Section 75 case studies

Persistence pays with section 75 claims, FOS reveal

A STUDENT who had his Section 75 claim for a faulty laptop rebuffed twice eventually had to complain to the Ombudsman for compensation.

Landed with an immediately faulty laptop and an unhelpful retailer, the student was told by his credit card provider that the "quality of the laptop" was not "within its area of responsibility".

Even after sending a letter detailing the claim, he never got a proper response.

It was only much later, when a university adviser told him he could make a FOS claim, that the credit card provider was finally forced to come through.

As well as the cost of his laptop, the FOS ordered the student's credit card provider to pay him £125 in damages for the inconvenience they had caused him.

The FOS case study is a reminder, if another were needed, that a degree of persistence is necessary when making a claim under section 75.

The Ombudsman got involved in this instance after the consumer had made several attempts to resolve the problem with the financial provider themselves.

Financial providers have eight weeks to respond to complaints. At that point consumers can take the problem to the Ombudsman who will independently adjudicate between the consumer and the financial provider.

What constitutes 'faulty'? FOS releases new guidance

The Financial Ombudsman Service (FOS) released more guidance on when consumers can make a claim under section 75 today.

Section 75 of the Consumer Credit Act 1974 states that lenders are equally liable, with retailers, for the satisfactory delivery of goods costing over £100 which are paid for under a borrowing agreement (using a credit card, for example).

The law should protect credit cardholders when goods are faulty, damaged or not delivered at all.

But all but the most straightforward of claims seem to flounder as credit card providers fail to take responsibility.

Clarity on 'faulty'

For example, many problems with section 75 claims revolve around the definition of what constitutes a 'faulty' item.

That's the issue the FOS has provided clarity on today.

The Ombudsman recounted a case resolved in favour of the consumer: she had bought two tables from a catalogue, under the impression they would be identical - they were even shown either side of a bed in the catalogue.

But when they arrived, they were different colours, not exactly 'faulty' but no use to her either.

Both the retailer and the credit card provider refused to take responsibility when she complained.

But, after taking the complaint to the FOS, she not only got her money back from the credit card provider, she got the interest back that she'd paid on her credit card purchase and the card provider paid for the tables to be picked up.

Now, that's a result.

And, in addition, it constitutes a far broader definition of 'faulty' when it comes to section 75 than we're used to seeing.

It's no coincidence, perhaps, that the FOS also revealed today that credit cards are the second most complained about product they deal with, after Payment Protection Insurance (PPI).

A whopping 60% of those cases are concluded in favour of consumers.

Section 75 to the rescue as Shudoo goes bust

Online shoe store Shudoo.co.uk looks set to go bust, leaving many customers high and dry.

The site has posted a message warning customers that it's facing serious financial problems as a result of "trading difficulties".

Customers with unfulfilled orders for the site or those left with faulty goods but nowhere to return them will have to turn to consumer legislation to get their cash back.

In terms of currently unfulfilled orders, Shudoo's provisional statement on its difficulties say, "we are informed that some orders can not be completed due to problems which have arisen with warehousing and missing stock."

That strongly implies that those that have placed an order with the retailer and have not yet received it are unlikely to get their goods at all.

Luckily, section 75 of the Consumer Credit Act 1974 was practically made for this sort of situation.

The law means that the credit card provider is jointly liable for undelivered or faulty goods.

Items over £100 (excluding post and packaging) are eligible and you must have paid by credit card directly (e.g. not through a third party site like Paypal).

Disappointed Shudoo customers could also get their cash back with Visa or Mastercard chargeback or additional credit card purchase protection.

Where customers have recently received faulty items that may need to be returned, again, the provisional notice on the Shudoo site says, "We ask that no more returns are sent back until further notice."

This is another case of section 75 to the rescue. When you're unable to return faulty goods the credit card company is jointly liable. The same terms as above apply.

As ever, knowing your consumer rights is the best protection when a company goes bust.

59% of credit card providers flunk Section 75 test

CREDIT card providers are failing to pass correct information on about consumer rights under Section 75, according to a new study.

Consumer group Which? found that in 59% of cases credit card providers were offering false or misleading information to customers calling to make a section 75 claim.

Which? mystery shoppers made 10 calls to each of the 12 biggest credit card providers.

In just 10 of those calls an adviser mentioned section 75 of the consumer credit act by name. In others, credit card protection wasn't just lacking - it was wrong.

An adviser for Lloyds TSB suggested contacting the Ministry of Justice to reclaim money while a Barclaycard representative told the caller to contact their local authority.

Meanwhile, a clearly confused NatWest worker suggested that ATOL could help with a claim for an undelivered sofa - ATOL is the travel agency insurance scheme that covers consumers when airlines fail.

No credit card provider came out particularly well in the Which? test. Tesco, Nationwide and HSBC were the worst of the worst, though.

The first two didn't pass the Which? test on a single occasion and the latter was singled out as offering particularly poor customer service.

