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Budgie’s strategy for reclaiming credit card charges
What is the usual process for reclaiming credit card charges and what charges can be reclaimed?
Usually a Claimant will send a preliminary letter, requesting a refund of charges, followed 14 days later by an LBA (a letter before Court action ) and if a full refund is not received then the Claimant would file a claim at the County Court. It is possible to claim back all late payment and over-limit fees together with failed direct debit charges. Basically anything that is a default charge. But a Claimant should not try to claim back interest that has been charged in respect of purchases made or cash advances taken by using the credit card as the Card provider is permitted, by the contract, to charge this interest..
Over what period can I claim back charges ( Limitation Act 1980 ) ?
Many people believe that it is only possible to claim back credit card charges for the last six years. This is incorrect.
The Limitation Act 1980 is quite clear ( see section 32 ) that in cases of fraud, deliberate concealment or the consequences of a mistake the period of limitation does not begin to run until the Claimant has discovered the fraud, concealment or mistake or could with reasonable diligence have discovered it. Claimant's could not have been in the slightest bit aware that charges applied to their credit card accounts were either unlawful or unfair prior to the OFT publishing their report into credit card charges on April 5th 2006. Basically, until that time any Claimant could not reasonably have been expected to have discovered the credit card companies deliberate concealment etc.
Claimants would therefore be fully justified in arguing that the period of limitation did not commence on this matter until April 2006, so you may argue that you have until April 2012 to make a claim in respect of ALL the unlawful / unfair charges applied to your account since that account was opened with the credit card company.
When do the credit card companies usually pay up ?
Nowadays, credit card companies seem to pay back all the default charges together with simple interest or statutory court interest ( basically the same thing ), although they do not usually pay a Claimant out until a claim has been filed with the County Court.
How does a Claimant add interest to a claim and when should it be added ?
It is recommended that an interest element is included at the preliminary refund request and LBA letter stages. If interest is not requested at these stages it’s possible that the credit card company may take the opportunity to pay back the charges only, effectively settling a claim, in full, at the preliminary letter stage or LBA stage, without paying the Claimant any interest element at all.
To avoid any potential problems with preliminary or LBA letters the interest element should simply be referred to as COMPENSATORY” interest.
Does the Claimant need to prepare and then send a spreadsheet with the claim?
It is recommended that a spreadsheet is used to actually calculate the COMPENSATORY interest element but it is not necessary to send this spreadsheet with the preliminary or LBA letters. Credit card companies know exactly what they have charged Claimants in respect of default charges and they also know all about the different types of interest that Claimants are likely to claim. It is obvious that they will try to force settlement at the least possible cost to themselves. Keep your cards close to your chest !
What are the types of COMPENSATORY interest that may be claimed ?
a) Simple Interest or Statutory Court Interest ( Section 69 interest )
An easy to use spreadsheet for calculating this type of interest may be found here Statutory Spreadsheet
Under section 69 of the civil procedure rules Courts have statutory powers to award whatever rate of simple interest they feel applicable. However the court usually elects to use a rate of 8% per annum as this is the rate that has been used for many years for similar claims. The statutory ( simple ) interest spreadsheet may be used to calculate a figure for COMPENSATORY interest and this interest figure could be included as part of the claim in Preliminary or LBA letters. However, it is important, at this pre-litigation stage that this is referred to as COMPENSATORY INTEREST and not as Statutory, Court or section 69 interest.
b) Compound interest
This is the type of interest that we are all used to in our everyday lives as the interest on overdrafts, loans, mortgages and credit card balances is calculated on a compound basis. It therefore appears quite reasonable that when asking the credit card company to repay charges that they should also be asked to pay compound interest upon those charges.
