The last few years have been carnage for consumers, as we battled to get refunds, struggled with businesses going bust and failed to get other firms to respond to our complaints.
However, if you’re canny – and have a bit of discipline – then there’s one way to pay that helps you avoid all that hardship and that gives you an extra level of projection when things go wrong.
‘The Consumer Credit Act and section 75 claims’
If you pay for goods or services on a credit card the Consumer Credit Act could come to your aid if things go wrong. It sounds a bit legalistic, but ‘section 75 claims’ help you get your money back from the card provider. What’s more, these claims cover a vast range of problems, for example, if your online shopping doesn’t turn up, or the business that’s building your conservatory goes bust – or even if you’ve been tricked in to taking out a dodgy timeshare.
Here’s how it works
There’s loads of ways to pay for things when you go shopping. But no matter whether you’re online or on the high street, you have certain rights if you pay by credit card that you don’t have if you pay by other methods.
Paying for goods or services with a credit card (or certain other types of credit agreement), gives you statutory protection. This means that you can ask the card provider to give you a refund if the goods or services you’ve paid for don’t turn up or are ‘misrepresented’ (in other words, what you’ve been sold isn’t what you were told it would be).
It’s not all straightforward though. Claims made under section 75 have to meet certain criteria and are looked at on a case by case basis by the card provider.
How do I know if I’ve got rights under section 75?
If you pay for goods or services on a credit card that cost between £100 and £30,000, the credit card provider is jointly responsible, along with the supplier of the goods or services, for any breach of contract or misrepresentation. This can involve goods not turning up, items that are damaged or don’t do what they are supposed to do or situations where you’ve been misled by the supplier. You don’t need to complain directly to the supplier either – though I strongly recommend you do.
You’re even covered if you’ve only paid for a deposit for something on your credit card – and in theory, that deposit amount can be under £100 (even £5!) as long as the total cost of the goods is between £100 and £30,000. In cases like this you’re still covered for the whole value of the item in question. So if you pay a £100 deposit for a sofa that costs £2,000 on your credit card and you paid the rest in cash, if the firm goes in to liquidation the card provider would in theory have to pay you the full £2,000.
The rules and the quirks
There are a number of other conditions that must apply before you make a claim:
- The card provider must be based in the UK, though you can complain about purchases made to businesses overseas.
- You are only covered if you buy direct from the supplier, not a third party. This is known as the debtor-creditor-supplier relationship and it’s enormously complicated. If in doubt, put a claim in anyway.
- Debit card payments, cheques and transfers are not covered by the Consumer Credit Act, though you may be able to make a ‘chargeback’ if there’s a dispute with a debit card payment.
- Though section 75 of the Consumer Credit Act is a great piece of legislation when it comes to consumer rights, it is still open to interpretation. So though it makes sense to pay for items on a credit card, just in case something goes wrong, it does not guarantee that you’ll get your money back.
Other ways of paying and the rights they give you
None of the following ways of paying for things are covered by section 75.
- Cash: paying by cash is declining but is still one of the most popular ways to pay for goods but if something goes wrong, there’s no audit trail to investigate. So you’ll need to keep hold of your receipts. If you make a significant purchase, photograph your receipt and email it to yourself so you can save it – just in case. This also helps if you need to make an insurance claim for items damaged or stolen.
- Cheque: Lots of people think cheques are dying out, but millions are still issued every year. Cheques work by using the ‘clearing system’ – which is well over a century old. Though the rules have finally updated and you can usually get the cash on the next working day, the new process is a bit more confusing – and cheques can still bounce. Here’s how it works: https://www.chequeandcredit.co.uk/sites/default/files/image_clearing_process_for_cheques_infographic_30-10-17.pdf
- Store card: Store cards are good for getting 10% off goods when you first take out the card, but pay them off straight away and cut them up. The interest rates are often extortionate and they’re an added complication when it comes to managing our finances.
- Debit card: Section 75 doesn’t apply to debit cards, but card providers offer a similar scheme called ‘chargeback’. Chargeback means you can ask your bank to get you back your money if you dispute a transaction (if you didn’t make it or authorise it). Chargeback isn’t a legal right and the timescales vary when it comes to how long you have to make a request – so don’t delay. While not set up to deal with disputes between you and a retailer, it’s worth asking your bank to help you out. And there’s no upper or lower limit. Confusingly, some credit card companies may attempt to ‘charge back’ your cash in the first instance – but you can still make a section 75 claim if it doesn’t work.
- Bank transfer: You should never transfer money unless it’s to someone you know or trust. As soon as you click send, the money is gone. So if you’ve put in the wrong number – or worse, been conned by a fraudster, you could lose everything. Be wary.
- Electronic Money: In recent years, websites like PayPal allow you to transfer money electronically. The have their own buyer / seller schemes that help mediate if there’s a dispute over a sale and failing that to the financial ombudsman too. They are considered to be a third party under the current reading of the law though, so using a credit card to pay through PayPal could mean you’re not covered by section 75.
A few other quirks
Nothing in life is ever straightforward though, is it?! The Consumer Credit Act is fabulous, but there are some quirks to bear in mind.
Buy direct. I mentioned the debtor-creditor-supplier relationship before. In short, you have to buy direct from the provider of the goods or services. But this is where the law hasn’t kept up with the way we live today. For example, if you use PayPal, that’s theoretically a third party so you can’t make a section 75 claim (though this is being disputed in some quarters). Another example is using an online holiday marketplace to buy a flight and holiday. As they don’t provide the flight and hotel, it’s likely you can’t make a claim too.
It’s a bit rubbish. As with everything, some things we buy don’t live up to expectations. So how about being sold a timeshare that isn’t as advertised (or built) – or you’ve paid for a kitchen that’s been fitted badly? The good news is you can claim but the investigations can be complex.
If in doubt, put a claim in!
One last thing…
If you are buying on a credit card, then pay off the balance immediately or as soon as the transaction shows on your bill. Credit card interest is high and it’s easy to get in to trouble. I lock my cards in a drawer so I don’t get tempted to splash out. Discipline is hard, so stay strong!
Featured in Mirror – Martyn James