Millions of people in the UK are scammed into one scheme or another every year. Whether it be the infamous PPI scandal, mis-sold pensions, unlawful bank transfers or ordering something online that didn’t show up. That’s why in the UK we benefit from consumer protection rights that give us, the customer, some sort of legal protection against these types of activities.
One of the laws that protects us, and our money, is the Section 75 Act 1974. Under this law, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader. For example: if you order an item and it arrives and looks completely different to what you expected, the bank is just as liable as the retailer. So, if the retailer refuses to refund you the money you paid, the bank will have to compensate you.
You can also make a claim to both the retailer and credit card provider simultaneously, although you cannot recoup 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 with both the retailer and trader. The goods or service you bought must have cost over £100 and no more than £30,000.
Section 75 also requires your credit card provider and the seller of goods to be different parties, it 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 (e.g. a deposit) on your card. It’s the value of the goods you’re buying that is key, not the amount paid on the card.
Yet some consumers are finding credit card firms are rejecting Section 75 claims, because the retailer they bought from used a third-party payment-processing firm (Paypal for example,) to collect their payment, and there’s prevalent confusion about how these rules apply. There are dozens of specialist payment-processing companies worldwide, providing retailers with card terminals and/or the ability to accept online orders, made with a credit or debit card – other big names include Worldpay, Sage Pay, Creditcall and Stripe.
So, if a consumer pays for a holiday and later finds out the company does not exist, they would naturally go to the bank. However, if they have paid for this holiday using their Credit card, but to a third-party processing company, they essentially have no argument with the bank.
The trouble is, deciding whether a third party breaks the debtor-creditor-supplier chain is incredibly complex. The rules are still not clear and even the Financial Ombudsman Service seems confused on the matter.
The Financial Ombudsman Service recommends that affected customers get in touch, because not all third-party payment mechanisms invalidate Section 75, and deciding which do and which don’t, is complex.
So be careful when making payments online and be wary of companies using third party payment processing. This does not mean they are all bad, rather until the law is clear on this matter, it is best to avoid the confusion.
