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BBC: Credit card debts can be dismissed if issuer can't produce contract

By , CardRatings contributor
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Several recent cases in the UK have highlighted the potential for cardholders to escape unscathed without paying their credit card debt, reports BBC News. Although the cardholders in question have admitted to accumulating the debt, card companies may not be able to collect their money if they are unable to produce the original loan agreement for the court--an important loophole that could affect debtors and banks in the U.S., as well as overseas.

British courts favor cardholders

Recent British court cases involving HFC, MBNA MasterCard, and Cabot Financial have all been judged in favor of cardholders when the banks and card companies were unable to produce proof of the terms and conditions that were sent with the cardholder's original agreement.

In some cases, the financial institutions were able to produce the agreement that was likely sent, but were unable to testify with certainty as to the precise version--and sometimes even the interest rates--that customers received when they opened a credit card account five or more years ago.

MBNA and other lenders vulnerable to document loophole

The exact interest rate and other details of a consumer credit card agreement are essential when investigating possible cases of fraud, identity theft, inappropriate fees, or inaccurate interest that may have been charged.

Without the original or "true copy" of the credit card contract between a customer and a credit card issuer, the law comes down on the side of the cardholder. Lenders have reason to be worried, since many have not kept extensive records of the original documents sent to each individual cardholder and may therefore be unable to collect on longstanding unpaid accounts.

Although HFC and Cabot are British financial institutions, MBNA operates throughout the UK, Canada and the U.S., so there is potential for this kind of lapse to give some American cardholders credit card debt relief in court as well.

 

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