Court Ruling Frees UK Woman of £8,000 Credit Card Debt Debt in Landmark Case

A judge has written off the £8,000 credit card debt of South Shields woman who was unfairly sold payment protection insurance (PPI) in a deceptive manner. The country court judge determined that MBNA was attempting to collect on insurance the woman had refused when she opened her credit card account.

This ruling is expected to initiate millions of pounds worth of similar cases being brought to court against building societies and banks across the UK who practice similarly deceptive methods of selling such policies. Throughout Britain there have been 40 million PPI policies solid in the past six years, making PPI the second highest selling insurance product being sold today.

While Debt Management Plans and Individual Voluntary Arrangements (IVAs) are excellent solutions for those with legitimate debt problems, wrongly administered fees are on the rise in the UK, so legal experts predict that this court case, while possibly extreme, may signal the need for sweeping changes in the way that credit card issuers are doing business.

In this particular case, the woman had checked ‘no’ for PPI when she signed up for the card, a Sunderland ASC-branded credit card funded by MBNA. Despite this, the company applied a fee of £20 per month. With a credit limit of £1,500 that suited the mother of three’s needs, the card was useful occasionally. That was in July 2002, but gradually the limit was was raised until she reached £7,000 in debt upon having her hours as a cleaning supervisor reduced from full time to part time.

Even contacting the company did no good, representatives informed her that she could not have gotten the card without signing up for PPI. As the debt collection calls became more frequent and MBNA began to threaten to repossess her house, she turned to legal help which assisted her in taking her case to court.

Deputy District Judge Jacqueline Smart ruled that the partnership MBNA with the PPI providers was in breech of the Unfair Relationships and Unfair Consumer Credit Act Section 78 due to the fact that MBNA earned a commission upon each sale of the insurance.