Section 75: are you covered?
Section 75 is one of the strongest weapons in the UK consumers' arsenal.
This tiny piece of legislation, makes credit card providers equally liable (with retailers) for ensuring that people get what they paid for.
Over the years, it has saved Britons millions of pounds they would have otherwise lost to unscrupulous retailers or shopping disasters.
In other words, it's well worth knowing about.
Read about how the process works to get the full picture.
Or click through to skip to:
- More information on items bought from abroad
- What's so great about part payment rules and cover for losses.
- And what's not so great like when cover fails or people aren't covered because they can't get a credit card.
The Consumer Credit Act 1974 is a piece of legislation that means that lenders must be licensed by the Office of Fair Trading.
Section 75 of the act says that license means that lenders are responsible for the credit agreements between traders and individuals.
In essence, it's a fall back: when a cardholder has a claim under legislation like the Sale of Goods Act, section 75 means the card provider has to help.
That means cardholders can claim on items that are:
- Not delivered example: you book a flight but the airline goes bust.
- Faulty example: you buy a TV but it doesn't work.
- Damaged example: you buy plates online and they arrive smashed.
Cardholders have a right to be refunded if they make a claim within 6 years (5 in Scotland) and the claim is dependent on the bank, not just the company.
Only purchases which cost between £100 and £30,000 are covered by Section 75. However:
- Part payments are covered, more here.
- Store cards and hire purchase agreement items are also covered.
- Other credit agreements - such as a car loan through a dealer - are covered too, though in this case the contracts will need to say something like: 'This agreement is covered by the Consumer Credit Act 1974'.
- What's more, all kinds of items are covered. As long as a breach of contract has occurred and the prerequisites for cover are met (see below for more on this) electrical items, a sofa or airline tickets will all be covered.
Making a claim
So that's how it works in theory. What about in practice?
To get money back under Section 75 cardholders first need to call the credit card provider (so: American Express, Barclaycard, RBS...) and tell them they intend to make a claim.
The law is very clear: credit card providers and retailers are equally liable for the delivery of goods.
However, the credit card provider will usually ask that the consumer make all possible efforts to first resolve the issue with the retailer.
Although, under law, they're not required to do this, to move the process along it's worth including in any claim the steps that have been taken to resolve the issue so far.
If the supplier has gone bust - a classic case for Section 75 - that should be pretty simple.
Similarly, although this protection is law it doesn't mean that consumers haven't had to be persistent to get it.
According to a recent study, an astounding 59% of credit card providers gave false or misleading information to customers calling to make a section 75 claim.
We've seen many consumers who were told on the phone that they couldn't get a refund succeed after correspondence through a clear, concise letter or email.
Persistence is key.
More on the cover available
In addition to the basic rules set out above, section 75 legislation has been refined over the years by legal precedents.
In effect, cardholders may be entitled to much more than the bare bones the legislation suggests.
Purchased from abroad
In 2007, a ruling by the House of Lords defined that Section 75 has no territorial limitations and, therefore, cardholders who use their credit cards to make purchases abroad are protected in the same way as in the UK.
They concluded that there was nothing in Section 75 that indicated there was any territorial limitation on the obligation of the credit card companies.
The new ruling now means that as well as in the UK, purchases made on a credit card may also be covered under Section 75 when:
- goods or services are purchased from a foreign supplier whilst the cardholder is abroad
- goods or services are purchased from a foreign supplier for delivery to the UK
- goods or services are purchased from a foreign supplier or agent who is temporarily in the UK
For example, you pay for a dress: £100 by card and £500 in cash. You're covered for the full £600.
Additionally, even if you only pay £10 on a credit card, as long as the full purchase price is more than £100, cover will still apply for the full amount.
Another example of this is paying just the deposit for a holiday on a credit card, as long as the full holiday price is over £100.
The Financial Ombudsman Service cites a claim that it upheld in the customer's favour where a man used his card to pay a deposit for a package deal from a travel agent. Part of this package consisted of flights that the agent had arranged.
Before the man left for his holiday, the airline went out of business and he had to buy two new tickets. The ombudsman found in favour of the man's subsequent claim because a contract existed between the man and the travel agent to supply the holiday package.
The contract was breached by the travel agent failing to supply the tickets that were part of the package.
Only partly supplied services
While not an explicit rule of Section 75, there may be cases where partly supplied services could be covered under the legislation.
An example of this could be where a year's membership to a golf club was purchased, but the golf club went out of business and closed it's facilities after only 3 months into the membership.
The Financial Ombudsman Service (FOS), the watchdog that deals with consumer claims, told us that in cases such as this scenario "it may be appropriate to consider how much a replacement membership for the remaining term would cost elsewhere."
