Don't be fobbed off by your credit card company

by Jane Baker on 31 March 2009  |  6 comments
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Section 75 provides protection for credit card purchases. But claiming refunds isn't always easy.

Here at lovemoney.com, we always recommend paying for goods and services using your credit card. Not because we think it's fun to hold up queues while the card machine dials your provider. Not because paying with plastic is more enjoyable. Because under Section 75 of the Consumer Credit Act (1974), you'll be entitled to valuable consumer protection if there's a problem with your purchases.

In a nutshell, as long as the items you buy using your credit card cost between £100 and £30,000, you'll be covered by Section 75. Section 75 protection kicks in when the contract you have with the supplier has been breached, or the goods or services you have bought have been misrepresented in some way. You can claim it on purchases you make in the UK and abroad.

When does Section 75 apply?

There are many circumstances where you may be entitled to a refund. Here are a few typical examples:

• The goods you buy turn out to be faulty or damaged.
• The supplier you buy the item from goes bust and your order never arrives.
• The quality of the item is unsatisfactory.

In all these cases - and many others - you'll have the right to redress under Section 75. You may also be able to claim for any further financial loss suffered as a result of the problems you have experienced with your purchase. So for example, if you booked a new, more expensive flight to get you home because the original airline you booked with went bust, you could claim the full cost of the more expensive flight. Best of all, there's no upper limit on the amount of damages you could claim.

How come you can make a claim through your credit card? Under Section 75, the supplier of your goods and your credit card issuer share liability jointly and severally. So you can pursue either or both parties. Neither claim carries more weight than the other, so it's a good idea to pursue your credit card company first if the supplier has gone out of business. It may also be better to claim against the card issuer for overseas transactions.

Does Section 75 work in practice?

The protection provided by Section 75 sounds fantastic is theory, but it can be a different story in practice.

The Financial Ombudsman Service (FOS) - which deals with consumer complaints against financial service companies - says there have been numerous occasions where claims under Section 75 have been wrongly rejected by credit card companies. Worryingly, this trend seems to be growing.

The total number of credit card complaints to the FOS doubled last year, and around 5% to 10% of these complaints related to Section 75. This suggests that claiming refunds successfully isn't as easy as it should be.

When does Section 75 go wrong?

According to the FOS, there are a several key areas where the rules are being wrongly applied by credit card companies, or misunderstood by consumers. There are many examples, but here are a few typical ones:

Chase the supplier

It is becoming more common for claims to be rejected by credit card companies because consumers haven't pursued the supplier for a refund first. But this isn't a satisfactory reason since both the supplier and the credit card issuer share liability. If your claim is rejected on these grounds, take your complaint to the FOS. There's a good chance the decision will be reversed.

Debtor-supplier relationship

This is another complex area which is muddying the waters. Claims under section 75 are sometimes rejected because there is no direct relationship between the debtor (the consumer) and the supplier.

Here's an example: Let's say you use your credit card to pay money into your PayPal account. You then buy an item and pay for it using PayPal. If the item later turns out to be faulty, you won't be covered by Section 75 because there are too many links in the chain between you and the supplier.

Unfortunately, when your claim for a refund is rejected for this reason, the FOS is likely to side with your credit card company.

The Visa chargeback scheme

As if all this wasn't complicated enough, there's some serious confusion over Visa's chargeback scheme and Section 75 because both provide broadly similar protection.

The chargeback scheme applies to Visa's credit and debit cards, and can be used to provide a refund by reversing the disputed transaction. Just like Section 75, the scheme enables you to claim your money back if goods don't arrive, or they're faulty and so on. (You can read more about how the scheme works here.)

But the trouble is credit card companies have started rejecting refunds under chargeback rules, rather than Section 75. Card issuers will often argue they can't apply a chargeback because the card holder failed to query the transaction within the timescale stated in the card scheme rules. This is normally between 45 and 180 days.  

But the timescale under Section 75 is far longer. In some cases, you could wait up to six years before making a claim. This is a useful part of the protection, since it may not be immediately apparent that a good is faulty.   

But still claims are frequently rejected because time has run out. If this happens to you, the chances are your credit card company is using Visa chargeback rules, when it should give you far more time to ask for a refund under Section 75 rules. So, don't allow yourself to be fobbed off.

It's good to know you can claim under Section 75 when things go wrong, but the law - and specifically how it's applied in practice - is far from perfect.  

My advice is this: If you make a claim under Section 75, but you feel it has been rejected unfairly by your credit card issuer, get onto the FOS straightaway and ask them to review your case. You may just find your complaint is upheld.

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