Introduction
Where medical treatment has been paid for on a credit card, a dissatisfied patient may have recourse against the credit card provider under section 75 of the Consumer Credit Act 1974 (“CCA”).[1] This provision gives consumers who have been the victim of a misrepresentation or breach of contract by the supplier of goods or services paid for on a credit card the option of seeking redress against the supplier, the credit card company or both.
Where healthcare is increasingly being sought on a private basis, in particular by those who ‘self-fund’, claims arising from such treatment are likely to increase in frequency. A LaingBusson report in November 2019[2] noted a doubling in the sum spent on self-funded private healthcare in the UK in the 5 years between 2013 and 2018, from £527 million to £1.1 billion p.a.; one in four private patients was self-funded. The growth in patients choosing to self-fund private hospital treatment was said to be present across all specialties, particularly orthopaedics, ophthalmology, gastroenterology, gynaecology and urology with growth in demand for diagnostic services such as MRI scans, CT scans and endoscopy. It seems likely that this trend towards self-funded private healthcare will have been accelerated by the Covid-19 crisis and the increasing pressures on NHS waiting lists. In addition, self-funding is the norm in elective cosmetic procedures, which seem likely to increase in number once pandemic restrictions are eased.
What then are the options for the self-funded patient who receives treatment that was not what he or she bargained for? A patient may of course pursue a claim against the clinician or organisation providing the treatment, usually both under common law negligence and breach of contract and less commonly under the tort of misrepresentation. There may however be challenges to that approach; the defendant may be insolvent, inadequately insured or difficult to trace (particularly if abroad). If however the treatment was paid for using a UK credit card, an additional route to compensation may exist. Section 75(1) CCA provides:
“If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor.”
For these purposes, a “debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c)” means someone who has paid for goods or services on his or her credit card. The “supplier” is the person or company who sold the goods or services and the “creditor” is the credit card company. It is important to remember that the debtor’s claim against the creditor is no different in substance from that against the supplier – it is “a like claim”. It is no wider, in that it still requires a misrepresentation or breach of contract by the supplier to be shown, but on the other hand no narrower in that it replicates in scope and remedy the claim against the “supplier” (in our example, the provider of private medical treatment).
How then could s75 CCA be of application to claims relating to medical treatment? I have attempted below to identify and where possible answer the key questions that clients and practitioners in this field are likely to have.
Does s75 CCA apply to medical procedures?
Yes. The section applies to “a transaction financed by” a credit agreement, without any restriction as to the subject matter of the transaction. The provision (though surprisingly rarely litigated for something which has been on the statute books for approaching half a century) has been held in a reported case to apply to a privately-funded medical procedure in the form of a “treatment for baldness which went disastrously wrong”.[3] Significantly, the section was relied on by around 600 claimants in the widely-reported PIP breast implant litigation to secure a settlement against their credit card provider Lloyds TSB[4] (albeit that this did not require the court to consider the scope of the section). Other reported claims under the section have been as varied as for purchase of land,[5] a conservatory,[6] a DVD recorder[7] and a personalised number plate.[8] The Financial Services Ombudsman (discussed further below) has determined a number of complaints under s75 in relation to medical treatment paid for with a credit card or finance scheme.
What is a “misrepresentation”?
A ‘misrepresentation’ is an untrue statement of fact (which can be made by words or conduct) that causes someone to enter into a contract. Misrepresentations can be categorised as fraudulent, negligent or innocent. In the medical context, a fraudulent misrepresentation might include a surgeon stating that a proposed procedure had a 100% success rate when in fact the surgeon knew the success rate was much lower; the same statement might be negligent if the surgeon, though believing it to be true, ought with proper care to have been aware of literature which contradicted it; the statement might be an “innocent misrepresentation” if the literature disproving it had not yet been published. A claimant who has been induced to enter into a contract by means of a fraudulent or negligent misrepresentation is entitled to be put in the position which he or she would have occupied if the misrepresentation had not been made .[9] This can include not only the return of the money paid under the contract but also compensation for consequential losses arising from having entered into the contract, including damages for personal injury (though the cases on this are limited).[10] It should be noted that an action in negligent misrepresentation can be founded on common law as well as section 2(1) of the Misrepresentation Act 1967 and that there is an interface between the statute and Pt 4A of the Consumer Protection from Unfair Trading Regulations 2008 which prohibit certain aggressive or unfair trading practices. In respect of innocent misrepresentation, the primary remedy is rescission i.e. unwinding the contract to return the parties to the position they occupied before it was entered into (which, in the medical context, seems unlikely to be possible in the majority of cases); where rescission is impossible, the court has a discretion to award damages in lieu but those damages are not likely to include compensation for consequential losses including personal injury. In reality therefore claims in this area are likely to be limited to fraudulent or negligent misrepresentations.