So, in other words, the credit card provider may choose to refund the membership in full or to cover the cost of a replacement elsewhere.
However, the key word in the FOS advice, though, is 'may'.
It is worth noting however, that section 75 rulings are made on a case by case basis and just because all the conditions are met for a section 75 claim, it doesn't mean that every credit cardholder will be able to get a refund for a partly delivered service.
Individual items bought as a set
Individual items that cost less than £100 but have been bought as a set costing more than £100 are covered.
For example, you buy a book of ten boat trip tickets for £220 and make three trips. The boat company goes bust. You can claim for the whole £220 even though each ticket is only £22 and 3 x £22 is only £66.
The legislation may even offer a refund for any outlay you had to make (known as a 'consequential loss') as a result of the problem.
For example, we've heard of cases where holidaymakers who got trapped abroad when their airline went bust bought flights to get home and claimed the amount back under section 75.
Just as we noted above, this also applies when the cardholder has only partially paid for goods on their credit card and settled the rest using a different method (debit, cheque or cash).
What's not covered?
Unfortunately, though, precedence can cut both ways.
The way Section 75 is worded in law means that it relies on a clear relationship that goes:
consumer (that's you) > credit card provider > retailer
And various rulings down the years have found that anything that upsets that clear line means that the consumer is not covered. There are four big examples of this.
1. Third party payment systems
consumer > Paypal > credit card provider > retailer
Completing a credit card transaction through a third party payment service means that the credit card provider and the seller are no longer in a direct relationship so are not equally liable.
This happens with payment services such as Paypal, as well as Amazon Marketplace, Worldpay and Google Checkout.
They create an extra link in the chain and so when Paypal is used for payment, there is no direct connection between the bank of the customer and the bank of the seller to qualify for consideration under section 75.
Some of these services do offer their own buyer protection though, such as Paypal's protection for buyers and while the level of protection isn't as strong as Section 75, they can be safer in certain situations than paying directly.
Shopping on eBay or Amazon Marketplace with private sellers, or on smaller websites for items under £100, are good examples of this.
2. When additional cardholders pay
consumer > additional cardholder > credit card provider > retailer
The primary cardholder is responsible for any additional cardholders on their account so that counts as an additional step. However, there is an exception. Payments made on an additional card for an item for both cardholders (a joint membership, for example) will be covered.
Since the law is a little murky on this one, however, paying for larger items with the original card is advisable.
We've covered how section 75 applies to additional cardholders in more detail in a separate article, which is available here.
3. Travel agents
consumer > travel agent > credit card provider > retailer
Like Paypal, travel agents are regarded as an 'additional step' in the process. Say an airline goes bust. If you paid the airline directly you're covered. If you paid a travel agent they're a third party.
Check, though, that the travel agent is truly a third party (i.e. not just the airline in disguise). If not, you may still be protected.
4. Paying by cash
consumer > ATM machine > credit card provider > retailer
If you withdraw cash from a credit card (which is inadvisable due to the high cost involved) and use it to pay for an item it won't be covered under Section 75. The same goes for credit card cheques.
Cover for purchases under £100
Purchases costing between £10 and £100 paid for with a Visa or MasterCard credit or debit card can be reimbursed using Chargeback if the goods don't show up or the firm you buy from goes bust.
When making a Chargeback claim it's important to remember that the onus is on you to raise the problem as early as possible and not more than 120 days after you first noticed it.
Contact your bank and tell them you'd like to question a payment. They can then contact the supplier's bank to initiate the Chargeback process.
Section 75 cover without a credit card
If you've got a bad credit rating, you might have been refused a credit card when you applied to a lender. But if you want the peace of mind that Section 75 offers, you can still get it under the following schemes:
- The CashPlus Prepaid MasterCard It's a prepaid card, meaning you have to load it with cash in order to spend on it. It's one of the few prepaid cards to offer purchase protection, something akin to section 75. When the Creditbuilder facility is activated (more information here) the card is issued under the Consumer Credit Act - so purchases made with the card are protected under Section 75. Note, though, that the same limitations still apply.
- Chargeback It's not Section 75 cover but Visa, MasterCard and American Express all offer Chargeback services and debit cards are included in this. The issuing bank can regain the value of a payment made from the supplier's bank to pass back to your own account. See our full guide here.
- Denied Boarding Regulations Again, not section 75 but if the problem is a cancelled or delayed flight it might be possible to get money back with these EU rules. Find out more.
Please note we can only provide general information and cannot answer questions about specific cases in the comments, sorry.
If you need specific help or information on your rights an advice agency such as Citizen's Advice would be able to respond directly and give you more in-depth information.
Additionally, if cardholders are not happy with how the card company deals with their complaint, they can ask the FOS to look into it. More information on Financial Ombudsman claims can be found on their website.
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