Office of Fair Trading
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House of Lords upholds decision on credit card cover for overseas purchases
UK consumers will continue to be protected when purchasing goods overseas on their credit cards following a landmark ruling by the House of Lords today. The Lords confirmed that section 75 of the Consumer Credit Act 1974 applies to overseas as well as domestic transactions, and this ruling brings to an end a legal process initiated by the OFT in 2004.
Today's judgment rejects an appeal by High Street Banks against a similar ruling by the Court of Appeal. It confirms that credit card issuers are individually and jointly liable with suppliers if a consumer has a valid claim against the supplier for misrepresentation or breach of contract. This applies to overseas purchases where the price is above £100 but no more than £30,000.
As a result, cardholders are able to make a claim against the credit card issuer as well as, or instead of, the supplier.
Section 75 covers foreign transactions including where:
* a consumer uses a UK credit card to buy goods or services while abroad,
* a consumer orders goods or services from a foreign supplier while abroad for delivery into the UK,
* a consumer in the UK buys goods or services from overseas by telephone, mail order or over the internet which are delivered to a UK address, or
* there are face-to-face pre-contract dealings with a foreign supplier temporarily in the UK, or with a UK agent of a foreign supplier, but the contract is not completed in the UK.
John Fingleton, OFT Chief Executive, said:
'The application of Section 75 to overseas credit card purchases has long been uncertain, which is unsatisfactory for UK consumers. We are pleased that the House of Lords has resolved the issue, and particularly happy that it has been resolved in a way that gives greater protection to consumers.'
Tips for consumers on credit card purchases:
* the consumer protection afforded by Section 75 allows for the possibility of money that seemed lost on a credit card purchase being claimed back,
* if you pay by credit card you can claim your money back from the credit card company if the seller fails to honour the contract, or the item is faulty or if the seller wrongly describes it or if the supplier goes out of business,
* you do not have to attempt to claim your money back from the seller first - the credit card company is individually liable
* if you are buying an item costing over £100 and you are asked for a deposit, consider paying the deposit by credit card,
* you are not covered by section 75 if you use a debit or charge card,
* if using your credit card abroad, you will need to work out whether the purchase price amounts to more than the sterling equivalent of £100 and less than £30,000.
NOTES
1. The OFT sought to resolve the issue of the application of section 75 to overseas as well as domestic transactions by way of a Court declaration (see PN 82/03). The OFT's position that the concept of 'equal liability' of card issuers and suppliers does apply was disputed by Lloyds TSB Ltd, Tesco Personal Finance (part of The Royal Bank of Scotland group) and American Express Services Europe Limited. The High Court ruled in November 2004 that section 75 applied to domestic credit card transactions only (see PN 186/04). That protection was extended by the Court of Appeal to overseas transactions.
2. Section 75 does not cover debit or charge cards. It does extend beyond credit cards to all connected lender liability.
3. £10 billion worth of transactions were made overseas in 2006 (this includes cash withdrawals). Figures given by APACS (the UK payments association) for 2006.
4 Over half of adults use the internet on a daily basis. In 2006 credit card use on the internet grew by 29% on 2005 to 252 million transactions with £19.2 billion spent online. Figures given by APACS (the UK payments association) for 2006.
5. Section 75(1) states that card issuers are jointly and severally liable for any misrepresentation or breach of contract in relation to a transaction with a cash price of £100 to £30,000 which is financed by an agreement regulated by the Consumer Credit Act 1974.
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