What is Section 75?
One of the main benefits cited for people using credit cards is the additional protection afforded to credit card transactions under ‘Section 75‘, but what is it? And, in practical terms, how can you ensure you benefit from this useful consumer protection legalisation?
‘Section 75‘ refers to Section 75 of the Consumer Credit Act 1974. This part of the legislation details the additional consumer protection afforded to individuals making certain types of payments using credit. This protection makes the supplier of the credit (e.g. the Credit Card issuer) ‘jointly and severally liable’ for any breach of contract or misrepresentation by a supplier of goods or services on credit.
In practical terms for credit card holders, this means that if something goes wrong with goods or services, costing between £100 and £30,000, the credit card issuer is liable for redress (i.e. refunding any monies paid).
Section 75 was not designed specifically to protect credit card users. Indeed, the legislation in which it is enshrined was enacted before mass credit card ownership; indeed even before the Visa payment processing platform was launched in 1977. Still, it offers credit card holders some of the most powerful consumer protection available in the UK, and arguably globally.
How did Section 75 come about?
Before UK credit legislation was harmonised with the Consumer Credit Act 1974, a variety of legislation applied to different types of credit and lending. Mortgage brokers, moneylenders, cheque & voucher traders, loan societies, building societies and mail order houses were governed by a number of different piecemeal, sometimes archaic, and often confusing, pieces of legislation. Needless to say there was a great deal of overlap, but also grey areas and scope for significant interpretation.
In 1971 Edward Heath's Conservative government received Lord Crowther's Report of the Committee on Consumer Credit (often referred to as 'The Crowther Report'). The report (actually started whilst the government of Harold Wilson was in office) took two years to write and made far reaching recommendations for harmonising consumer credit legislation in the UK. This started with an overarching definition of credit, which they took to mean '...deferment of payment for goods delivered or services rendered at once or the straight lending of money...') and subsequently shaped the drafting of the bill which later became enshrined in statute as the Consumer Credit Act 1974.
One key passage of the Crowther Committee report recommended that defective goods or services bought with a credit agreement linked directly to purchase, should become the responsibility of the lender. The catalyst for this inclusion was press and public outcry at the situation many individuals who had purchased goods or services using hire purchase schemes found themselves in. Often the product retailer and the supplier of credit were different organisations, so when goods arrived that were faulty (or did not arrive at all), the individual who had signed the agreement still had a legal obligation to pay the lender, despite the fact that they drew no benefit from the purchase.
The committee's suggested alteration to the law sought to ensure that purchasers using credit had rights concerned with the fitness and quality of the goods they had purchased, whilst lending institutions were liable for misrepresentations made by sellers.
What does Section 75 cover?
Section 75 offers UK consumers, at home or abroad, phenomenal protection when using their credit cards, and although the legislation in which it is contained can be somewhat confusing in its use of obscure legal phraseology, its interpretation and application is relatively straightforward.
In simple terms Section 75 is applicable to any purchase (excluding purchases of land) that meet the following conditions:
The purchase must be made on credit which is directly linked to specific goods or services
For this reason it tends to be most closely associated with credit cards, but it applies equally to other credit arranged specifically for the purchase of a given product - for example, car finance - indeed, the Consumer Credit Directive, which came fully into force on 1 February 2011, added Section 75A to increase the upper limit for creditor liability to £62,260 in certain limited cases, for breach of contract, where Section 75 does not apply.
Section 75 applies to the total purchase cost even when only part of the payment was made using a credit card.
For example, if only a £10 deposit for a car costing £10,000 was paid on a credit card, then the card holder could get their money back from the issuer if the supplier of the car failed to deliver the item.
What does Section 75 not cover?
There are a few exceptions to Section 75 cover worth highlighting:
- Section 75 does not apply to credit not directly associated with a given purchase. Personal loans, even where the purpose of the loan is stated in the application, are not covered by Section 75 provisions, as credit is not advanced to the consumer under arrangements between the credit provider and the supplier.
- Section 75 does not cover purchases made on debit cards, prepaid cards, cheques, postal orders or charge cards. Some protection is offered for users of these products, but it tends to be discretionary in nature and is not enshrined in statute as a legal consumer right. Section 75 offers consumers additional rights of recourse to a creditor over and above those already enshrined in the Sale of Goods Act 1979, but all consumers of who purchase goods which are not ‘as described’ or of ‘satisfactory quality and fit for purpose’ have recourse to the retailer under this law.
Only purchases by the primary card holder, or where the main beneficiary is the primary card holder, are covered by Section 75. This is particularly relevant to additional cardholders, who do not benefit from the same provisions as the primary card holder, unless the item they purchased was for the sole or main benefit of the primary cardholder.
For example, items (costing between £100-£30,000) bought by children for parent A using an additional card linked to parent A’s account would gain protection under Section 75, yet they would not be afforded the same protection if the gift was for parent B who was not the primary card holder.
- Section 75 only covers arrangements directly between the credit provider and the supplier. Where a third party is involved with the transaction, Section 75 is not applicable, e.g. Paypal, Amazon Marketplace - where items are supplied by re-sellers and not directly by Amazon - or Travel Agents. Users of Travel Agents registered with ATOL and ABTA are, however, afforded some enhanced consumer protections under schemes operated by those organisations.
Only single items with a ‘cash value’ of between £100 and £30,000 are covered.
A bicycle costing £99.99 and with a bell costing £1.00 would not be covered, yet a bicycle with a bell costing £100.99 would be covered.
- Items paid for with cash withdrawn from an ATM using a credit card are not covered by Section 75, in the same way that personal loans are not covered, because a direct link between the credit and the item purchased is not established.
- Section 75 only applies to purchases made with credit in the capacity of a consumer. It does not therefore apply to Business credit cards and users of these products should not expect Section 75 protection. Theoretically, purchases made with a consumer credit card for business purposes would not be covered either.
Claiming under Section 75
To claim redress under Section 75 you must contact your credit card issuer, not the transaction processing network (Visa, Mastercard, American Express), and request a form for claiming under Section 75 of the Consumer Credit Act 1974.
Most credit card customer service hotlines should be fully aware of Section 75 and their procedure for redress, but some may ask you to put your request in writing.
If your credit card issuer is unhelpful, or decides you do not have sufficient grounds for redress, and you disagree with their reasoning, you should seek the help of the Financial Ombudsman Service.
Claims under Section 75 which have been with the credit card issuer for more than 8 weeks can immediately be referred to the Financial Ombudsman Service. Where individuals have submitted claims to an issuer who feels there is no case for redress (and less than 8 weeks have gone by since the original application), the individual should ask the issuer for a 'letter of deadlock' so the case can be submitted to the Financial Ombudsman Service.
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