Section 75 and what it can do for you

By Emma Lunn

Say you booked a cruise only to have the company go bankrupt a month before your departure date. Or, perhaps you ordered expensive electronics that never arrived.

If you purchased those things with a credit card, you're not powerless, thanks to Section 75 of the Consumer Credit Act of 1974, a useful piece of protection for consumers.

In short, Section 75 can get you a refund if the goods you receive are faulty or don't turn up, or if the company you buy from goes bust.

Here's when Section 75 applies (and doesn't apply) -- and some tips for filing a complaint.

The technicalities of Section 75
Section 75 stipulates that credit card issuers share responsibility for the faulty goods with the business you bought the goods from. In other words, if the business doesn't hold up its end of the bargain, the credit card company must step in -- as long as the goods or services cost between £100 and £30,000. section-75

"As long as the thing you bought cost between £100 and £30,000, you may even be able to make a successful claim if you only used your credit card to pay for part of it," says Neil Aitken, spokesman for The UK Cards Association.

Section 75 generally applies in one of the following situations:

  • The goods you bought were defective (a laptop that never turns on, for example).
  • The goods were never delivered.
  • The company breaks its contract with you -- such as by going out of business before supplying you with the goods or services.

In the first instance, it's usually quicker and easier to sort out any problems with the business you bought from. Start with a phone call or letter and escalate the matter through the company's complaints process if necessary.

If the company can't or won't help fix the problem, it's time to turn to your credit card issuer and invoke Section 75.

How to make a claim under Section 75
To make a claim, contact your card issuer in writing or by phone. Have the details of the purchase (such as receipts), as well as copies of any correspondence you have had with the seller. If you contact your issuer in writing, consider using this template.

After you get in touch, your card issuer will then assess the claim to see if it is covered under Section 75.

"Every Section 75 claim is different and each one has to be reviewed on a case-by-case basis, but credit card companies may even pay out even in situations where they are not legally obliged to," Aitken says.

If Section 75 does not apply (because you spent less than £100 or used a debit card instead of a credit card, for example), your issuer might still be able to get you a refund via a chargeback, according to the UK Cards Association. Chargebacks involve your card issuer appealing to the seller's bank, essentially asking for your money back. The process isn't protected by law, like Section 75 claims are. Yet many banks and card networks (Visa, MasterCard and American Express) subscribe to it.

If your issuer decides neither a chargeback nor a Section 75 refund is warranted, ask for an explanation.

"Ultimately -- no matter how you claim -- your card company should be able to tell you why they have taken their decision," Aitken says.

When Section 75 does not apply
Section 75 provides powerful protection, but it doesn't apply to every situation. Here are some times you might be out of luck:

  • You used a credit card cheque to pay for goods. These cheques allow you to draw from the available credit on your card -- but they're not covered under Section 75.
  • You used a credit card cash advance to pay for the goods. If you used your credit card to withdraw cash and used that cash to pay for something, there's no Section 75 protection. That's because there won't be a link between the credit card company and the retailer.
  • A second cardholder buys something not for the benefit of the main cardholder. This is a gray area. For example, say a husband buys a smartphone using a secondary card on an account in the wife's name. Whether Section 75 applies depends whose name is on the smartphone account. If it's the husband's, Section 75 likely would not apply if the smartphone turns out to be faulty, as the wife (the main cardholder) does not benefit directly from the purchase.

The importance of Section 75
In some cases, Section 75 will be the only way you can get your money back -- especially if a company goes bust before delivering the service you paid for.

For example, the past few years have seen several airlines go into administration. Passengers who paid for a flight that was then cancelled were able to get a refund if they paid by credit card. Customers who paid a different way would have been added to a list of the company's creditors and been unlikely to get all of their money back, if any.

In March 2006, the Court of Appeal ruled that Section 75 applies to transactions with companies based overseas (as long as the credit card was issued in the UK). That means online purchases you make with foreign companies, and even purchases you make while traveling, fall under Section 75's protections.

See related: Credit cards vs. payday loans: What's the best way to get emergency cash?, If your airline loses your luggage, will your credit card come to the rescue?

Published: 15 October 2012