What is a “breach of contract”?
At its most straightforward, a supplier of goods or services (in our contemplated example, a medical professional providing treatment) will be liable for any loss (including consequential losses) caused by a failure to comply with the terms of the agreement reached with the customer. The common law has long held that in most circumstances a contract for the performance of a service will include an ‘implied term’ that the service will be carried out using reasonable care and skill. Section 49 of the Consumer Rights Act 2015 replicates the implied term of reasonable care and skill; section 50 goes further in providing that “anything that is said or written to the consumer” by the trader “about the trader or about the service” may become a term of the contract if (a) it is taken into account by the consumer when deciding to enter into the contract, or (b) it is taken into account by the consumer when making any decision about the service after entering into the contract. This formulation widens the scope of statements or representations which, though not forming part of the written agreement, may nonetheless be actionable as contract terms.
Are there financial limits on the cost of the treatment?
To qualify for protection, the cash price of the goods or services must be more than £100 and not more than £30,000 – s75(2). In certain circumstances where the cash price is over £30,000, a credit provider under a “linked credit agreement” might still be liable under s75A; an important feature of s75A is that (unlike s75) it requires at least “reasonable steps” to be taken to pursue the claim against the supplier first, before seeking redress from the creditor.
Does the whole cost of the treatment/procedure have to be paid for on a credit card?
No. Under section 189 CCA “finance” means to finance wholly or partly, and “financed” in s75 is construed accordingly. In essence, this means that only part payment (such as a deposit) is required to be made by credit card in order for the section to apply. Importantly, whilst a £100 threshold exists for the item which is the subject of the transaction, if any part of that single item (even less than £100) is paid for on a credit card, s75 is engaged.
Is the debtor/patient limited to a refund of the price paid or can he/she get damages for consequential loss?
Although reported cases interpreting the section are surprisingly sparse, there appears to be a consensus[11] that damages for consequential losses are recoverable pursuant to s75, an important consideration in medical treatment cases where the injury, loss and damage inflicted by inadequate treatment may outstrip the treatment cost many times over. This is consistent with the structure of s75, which replicates as against the creditor the debtor’s causes of action in misrepresentation and breach of contract against the supplier. As discussed above, damages for consequential loss may be claimed under misrepresentation (fraudulent or negligent) or breach of contract against the supplier[12] and there is no express wording in the statute to limit the scope of the remedies available to the debtor in the parallel action against the creditor.
What if the treatment took place outside the UK?
Section 75 will still apply, so long as the credit agreement is with a creditor carrying on business in the UK. An argument that s75 should be limited to transactions in the UK was roundly rejected by the House of Lords in Office of Fair Trading v Lloyds TSB Bank plc and others.[13] This wider approach is clearly beneficial to patients who seek treatment abroad, paid for on a UK credit card, who may otherwise face an uphill struggle in obtaining compensation for deficiencies in that treatment.
Who is the creditor?
Section 189 CCA defines “creditor” as “the person providing credit under a consumer credit agreement or the person to whom his rights and duties under the agreement have passed by assignment or operation of law”. Essentially, this means the company (usually a bank or building society) that has provided the credit card under an agreement with the debtor rather than the payment processing network (such as Visa and Mastercard). American Express is both a credit card provider and a payment processing network.
