14 December 2017 : 

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Guide to Section 75 of the Consumer Credit Act

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Guide to Section 75 of the Consumer Credit Act

Although not widely known of, Section 75 offers shoppers using UK issued credit cards some of the most powerful protection in the world.

‘Section 75’ refers to a particular section of the Consumer Credit Act 1974 that UK consumers should be aware of, as it removes the risk of debt in the event of goods being faulty, or never received, after being paid for.

The section states that, "75. (1) If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor."

Although the language can be difficult to understand, understanding this specific section of the Consumer Credit Act 1974 has resulted in Britons saving millions of pounds over the decades.

What does Section 75 mean?

Section 75 basically means that the suppliers of credit cards (or other credit linked directly to a specific product) are equally liable, with retailers, for ensuring that UK consumers receive the goods that they paid for and for refunding their money if there are any problems.

The Consumer Credit Act 1974 was introduced after Lord Crowther and his committee were commissioned to help harmonise and improve certain aspects of the UK credit industry, particularly hire purchase.

There had been a number of cases surrounding unscrupulous lenders in the years before its introduction, whereby customers were forced to pay for goods they had never received.

Section 75 - The Rules!

Section 75 of the Consumer Credit Act is just one part of the legislation, but it's often regarded as the most important for UK consumers.

Section 75 doesn't apply to every purchase, but it can be put to use when consumers use a credit card to pay for a single item or service with a value of between £100 and £30,000. However, if the total amount borrowed exceeds £30,000 - £60,260 it can be covered under section 75A.

Cardholders are able to make a claim on goods or services that are:

  • Not delivered
  • Faulty
  • Damaged

Consumers can only make a claim under Section 75 when they have paid using some form of credit. Credit cards are the most common method of payments, but store cards, hire purchase agreements and some other credit agreements are also covered, as long as the goods are worth between £100 and £30,000.

Part payments and multiple items

The wording of Section 75 is explicit and states that consumers should receive the same protection whether they have paid the entire bill on a credit card or just a portion of it.

For example, if someone paid a £100 deposit for a £3,000 holiday with a credit card, then paid the remaining £2,900 in cash, they could make a claim against Section 75 for the whole £3,000.

The £100 minimum value under the legislation is that of a single item, excluding any other fees or charges, such as delivery. The definition of a single item isn't always straightforward. If someone is travelling from London to Glasgow and buys a return ticket for £150, they are able to claim. However, if the same person bought two single one-way tickets for £75 each, they wouldn't be protected.

Credit card cash withdrawals, whether from an ATM or a bank, then used to purchase an item, whatever its value, are also not covered by the Act.

What’s not covered under Section 75

The way Section 75 is worded dictates that the payment relationships between the consumer, their credit card issuer and the retailer/service provider must be direct and very clear.

Consumer > Credit Card Issuer > Retailer

Anything that disrupts the direct link between consumer and credit card provider, or the retailers and the credit card provider, is not covered by Section 75.

Examples of technologies and systems that disrupt the direct links include third party payment systems, such as Paypal, Amazon Marketplace, Worldplay, Ebay and Google Checkout.

When these technologies are used, the payment relationship looks more like…

Consumer > Credit Card Issuer > Amazon Marketplace > Retailer

Another example would be travel agents. Like third party users it is seen as another stage in the link. If you’d paid the airline yourself directly you would be covered, however travel agents are seen as a third party.

Consumer > Credit Card Issuer > Travel Agent > Service Provider

The final example is paying by cash. If cash is withdrawn from a cash machine and used to purchase a product it will not be covered under section 75. This is because another step has been taken within the link and no direct link between the credit and the product or service is established. (Credit card cheques are also not covered)

Consumer > Credit Card Issuer > ATM/Cash > Retailer

Claiming Under Section 75

Consumers that are dissatisfied with goods or services because they are faulty, not as described or have never been delivered, are advised to approach the retailer initially to see whether they have any initial redress available under the Consumer Rights Act 2015, which states that products/services must be “be as described, of satisfactory quality and fit for purpose” (Which have a good guide to the Consumer Rights Act – click here)

The next step is to contact the credit card company directly regarding the issue, explaining that a claim is made for refund under Section 75 of the Consumer Credit Act 1974. In some cases the provider will send out a claims form, whereas others will simple request full details in writing, which should include at least the following:

•    What the problem was
•    The date of purchase
•    Where the purchase was made
•    Any copies of paperwork or receipts relating to the purchase.
•    If contact has been made with the retailer.

(you can use our letter template found here)

If your credit card company does not accept your claim and refuses to pay up (or offer alternative redress), then you can ask for a ‘letter of deadlock' so you can then refer the dispute to the Financial Ombudsman Service (FOS).

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