Cardholders may lose overseas protection
Credit card holders may not be entitled to refunds for damaged or undelivered goods bought abroad or from overseas suppliers following the outcome of a test case in the House of Lords.
Card providers are challenging the appeal won by the Office of Fair Trading last year, making lenders jointly liable with the retailer for purchases under section 75 of the Consumer Credit Act, whether bought overseas or in the UK.
Sandra Quinn, director of communications at the Association for Payment Clearing Services, said: “Section 75 was written for hire purchase agreements and was not designed to cover credit cards or the extensive way we now use them. This current case tests the validity of an interpretation by the Court of Appeal, which gives card issuers an open-ended liability to provide insurance for customers, not only for the amount of a transaction undertaken abroad but also for any consequential loss.
“Pending a decision card companies will continue to meet their legal obligations to honour these section 75 claims but the industry looks forward to having clarification of the law which has been unclear for far too long.”
The lenders argue that they are being placed in the position of “the insurers of some 29m foreign suppliers”, and that they are also unfairly liable for credit card purchases made over the internet from fraudulent overseas suppliers who fail to deliver.
A spokesman for Lloyds TSB, which is making the appeal along with Tesco Personal Finance (part of the Royal Bank of Scotland group), and American Express, said: “A UK card issuer has no real connection with the millions of foreign suppliers where its credit cards can be used, and may not be able to recover section 75 payments from that supplier.
“The act was introduced when the internet was just a glimmer in someone’s eye, but now a lot of people shop online through foreign suppliers, and we are living in an increasingly litigious society.”
Martyn Saville of Which? said: “Consumers should be covered by section 75 regardless of where they buy the item, including online and overseas.
“The internet has opened up huge new markets to consumers and the level of cover they receive when purchasing items with their UK credit card should not be restricted geographically.
“In addition, with most credit card companies, consumers already pay a charge each time they use a credit card abroad. It would be highly disappointing if the courts found against consumers in this case.”
In March 2006, Lord Justice Waller, Lady Justice Smith and Lord Justice Moore-Bick overturned an earlier decision that section 75 did not apply to overseas transactions.
In November 2004 a judge upheld the card companies’ argument that parliament had intended section 75 to apply only to domestic transactions which were subject to the jurisdiction of the British courts.
