Finance companies are liable to the ultimate customer on the basis of joint and several liability with the supplier - and this includes in relation to fraudulent misrepresentations.

This was the finding of the County Court in Mal'ouf v MBNA Europe Bank Ltd (t/a Abbey Cards).The claimant had been induced to purchase two plots of land from two companies. The vendors had fraudulently misrepresented that it was very likely that the plots would get planning permission, significantly increasing their value.

The claimant paid the deposits for the plots using her credit card. The companies became insolvent and the claimant pursued her claim for return of the purchase prices against the defendant credit card company. The defendant had no knowledge of the frauds but the claimant claimed they were liable under s56 and s75 of the Consumer Credit Act 1974.

The combined effect of s56 and s75 is that any misrepresentation or breach of contract made by or on behalf of the supplier is deemed to have been made as agent for the credit card company and if the customer has a claim against the supplier, there is a like claim against the credit card company. There is joint and several liability. Although there was no direct Supreme Court or Court of Appeal authority on the point, the County Court held these provisions would include claims for fraudulent misrepresentation.

At common law, if an agent is guilty of fraud to a third party, the principal is liable for the actions of the agent even if he knows nothing about the fraud and was not a party to it. There was no reason why the statutory agency created by s56 should produce a different result.

The claimant here would succeed in her claim against the credit card company.

Things to consider

This judgment fulfils the aim of the Consumer Credit Act being to protect the consumer leaving the credit card company to pursue the supplier, including in relation to fraudulent misrepresentations.