If you buy goods or services on your credit or debit card, you could have extra protection if things go wrong compared with paying by cash or cheque.
Credit cards have the greatest protection, potentially giving you a claim against your card provider under Section 75 of the Consumer Credit Act.
Your rights under Section 75
Under Section 75 of the Consumer Credit Act, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the company.
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.
Making a Section 75 claim
There are some limitations to when a card company is liable along with the retailer or trader. The item or service you bought must have cost over £100 and not more than £30,000.
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, 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 chargeback.
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 chargeback instead to get some or all of your money back – for more information read our guide to the chargeback system.
Where Section 75 doesn’t apply
There are some transactions where there are arguments that Section 75 may not apply – these include where the payment has been made through an online payment service and where a third party is involved, such as where you buy goods or services through an agent, rather than directly from the seller or supplier.
Payments through Paypal
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. There are arguments that having another party involved in the process takes away the Section 75 protection.
PayPal 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 look to pay the trader direct with your card.
If your partner has a credit card and has added you as an additional cardholder, it’s usually best to get the main cardholder (your partner) to make any big purchases, rather than using the extra card yourself.
This doesn’t mean that purchases made by a secondary card holder won’t 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 could still be covered under Section 75.
Payments through an agent
It’s not unusual for a business taking payment to be acting as an agent for the actual supplier.
In these circumstances Section 75 should still apply and you should be able to claim against the credit card provider. It is possible that the card provider may try to argue that as payment wasn’t made direct to the supplier of the goods or service that Section 75 doesn’t apply.
To avoid any arguments, where possible, make any credit card payment direct to the company actually supplying the goods or services.
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
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.