One of the key advantages of choosing to pay for a product or service with a credit card is the financial protection it gives you if you need to request a refund, through something called Section 75 of the Consumer Credit Act.
Ever heard people talking about Section 75 and wondered what it is? And under what circumstances you are protected by it?
We've gathered together everything we think you need to know about the Consumer Credit Act.
In this article:
You can also Download the template letter for Section 75 claims
It's important to understand what legal rights you have if you spend money on something that didn't turn out exactly how it should have done. From fake hotel websites claiming great deals for cheap holiday rentals to dodgy websites selling discounted and/or low quality products, it's easy to lose track of what's genuine in the digital world. Before you know it you've been scammed. It's true that the majority of people never have any problems using their credit card. However, you can never be too cautious. It's always good to know that you are protected if you accidentally find yourself in a sticky refund situation.
Basically, when you purchase goods using your credit card, a law called the Consumer Credit Act gives you rights to request a refund from your supplier under certain circumstances. Rights that are superior to purchase made with a debit card.
Here's what you need to know:
One example of where section 75 could be particularly useful to you is if the supplier didn't respond to your queries after you made a purchase. Maybe you bought a product from a scam website. The scammers have taken your money and disappeared. Under section 75 you can claim against the credit card company as well, so you would most likely still get your money back.
Section 75 of the Consumer Credit Act states that both the creditor (the credit card company) and the supplier (the retailer selling you stuff) are jointly liable to the debtor (you, the customer) if there is an issue with an item you bought using your credit card (or it simply never arrived in the post).
When you use your credit card to make purchases, you are borrowing money from the bank before you pay it off. This means the banks are more likely to get involved and help you out because it is their money that has been lost. They are equally responsible to you, the consumer, to resolve the financial issue at hand. The Consumer Credit Act places joint obligation on the credit card company as well as the supplier to protect you from purchasing mishaps on credit.
What does this really mean for you, the consumer? If you make a purchase from £100 to £30,000 on credit and it turns out you've lost money through no fault of your own, the Consumer Credit Act will protect you from having to pay. If you read section 75 in full you will see that under subsection (2) the creditor (the credit card company) is entitled to compensation from the supplier. So you as the consumer won't have to pay up for a breach of contract, or if you bought a product or service from a company that later goes bust, or the product simply never arrived or is in bad condition.
There is no time limit to make a claim, but the Statute of Limitations is six years (five in Scotland) - the deadline for pursuing a claim in the courts.
Yes you can. Section 75 claims also applies to payments made in foreign countries and purchases of products from abroad. You can use the link below to download a letter template to make your claim.
And it is not just credit card purchases that are protected. You can claim under Section 75 for:
Interesting fact: if you use a credit card to pay a deposit for something, even just a few pence, you are protected for the total amount of the product (as long as it is more than £100 and less than £30,000).
It's fairly simply:
DID YOU KNOW? Since 2014 approximately 18,600 people have lost money due to holiday rental fraud.
Sadly not. However, for debit cards you can make a request for a charge back with your bank. It's not a legal requirement but it can have a happy ending too:
"Mrs M, from West Sussex, purchased insulated cardboard boxes from a company online, in good faith, in April 2018, for a charity event she was helping with. She paid using her debit card by bank transfer (she wouldn't have normally dont that, but the sales agent who helped her by email to get the right size boxes and spec offered her that option (!) and because she was in a hurry abotu her deliery, she didn't think further and agreed to it). After a couple of weeks she realised she hadn't received any delivery confirmation. the website did not display any contact phone number. She tried to get in touch with them with no joy. It was becoming clear to her that she had been scammed of her money and would never see the goods. Mrs M got in touch with the Citizen Advice Bureau who directed her to the Fraud Agency, who made a note of the issue but directed her to her bank for help.So Mrs contacted Santander. The customer service team there explained that they couldn't legally get the money back under Section 75 as she didn't use a credit card to pay for her order and didn't even actually pay through the website. But also said they would flag this with their own fraud team for investigation.They did kick off a Charge Back process with the seller's bank, which eventually got her £212 our of the original £234 she'd spend back into her account."
You will need the following:
Prevention is better than cure of course. but how can you sure you are not scammed or given a faulty product in the first place? This is sometimes hard; a Which investigation found that the amount of money lost to parties purporting to offer cheap holiday rentals has risen by 25% in 2017-2018. This can often ruin a family holiday and lead to unnecessary stress, worry and wasted time trying to sort out the problem.
It is also important to understand where section 75 does not protect you.
The most common instances are:
If you're buying something worth MORE THAN £30,000, make sure to triple check that everything is legitimate so that you won't find yourself out of pocket.
Similarly, if you are buying products UNDER £100 you will not be covered, even if the items combined are worth more than £100.
For example, if you buy two single one-way train tickets each costing £51 and the train operator goes into administration, you would not be protected by section 75 because neither train ticket was valued at £100 or more. Yet ironically, if you had bought a return ticket at £102 you would be covered under section 75.
Section 75 MAY NOT apply if there is a third party involved in the transaction process, a significant loophole discovered by MoneySavingExpert.
The Consumer Credit Act identifies that in each financial transaction with a creditor there are three actors involved: the consumer, the creditor and the supplier. They form a direct link with each other so that in the event of a mishap, the creditor and supplier are jointly liable to the consumer.
However, when a third party gets involved - such as Paypal, Amazon, eBay or any kind of agent - that link breaks down and section 75 does not apply. But the rules surrounding this loophole are confusing. Even the Financial Ombudsman Service cannot provide a full break down of third parties that would deem section 75 redundant.
Additionally, a lot of third parties offer protection to their customers irrespective of the Consumer Credit Act:
Sadly you will not be covered if you make a purchase using a credit card which is registered to an account in another person's name, maybe your husband's.
In the UK all credit cards have one account holder. So section 75 will not apply in cases where a husband and wife both have credit cards carrying their own names but are registered to one account (in the husband's name or vice versa). If the wife purchased a product on her husband's account from a company that went bust overnight, she would not be protected by section 75 because the creditor-debtor-supplier link has been broken.
If you are unsure about whether you are legally protected under the Consumer Credit Act when buying through a third party, your best bet is to purchase the product directly with the supplier or contact the third party themselves to see what consumer protection they provide. Alternatively, the Financial Ombudsman Service have a page dedicated to common misunderstandings about claims relating to article 75 of the Consumer Credit Act.
We hope these tips will help you if you need to a refund claim on your credit card in the future. Let us know i you have any question or other points related to this topic that you'd like us to answer. You can leave a comment below, email us or send us tweet.
Pin this article for reference:
If you'd like to understand more about dealing with other types of claims, here are some suggestions about what to read next: