Plastic Cards: A Guide to Consumer Protection in the UK

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1 Plastic Cards: A Guide to Consumer Protection in the UK One of the key benefits of using a UK-issued credit, debit or pre-paid card, is that your transactions can benefit from consumer protection that doesn t exist if you use cash or cheques. Some legal protection on UK credit cards is provided for (commonly known as Section 75 protection) and some is offered by card companies on a voluntary basis which means different protections may apply depending on the type of payment card used, and on the specific circumstances of each transaction. This guide explains the different protection and when each may be relevant. Whilst we have made every effort to ensure information in this guide is accurate, it contains comment on legislation that may be open to interpretation. Therefore, it is not intended to constitute legal advice and should not be regarded as such. No liability can be accepted for any individual claimants who rely on the information given. There are three categories of consumer protection available on credit and debit cards, if you want to make a claim - all of which are explained more fully in this guide: Section 75: this is only available on credit cards. It is statutory protection provided by legislation under Section 75 of the Consumer Credit Act Chargeback claims for disputed transactions can potentially be made on all types of cards. Chargeback is the mechanism by which a card company may be able to recoup money from a retailer on your behalf. Some debit card providers may go one step further and guarantee to refund you in certain situations by providing voluntary protection similar to Section 75. If they do, it will be outlined in their terms and conditions. Fraud claims can be made on both debit and credit cards. Thanks to protection provided by The Banking Code, if you are the innocent victim of card fraud you should not suffer any financial loss as a consequence. However, if you have acted without reasonable care and this causes losses, you may be held responsible for them. Section 75 of the Consumer Credit Act (CCA) 1974 Legislation that provides protection on credit cards When you spend between 100 and 30,000 on a purchase with your credit card you benefit from Section 75 of the Consumer Credit Act Page 1 / 6

2 The Act states that: If the debtor under a debtor-creditor-supplier agreement has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contact, he shall have a like claim against the creditor, who with the supplier, shall accordingly be jointly and severally liable to the debtor. This law means that your credit card company is jointly responsible, along with the supplier of the goods or services, for any breach of contract or misrepresentation by the supplier. In practice this means that if a company fails to actually deliver the goods or services you ve paid for perhaps because they have gone out of business you can get your money back from your credit card company. Section 75 does not absolve the supplier of their responsibilities, and if you buy something that turns out to be faulty or isn t delivered, usually the quickest way to put things right is to first speak to the retailer concerned. Although Section 75 claims will always need to be reviewed by a card company to ensure they meet the legal parameters, generally the following applies: Section 75 when your card payments are protected: Section 75 protection applies when you pay for something with your credit card, either in the UK or abroad, that costs between 100 and 30,000 and: o the goods or services never arrive (including if the company has gone bust); o the goods or services turn out to be faulty or not as described; or o the goods or services turn out to be damaged. This includes goods purchased through any channel including online, by mail order, by phone as well as on the high street. Section 75 also applies to purchases where only part of the payment was made by credit card so long as this total cost is between 100 and 30,000. For example, if you pay a 10 deposit with your credit card and the remainder on your debit card when you buy a 1,000 TV then Section 75 protection will normally apply. Section 75 when your card payments are not protected (unless your card issuer voluntarily chooses to offer it as a matter of customer service): If you do not use a credit card to pay; for example, if you pay with o a debit card, charge card or pre-paid card, cash, automated payment or cheque; o credit card cheques; o using cash that you ve withdrawn using a credit card; or o a store card that can only be used in specific retailers, or which requires you to settle the bill in full every month. If you buy something that costs under 100 or over 30,000. If you make a claim as a secondary cardholder on a credit card account. Page 2 / 6

3 If you make a purchase through a third party, such as buying a holiday through a travel agent. However, if your tour operator is ATOL-affiliated (Air Travel Organiser's Licence) you also benefit from ATOL protection. In addition, many of the travel arrangements provided by ABTA Members are protected in case of the financial failure of the travel company. You should contact these organisations or your travel agent directly for further information. If you buy individual items that do not cost over 100, for example if you buy a jacket for 80 and matching trousers for 40. However, if you buy them as a suit for 120 this may constitute a single item and you are covered. If you use an electronic money company that offers third party payment services, such as PayPal (some online payment service providers do offer a form of purchase guarantee, so check with them to see if you are covered by their guarantee). If the transaction was made more than six years ago. Disputed Transactions using the chargeback mechanism Potentially those outside of Section 75 claims or those on debit cards If you want to dispute a transaction on your card (for example, if you do not recognise a transaction; if the goods provided are not what was ordered or if the goods do not arrive) it will usually be easiest in the first instance to resolve your problem with the retailer. However, if this fails it may be worthwhile disputing the transaction through your card company. A disputed transaction does not mean that you will automatically or immediately get your money back and you may be asked to substantiate your claim. You should therefore retain any receipts or documentation and details of any efforts made to recover costs directly from the supplier. You must address your claim to your card company, and in general you should do so within 120 days from the day you re aware of a problem. If your card company agrees to try to recoup money from a retailer on your behalf, they won t have a direct relationship with the retailer concerned so they will need to follow what is known as the chargeback process. This process enables your card company to refer the transaction back to the financial institution that processes card payments for the retailer so they can make further investigation. In isolation, chargebacks do not provide legal rights to consumers; what the chargeback process provides is a mechanism for disputing certain transactions. The card schemes (Visa Credit, Visa Debit, MasterCard, Maestro and American Express) who have put card operating regulations in place across the world permit chargebacks for a variety of reasons - depending on the type of card used. Unlike Section 75, chargebacks do not have transaction limits, so you can initiate a chargeback on purchases for any value, including those below 100. Page 3 / 6