However, claiming compound interest is not easy; it is not simply a matter of just asking for it. The County Courts currently have no statutory powers to award compound interest in these types of claims. Unfortunately this is just the way that English Law has developed over the years. Certain types of cases were originally decided with an award of simple interest. Judges then used the authority of those previous cases to enable them to make decisions in subsequent ones. It became accepted practice that compound interest would not be awarded, except in a very limited range of claim types. However, the recent case of Sempra Metals Limited (formerly Metallgesellschaft Limited) (Respondents) v Her Majesty's Commissioners of Inland Revenue and another (Appellants) 18th July 2007 raised the issue of Compound Interest. As a result of the House of Lords appeal in that case many of the preconceived ideas with regards to the awarding of compound interest were examined, picked apart and the law concerning the awarding of compound interest was basically rewritten. It now appears possible for Courts to award compound interest in such claims as these. In legal terms Sempra is also very recent so the developments in law that have arisen from it have not yet found their way throughout the entire Court system. No Claimant has yet actually argued and won a claim for an award of compound interest in a County Court, although this situation is likely to change very soon. Some Claimant's may have “won” claims by default but no one has actually argued and received a judgment for compound interest in the normally accepted sense. So in summary, it is possible to make a claim for an award of compound interest in a credit card charges claim but there is no current precedent stating that a Claimant is entitled to receive such an award. Until a precedent is set a Claimant would be expected to argue a claim for compound interest from scratch, which would mean studying, understanding and learning the multitude of arguments and case law referred to and decided in the Sempra case. Eventually, a Claimant will WIN the argument in court and hopefully make it easier for others with similar claims to successfully follow on. However, until that stage is reached it must be a Claimant’s own decision as to whether to proceed with a claim on a compound interest basis. An easy to use spreadsheet for calculating compound interest may be found here Compound Spreadsheet. Remember that it is important, at this pre-litigation stage that this is referred to as COMPENSATORY INTEREST and not compound interest.
What percentage rate should a Claimant use for claiming interest ?
a) Statutory court interest or simple interest
The spreadsheet linked above calculates at an equivalent rate of 8% per annum using the same method of calculation as the Courts. A Court may decide to agree a claim for simple interest at a different rate. However, the work involved in preparation and argument of such a claim would be nearly the same as for a claim of compound interest, so in reality a Claimant wishing to claim anything other than 8% simple might as well claim compound interest.
b) Compound interest
There is a lot of debate about a suitable rate to use when making a claim for compound interest. A simplified version of the principal argument used in a claim framed in “restitiution” is that the credit card company unlawfully took a cash advance from the claimant and was then able to re-lend that cash at their commercial rates in accordance with their normal business practices. There is justification for arguing that the credit card company actually re-lent out a Claimant’s cash at the same rate as they actually charged the Claimant in respect of the Claimant’s own credit card account. Therefore, the Claimant would be justified in using the applicable rate of interest that the credit card company has usually charged them for cash advances. In restitution claims of this type the claimant has to demonstrate that an opportunity existed for the Defendant to become unjustly enriched by using the money taken from the Claimant. It then becomes the Defendant’s responsibility to either prove that no such unjust enrichment occurred or that enrichment was at a lower level than that suggested by the Claimant. For the purposes of a Claimant’s preliminary letter and LBA it is considered that the applicable cash advance rate ( for the credit card account being claimed for ) is the most sensible starting point for a claim for compound interest framed in restitution. Further arguments and justifications may then be developed in the Claimant’s POC when filing the claim at Court.
An alternative approach is to frame the claim as a claim for damages, in the form of compound interest for the late payment of a debt, the debt being the charges applied to the credit card account. It is possible that an award of compound interest could be achieved via this sort of claim, however this type of claim requires that the Claimant prove they actually lost an amount of money equivalent to the interest rate being claimed as a result of the charges being taken by the credit card Company.
What are the types of COMPENSATORY interest that should NOT be claimed ?
a) Contractual Interest
This is probably the most confusing area of interest and making a claim for this type of interest is doomed to failure. Contractual interest is basically the rate of interest and method of calculation that the credit card company would use to work out the interest charges on an account as described in the contract between the Company and the Claimant. There is nothing actually wrong with the idea of claiming back interest that may be calculated in the same way as contractual it is just the use of the actual word “contractual” that is dangerous. The credit card company would argue that there is no contractual term, nor is there an implied contractual term in the contract that entitles the Claimant to interest at the same rate and using the same calculation method as they are able to apply to the Claimant. “Halliday” tried to claim for contractual interest as part of his claim for a refund of bank charges. He argued for an implied term and also on the grounds of mutuality and reciprocity and lost his claim for contractual interest on that basis. Most credit card companies will cite this case if a Claimant claims for contractual interest.
b) Interest on the interest the Credit card Company has charged the Claimant.
