the issuers of the card at the time, GE Capital, didn't need to send out new terms and conditions with the card. But the judge ruled that these details were required to comply with consumer credit regulations and therefore the bank can't now legally recover this debt.
Although this is a specific case, it has raised questions about other providers, such as Marks & Spencer, which in 2003 went through a similar process and converted all of its customers on store cards to credit cards.
If, as in this case, a provider is found to have acted against consumer credit regulations when automatically upgrading these cards then it could pave the way for a rise in cases like this.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.