A WINSFORD couple who took out a personal loan for just £17,500 could be left homeless after a landmark court judgement left them facing total debts of more than £140,000.

Michael and Suzanne Walker, of Sandringham Close, have spent the last few years fighting an epic legal battle to prove the loan was invalid from the start.

But last week an Appeal Court judge, in a decision that could affect thousands of similar loan agreements across the country, has dismissed the couples challenges and ruled in favour of the lender.

Mr and Mrs Walker took out the £17,500 loan with Southern Pacific Personal Loans Ltd in March 2005, and secured it against their home with a second mortgage.

When the couple fell into arrears they watched with dismay as the figure ballooned to more than £40,000.

To add insult to injury, the Appeal Court’s decision means the Walker’s now face a legal bill of more than £100,000 from Southern Pacific, on top of their original debts.

This leaves the couple facing bankruptcy and homelessness with little hope of rescue, after the judge refused permission for the couple to appeal further to the Supreme Court.

Represented by top QC, David Berkley, the couple claimed the loan agreement was unenforceable from the outset, after a £875 ‘broker administration fee’ added to the debt meant the ‘true amount of credit’ was not correctly stated on the document they signed.

The 1974 Consumer Credit Act makes this a compulsory requirement for all credit agreements, and Mr Berkley argued that Southern Pacific were charging interest on a ‘charge for credit’ - the administration fee - rather than the loan itself.

The Walkers argument relied on the assumption that if ‘loan companies could charge interest upon interest, it would drive a coach and horses through consumer protection laws’, which are in place to ensure that borrowers can see the true cost of the credit ‘at a glance’.

Last year a Chester Court judge sent shockwaves through the credit industry, after ruling in agreement with the Walkers, saying the loan agreement was unenforceable.

The implications of that decision were potentially huge, with thousands of other credit agreements - worth tens of millions of pounds to lenders - in jeopardy if the Walkers were victorious.

It was an issue that Lord Justice Mummery was well aware of when he handed down his verdict, stating the case raised a ‘vital point of principle’.

However he added that the Chester Court judge had ‘misapplied’ the law, and there were no rules to prevent the inclusion of the £875 admin fee in the statement of the ‘total amount financed’.

Lord Justice Mummery, sitting with Lord Justice Sullivan and Mr Justice Owen, ordered the couple to pay £30,000 of legal fees on account, but delayed payment to allow them to petition the Supreme Court directly to hear the case.

The Walkers were unavailable for comment at the time of going to press.