What if the debtor was in breach of his or her credit agreement?
Section 75(4) CCA provides that “This section applies notwithstanding that the debtor, in entering into the transaction, exceeded the credit limit or otherwise contravened any term of the agreement.”
What is the limitation period for bringing a claim?
Where the transaction concerned is one involving medical treatment, any claim for damages arising from inadequate treatment is likely to include a claim for damages “in respect of personal injuries”[14] within the meaning of section 11(4) of the Limitation Act 1980. In those circumstances a 3 year limitation period will apply, measured from the date the cause of action arose or the claimant’s date of knowledge within section 14 of the 1980 Act. In Bond (see above), the claimant’s representatives erroneously believed that a claim against two credit card companies could be brought as of right up to 6 years from the date of the alleged breach; the court found otherwise, declined to extend time pursuant to section 33 of the Act and dismissed the claimant’s claim; the claimant then obtained summary judgment against his solicitors for negligently failing to bring the claim against the credit card companies in time.
Does the debtor have to sue the supplier first / at all?
No. There is no requirement that the supplier (such as the operating surgeon or treatment clinic) be sued in preference to the credit card provider. Indeed, the Financial Ombudsman Service (which has jurisdiction in relation to complaints against consumer credit providers) has awarded compensation to a customer for inconvenience caused by a credit card company “repeatedly, and incorrectly, telling him that it was only required to meet his claim if he first obtained a court judgment against the supplier.” That having been said, it would seem prudent to heed the words of Master Ungley in Bond, remarking on “the desirability of joining all Defendants potentially at risk in the original action. It would not have greatly increased costs. There would have been three defences rather than one and they may well have served contribution notices against each other. Since proceedings were commenced it is difficult to see why it was not done in 1994. Had this been done, Mr Bond would have recovered the damages to which he seems undoubtedly entitled and there is some doubt whether the costs of the second proceedings being brought out of time would ever have been incurred.”
Does QOCS apply to a s75 claim against a credit card company in relation to medical treatment?
CPR 44.13(1) provides that section II of Part 44 which deals with Qualified One-Way Costs Shifting “applies to proceedings which include a claim for damages – (a) for personal injuries…”. Provided that the s75 claim does indeed include a claim for personal injuries, whether for general damages or losses arising (or more likely both), the QOCS provisions would seem to apply. This would also be consistent with the reasoning in relation to the application of the 3 year limitation period discussed in Bond (see point 0 above).
Can a claim be brought under s75 by the estate or dependents of a patient who has died following / as a consequence of medical treatment paid for on a credit card?
Subject to certain exceptions, all causes of action vested in (i.e. maintainable by) a person who dies will survive for the benefit of his or her estate (section 1 Law Reform (Miscellaneous Provisions) Act 1934). This would appear to include a s75 claim against the credit card company. However, the position is different in respect of a (usually more valuable) dependants’ claim where the deceased’s death is alleged to have been caused by the deficient medical treatment. The claim for the benefit of the dependants under the Fatal Accidents Act 1976 is purely statutory and the cause of action does not arise until the death of the deceased. In so far as a s75 claim requires the person bringing the claim to be both (in our scenario) the injured patient (who contracted with the supplier) and the credit card holder, this appears to preclude its being deployed by the surviving dependant(s).
What if the treatment was paid for on someone else’s credit card?
Section 75 applies if the “debtor” has a claim against the supplier. In the context of credit cards, the question arises whether the term “debtor” only covers the person who enters into the agreement with the card issuer or whether it extends to any “additional card-holders” which the account-holder nominates to receive additional cards for use on the account. The definition of “debtor” in s.189(1) (as “the individual receiving credit under a consumer credit agreement”) suggests that only the account-holder is the “debtor”. The additional holders have been given authority by the account-holder to obtain goods or services to be paid for, in the first instance, by the card issuer, with reimbursement to be made by the card-holder. This arrangement does not render them “debtors” to whom the card issuer has provided “credit” in the sense of enabling them to defer payment. On the other hand, it may be arguable (at least in some fact situations) that when they use the card, the additional holders act as agents for the account-holder and therefore any claims arising against the supplier are the claims of their principal: the debtor. Moreover, the Financial Ombudsman Service has upheld a claim made by an additional cardholder where that person purchased goods for the benefit also of the principal cardholder.[15] By contrast however, the Ombudsman has rejected a number of claims where cosmetic surgery was paid for by the patient’s spouse on credit, on the basis that the patient and the debtor were two different people.[16] Absent a successful argument that the patient in undergoing the procedure was acting as agent for the account holder and/or that the medical procedure was to the benefit of the patient and account holder jointly, a s75 claim in this situation appears unlikely to succeed.