4 Common chargeback reasons include: A transaction processed more than once, or where a retailer fails to cancel a recurring payment when asked to. A transaction not authorised by the genuine cardholder. If you are an innocent victim of fraud you are protected by The Banking Code see section below for further details. Cases where goods delivered are not as described, where the goods delivered are defective, or if goods or services are not received - including when the seller has ceased trading. If you used a credit card to pay, your claim may also be supported by law through rights granted under Section 75 of the Consumer Credit Act. [Note: if you used a UK issued Maestro card then a chargeback will only be processed for goods not received if the order is placed with an overseas website.] Advice when making any type of claim If you think you think are a victim of card fraud you should contact your card company immediately. They will also let you know if you need to notify the police. If you want to make a claim for any reason other than fraud: for instance if you experience a problem with the goods or services purchased by card normally it will be in your interests to first seek recompense from the retailer or business concerned as it will usually take longer to provide the necessary information and obtain recompense through your card company. Always make a claim as soon as possible. If you have used a credit card and you want to make a claim under Section 75 of the Consumer Credit Act it will help if you make this very clear to your card company. Each credit card company will have a process in place for making these types of claims and will tell you exactly what you need to do. It s advisable to make a note and date of any conversations or correspondence you have with either the retailer or your card company. If you are unhappy with the service you receive from your card company you can ask to follow their formal complaints procedure. Should you still fail to get a satisfactory resolution you may be able to take your claim to the independent financial ombudsman. Remember that you are not legally entitled to a refund if you simply change your mind about what you have bought. However, many retailers are happy to exchange goods or give a refund or a credit note if you do change your mind. A retailer cannot refuse a refund for goods that are obviously faulty and so you should not accept a credit note if you do not want one. Try to provide some form of proof of purchase. It need not be a receipt; a credit card statement will often be enough. If the retailer or service provider will not assist you or Page 4 / 6

5 refuses to accept your complaint then you should write a letter of complaint to either their head office or store manager and keep a copy. The Banking Code The banking industry s code of practice sets out what customers should expect from their bank - including fraud protection The Banking Code is a voluntary code that sets standards of good banking practice for financial institutions to follow when dealing with personal customers in the UK. The vast majority of card issuers in the UK are subscribers to the Code. It provides valuable protection for you, and explains how financial institutions are expected to deal with you both day-to-day and in times of financial difficulty. Among other things, The Banking Code is in place to protect innocent victims of fraud. It states that unless you have personally acted fraudulently or without reasonable care, the most you will be liable for is 50 although, in practice, most card companies refund their customers in full. For more information about protecting against fraud refer to section 12 of The Banking Code. The Banking Code also sets out card companies obligations when they deal with unauthorised transactions or any transactions that you do not recognise on your statement. See section 10 of The Banking Code for further information. Purchase Protection Insurance Additional insurance provided by some credit and debit card issuers Purchase Protection Insurance (not to be confused with Payment Protection Insurance) covers consumers against the loss, theft or accidental damage of newly purchased personal goods for a specified period, often around 90 days. It gives shoppers the chance to replace purchases that are stolen or broken but are not covered by other insurance policies. Many credit card companies will automatically provide this cover for free as part of a credit card product or it may cost a few pence a month. It is also sometimes offered with a debit card. However, don t assume that your card has purchase protection insurance or that all your purchases are covered. Always check the small print or ask your card company for more information. Distance Selling Legislation Legislation covering phone, mail order, internet and digital TV transactions Whether you pay by card or any other method of payment, the Distance Selling Regulations give protection to consumers who shop online, by phone, mail order or by digital TV. The Page 5 / 6

6 Regulations, which apply to all EU Member States, were implemented in 2000 as it was felt that consumers who buy at a distance needed extra protection, as they are not able to inspect the goods before making the purchase. This protection includes: The right to receive clear information about goods and services before deciding to buy; Confirmation of this information in writing; A cooling-off period of seven working days in which the consumer can withdraw from the contract; and Protection from credit card fraud. More information on Distance Selling Regulations is available on the Department of Business Enterprise & Regulatory Reform website: Page 6 / 6