There are generally three types of interest that a credit card company will have charged a Claimant.
For two of these it is fairly obvious that a Claimant should not expect to be able to claim.
i) Purchase interest – this is the interest that would be charged on any purchases made with the credit card.
ii) Cash advance interest – this is the interest that would be charged on any cash advances taken using the credit card.
The 3rd type is the interest the credit card company may have charged a Claimant on the default charges that are being claimed back. A Claimant can certainly justify that if the default charges should not have existed then neither should the interest that the credit card company charged the Claimant on those default charges. However, credit card companies do not usually separate out that type of interest on statements so working out what they have actually charged is extremely complicated. The credit card company could also easily argue that if the Claimant is entitled to any interest at all then they are only entitled to that interest from the date the Claimant actually paid across to them the default charge ( not the date that they applied it to the Claimant’s account ). However, there is a simple answer to all of this ; by actually claiming interest from the date the default charge was applied to the account the Claimant is effectively already claiming the interest that the credit card company would have charged the Claimant on that charge. So there is no need to use a spreadsheet that is any more complicated than either of the two versions linked above.
c) Interest on default charges not actually paid to the credit card company
The Claimant may of course claim a waiver or reversal of any default charges which have been applied to the account but which have not actually been paid across to the credit card company. However, it would not be correct for the Claimant to claim interest in respect of those particular charges that have not actually been paid across to the credit card company.
Can a Claimant mix the types of interest claimed ?
It is advised that the Claimant decides on the type of interest and a method of claiming and sticks to that one type of interest throughout the claim. Interest is confusing enough without mixing two different strategies on the same claim. If a Claimant decides at the commencement of the claim to request COMPENSATORY interest calculated as compound interest then the Claimant should stick to that type of request throughout the claim, especially when filing the claim at Court. IE Claiming compound interest as COMPENSATORY interest up to the date of filing the claim at Court and then switching to statutory Court interest is not sensible as it may indicate to the credit card company and the Court that the Claimant is either unsure of the arguments relating to the claim or of the Court procedures relating to interest awards. Most credit Card Companies will try to force settlement of a claim ( with a statutory court / simple interest element included once a claim has been filed at Court, so there is usually an option for a Claimant to drop out in the early stages of a court claim and accept a simple interest settlement rather than continue on through the court process to fully argue a claim for compound interest.
Should the Claimant accept “without liability payments” or “gestures of goodwill”
The simple answer is NO !
Unless a Claimant is prepared to accept an ‘offer’ or a forced cheque or account credit from the credit card company in full and final settlement of the claim then any partial offers should usually be refused. The refusal should be confirmed in writing to the credit card company and if the claim has already been filed at Court a copy of all correspondence should be sent to the Court. The credit card company will probably not reverse any forced payment but the Claimant would have evidence to prove to the Court that no part settlement has been accepted and that, in the view of the Claimant, the entire claim remains intact. The Claimant can then continue to argue the unlawful or legal mistake aspects of the default charges.
When arguing for COMPENSATORY interest ( especially compound interest ) the Claimant needs to argue and prove that the credit card company has committed an unlawful act or made a legal mistake in applying the charges to the account. This is actually fairly simple to argue; the Claimant would request justification of the default charges by disclosure of the true costs.
But, if the credit card company has settled, or made a forced payment in respect of the charges part of a claim and this has been accepted as a partial payment by the Claimant then it becomes virtually impossible to continue on to a Court hearing purely on the interest arguments. This is basically because the Claimant would have accepted the return of the charges on a without liability / gesture of goodwill basis, so the unlawful or legal mistake aspect of the charges no longer exists as a matter for the Court to decide. Therefore the Court would also not then have to make a decision regarding any COMPENSATORY interest.
For the story of my own claim against a credit card company - see my thread Legal Beagles
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