If you buy goods or services on your credit card, Section 75 can give you extra protection if things go wrong.
Under Section 75 of the Consumer Credit Act 1974, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader.
This means it is just as responsible as the retailer or trader for the goods or service supplied, allowing you to also put your claim to the credit card company. You don’t have to reach a stalemate with the retailer or trader before you can contact your credit card provider – you can make a claim to both the retailer and credit card provider simultaneously, although you can’t recover your losses from both.
This right is particularly useful if the retailer or trader has gone bust, or it doesn’t respond to your letters or phone calls. Section 75 of the Consumer Credit Act also applies to foreign transactions as well as goods bought online, by telephone or mail order for delivery to the UK from overseas. There are some limitations to when a card company is liable along with the retailer or trader.
The goods or service you bought must have cost over £100 and not more than £30,000. Section 75 protection also requires your credit card provider and the seller of goods to be different parties. Section 75 will not apply if the lender is also the supplier. However, to claim under Section 75 you don’t have to have paid more than £100 or the full amount on your credit card – the card company is liable even if you made only part of the payment (a deposit, say) on your card. It’s the value of the goods you’re buying that is key – not the amount paid on the card.
For example, if you ordered a new sofa from a furniture store and paid a £60 deposit with your credit card and the balance of £600 by cheque, you would be covered for the whole £660 if the dealer went out of business and you didn’t get your sofa. Section 75 gives you the same rights against the card company as you have against the retailer. So if your claim against the trader is for the cost of fixing or repairing an item, this would be the claim you could bring under Section 75 against the card provider. However, if you bought two items that together cost more than £100, but each cost less than £100, Section 75 would not apply and the card company wouldn’t usually be liable.
Remember that you can make a claim even if an account is closed and that Section 75 can apply to credit card transactions made abroad. If the item or service you’ve bought was under £100, you may still be covered by charge-back. What if I paid by debit card? Section 75 applies only to credit cards and not to debit cards or charge cards (where all charges must be settled at the end of the month). If you use a debit card, it’s possible that you may be able to use charge-back instead to get some or all of your money back. Charge-back is a transaction reversal made to dispute a card transaction and secure a refund for the purchase. Charge-back works by the bank withdrawing funds that were previously deposited into the recipient’s – usually a retailer – bank account and putting them back into your account.
The recipient may dispute a charge-back with the bank if it can prove the charge-back is invalid. Payments through an agent or third party It’s not unusual for a business taking payment to be acting as an agent for the actual supplier. In this circumstance, Section 75 may not apply and you may not be able to claim against the credit card provider. A good example of this is when you buy concert tickets. If you buy direct from the venue, then Section 75 may apply if the cost is over £100. If you buy through a ticket agency, then it may not. This is because the card provider may argue that as payment wasn’t made directly to the supplier of the goods or service, Section 75 doesn’t apply. So where possible, make any credit card payment direct to the company actually supplying the goods or services.
Payments through PayPal
There are legal arguments that having another party involved in the transaction process takes away the Section 75 protection. However, if you use your credit card to pay for something through PayPal and the funds go direct to the seller, then as long as the company you’re buying from has a ‘Commercial Entity Agreement’ with PayPal you may still be able to claim against your credit card company under Section 75 for any misrepresentation or breach of contract by the seller.
There are arguments that having another party involved in the process takes away the Section 75 protection. PayPal also offers its own buyer protection scheme, called PayPal Buyer Protection, so it’s worth checking if you’d be covered by that if you have a problem with your purchase. If you particularly want to have the protection of Section 75 then try to pay the trader direct with your card. Additional cardholders If somebody else such as your partner has a credit card and has added you as an additional cardholder, it’s usually best to get the main cardholder to make any big purchases, rather than using the extra card yourself. This doesn’t mean that purchases made by a secondary card holder will never be covered, but it’s best for the primary card holder to make larger purchases if you want to be sure of protection under Section 75. If, however, the purchase is made with the primary card holder’s authority and if they expressly request the purchase and will benefit from it – a family holiday, for instance – they will still be covered under Section 75.
Cash withdrawals using your credit card
If you use your credit card to withdraw cash for a particular purchase, you won’t be covered by Section 75 as there’s no link between the credit card company and the retailer. Cash withdrawals usually attract a fee and a much higher interest rate anyway, so they’re best avoided on the whole. Financial Ombudsman Service There’s no set time-frame for your card provider to resolve a charge-back or Section 75 claim, but if you’re unhappy with the outcome of the claim, or how long it’s taking, you can complain to your provider, it then has eight weeks to deal with this complaint. If your credit card company doesn’t accept that you have a claim and refuses to pay up, you can ask for a letter of deadlock so that you can refer your dispute to the Financial Ombudsman Service (FOS).
If more than eight weeks have passed since you submitted your claim to your credit card provider, you can refer your claim to the FOS straight away without the need for a deadlock letter. You can also approach the FOS before the eight weeks are up if your provider has given consent for you to do so.
If you are seeking further information or advice about any of the above, please contact John on 01207654365.
Disclaimer: This briefing is for guidance purposes only. We accept no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client’s own particular circumstances.