Loophole in the law could be costly for card holders
MILLIONS of shoppers who spend money on credit cards could be left thousands of pounds out of pocket because of a loophole in the law.
Anyone who makes a purchase with a credit card should be protected under Section 75 of the Consumer Credit Act.
This makes the retailer and the credit card company jointly liable to pay a refund if there is a fault with the product or if it is not delivered. It applies to purchases between £1,000 and £30,000.
Many people make big purchases such as a holiday or a car on their credit card precisely because it gives them peace of mind if something goes wrong. But a joint investigation by MoneySavingExpert and ITv’s Good Morning Britain has found that apparently valid claims are being rejected, as companies rely on a little known exemption to wriggle off the hook.
In one case a man paid for a family member’s £6,000 breast surgery on an Amex credit card in order to qualify for Section 75 protection. He tried to seek a refund after the patient was unhappy with the work. Amex rejected the claim on the
‘Claims are rejected’
grounds that the payment to the surgeon was collected via a third party firm called iZettle. Technically, for Section 75 to apply, there must be a direct link between the customer, the supplier and the credit card company. If the relationship is deemed to be broken by the involvement of an intermediary or third party, Section 75 protection will not apply.
Dozens of payment processing companies such as Paypal and Worldpay offer retailers the ability to accept online orders or provide card terminals to shopkeepers.
To add to the confusion the Financial Ombudsman, which deals with Section 75 disputes, is unable to provide clear guidance to customers when purchases will not be protected. It says each payment has to be fully investigated to establish how it is processed and whether Section 75 protection applies.
Martin Lewis, founder of MoneySavingExpert.com, said it was bizarre that if you pay on a website, or are given a machine in a shop, some hidden detail about the way it is done can invalidate your protection.
He added: ‘Companies and payment processors should be made to clearly state when Section 75 doesn’t apply.’