Which? chief executive, Peter Vicary-Smith said: "It's not as if the rules on credit card claims are complicated. This situation is unacceptable - companies must accept that advice really matters.

"Consumers are potentially missing out on money they're owed because they've been misinformed. The industry must know the rules, and it shouldn't be up to the consumer to remind them of their rights."

Which?'s research brings home the importance of credit cardholders knowing their rights; they certainly can't rely on their providers to know on their behalf.

Credit card users protected as Flight Options goes bust

TIMES are grim for holidaying Brits. This week, yet another travel group collapsed, the latest in a turbulent summer for the industry.

Thousands of those hoping to leave their troubles behind and find solace on a Mediterranean beach may lose or have to rearrange their holidays as the London based Flight Options and its trading arm, Kiss Travel, go under.

There are now some 200,000 people who have been affected by the multiple closures of holiday companies this year.

The first to go under was Globespan and its associated airline, FlyGlobespan. There were around 4,000 people abroad on one of its holidays when the closure was announced.

Goldtrail Travel was the next to go under, this time during the height of summer. Around 20,000 consumers found their holidays prematurely shortened, with another 110,000 losing their bookings for holidays to places such as Greece and Turkey.

Birmingham's Sun4U travel group was another Mediterranean holiday specialist to fall foul of the brutal economic climate. That time, 10,000 people were affected.

ATOL protection

The upside of being the forth travel firm to collapse in the past year, however, is swift and reassuring action from aviation regulators.

Around 13,000 affected holidaymakers who heard the news about Flight Options while abroad were informed that they would still be able to return home as planned, while those with imminent departure times were still guaranteed travel.

"Because the company has failed at the height of summer, the CAA is also putting in place arrangements to allow people to travel out on their holidays for the next 24 hours, to minimise confusion and protect passengers," a statement by the Civil Aviation Authority said.

Those with later travel have been advised bookings were been advised to approach their travel agents for alternative travel options.

Thankfully, many of the 60,000 people who have flights booked to destinations such as Greece, Turkey and Egypt will be protected under the CAA's Air Travel Organisers' Licensing (ATOL) protection scheme and will be entitled to a full refund.

ATOL protects people from being stranded abroad or losing their money when a holiday firm goes bust. However, the scheme currently only protects certain aspects of a holiday.

Customers using Flight Options will mostly be refunded because the company was only involved in selling seats on flights.

Credit card compensation

ATOL becomes problematic, however, when the customer has purchased separate components to a holiday in a series of transactions, say for flights, accommodation and car hire.

In this case, the courts may not consider this to constitute a package holiday and holidaymakers will have to seek compensation elsewhere, through section 75, for example.

A decade ago, some 90% of holidays were protected under the ATOL scheme. In recent years, this has shrunk to 50% - a reduction which has led the CAA to call for reforms to the law.

"Because of the rise of direct booking over the internet, and companies offering holidays that are not protected in the traditional way, the case for reforming ATOL to simplify the scheme for holidaymakers has never been stronger," it said.

Volcano burns credit card companies

THE Icelandic volcano is creating heat in the credit card world as frustrated holidaymakers seek recompense for their cancelled flights and subsequent expenses.

The major insurers are yet to reveal to what extent, if any, they are willing to pay out for the havoc wreaked by the volcano.

Many are expecting the insurers to cite "exceptional circumstances" as a way to avoid paying out for travel claims and this, in turn, might create a problem for many as they turn to the credit card companies to help repair their damaged wallets.

If consumers can show that their airline is in breach of contract by not providing them with the flight purchased - at least in normal circumstances - they can then approach the credit card company to reimburse them.

God clause

Unfortunately, the airline won't be in breach of its contract if its terms and conditions say it does not have to in "exceptional" or "Act of God" circumstances.

According to the UK Cards Association, which represents the credit card industry, in these cases the credit card company does not have to pay out.

However, holders of Visa credit and debit cards - may be able to get a refund through Visa Chargeback for a service not received - even where the wording of terms and conditions means that an airline hasn't breached its contract.

In a Visa chargeback transaction the bank "charges back" the value of the original transaction directly from the supplier's bank and passes this amount on to the consumer.

Those wishing to try and claim should contact the bank who provided them with their Visa debit card within 120 days, requesting that they initiate the chargeback process.

Consequential cover

Where section 75 does apply, however, it's worth noting that "consequential cover" may be a saviour for those consumers who need to claim for extra hotel expenses in the wake of the volcano.

However, according to Sandra Quinn, from the UK Cards Association, "it's not clear what this cover means, so it matters on a case by case basis.

"You can't just book a five-star hotel to tide you over if you were staying in a three-star for the length of your holiday."

"Card companies have not seen any claims yet," she adds. "We'll have to see how this plays out as everyone is still trapped abroad. Our advice is to keep all your paperwork when you put in a claim."