Do I have to go to court?
Part XVI of the Financial Services and Markets Act 2000 created an ombudsman scheme “under which certain disputes may be resolved quickly and with minimum formality by an independent person”. The Financial Services Ombudsman has jurisdiction to determine complaints in relation to the provision of credit to consumers as a regulated activity under FSMA 2000. The outcome of complaints “is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case.” The overall approach of the FSO of providing a swift, free resolution of disputes without a hearing may on its face appear attractive. However, the absence of a hearing and of cross-examination to test evidence may limit the appropriateness of the scheme to only the most straightforward and modest of medical claims. The FSO rules allow for the referral of a complaint to another complaints scheme or the court, which may occur where the Ombudsman considers the matter too complex for the informal scheme to be appropriate or if the limit in the sum which he has jurisdiction to award may be insufficient.[17] The level of compensation which the FOS can award is subject to limits depending on the date of the acts complained of and the date on which a complaint is referred. The current cap is £355,000 (excluding interest) for complaints referred on or after 1 April 2020 about acts or omissions by firms on or after 1 April 2019.
[1] The same may also apply where the medical treatment has been paid for under a specific loan agreement or finance scheme. For simplicity this article will focus on the credit card situation.
[2] Private Healthcare: Self-Pay UK Market Report (2019, LaingBusson)
[3] Bond v Livingstone & Co [2001] 3 WLUK 739; [2001] PNLR 30
[4] https://www.bbc.co.uk/news/health-20935107
[5] Mal’ouf v MBNA Europe Bank Ltd (t/a Abbey Cards) [2014] 1 WLUK
[6] MBNA v Ankers [2013] 8 WLUK 294
[7] Grant v Electro Centre Ltd [2006] 6 WLUK
[8] Lampon v Midland Registration Ltd [2000] 5 WLUK 821
[9] I.e. the tortious measure of damages – see McGregor on Damages, 20th Ed, Chapter 49.
[10] McGregor cites the “strange case” of Burrow v Rhodes [1899] 1 QB 816 where the claimant was induced to join an invasion of the South African Republic by various fraudulent misrepresentations; he successfully claimed damages arising from the loss of his leg, his kit and his pay.
[11] See Bond (supra) where no point is raised as to the legitimacy of a claim in general damages against the credit card company for the failed treatment.
[12] Though the approach to the measure of loss differs between the tort of misrepresentation (where the Claimant’s “reliance interest” is protected i.e. the claimant is to be put in the position he or she would have occupied had the misrepresentation never been made) and breach of contract where the “expectation interest” is protected i.e. the claimant is to be put in the position he or she would have occupied had the contract term been fulfilled.
[13] [2007] UKHL 48
[14] One might however have a claim for e.g. last minute cancellation of an elective procedure where the patient/debtor is seeking refund of the sum paid and consequential losses such as travel or accommodation expenses, which might not involve a claim for “personal injuries”.
[15] See https://www.financial-ombudsman.org.uk/files/105848/DRN4115539.pdf;
[16] See https://www.financial-ombudsman.org.uk/files/64133/DRN2215933.pdf; https://www.financial-ombudsman.org.uk/files/106003/DRN4121740.pdf and https://www.financial-ombudsman.org.uk/files/240966/DRN7944294.pdf
[17] See for example https://www.financial-ombudsman.org.uk/files/43870/DRN1246765.pdf
