(02/11/2008) Comment on recession-proofing purchases via Section 75 of the Consumer Credit Act 1974

If you are writing any stories on the consumer implications of Section 75 and using a credit card to protect your purchases in these uncertain times, then Brad King, MD of compareandsave.com, the leading personal finance comparison site for credit card applications, is able to comment. 

A summary of his viewpoint is below but please don't hesitate to contact the team at BOTTLE PR on 01865 882988 or email louisashutie@bottlepr.co.uk or bridgettaylor@bottlepr.co.uk

"After Sir Mervyn King, the governor of the Bank of England, predicted that the UK economy is likely to slump into recession over the forthcoming year, there is a risk for consumers that they may be buying goods from businesses which are likely to collapse during this difficult economic time.

Indeed, there have already been plenty of examples of this so far this year what with the collapse of the UK's third-largest tour operator, XL Leisure Group in mid-September and the last-minute buyout of furniture chain MFI to save it from bankruptcy three weeks ago.

Using a credit card to make purchases means that consumers can protect themselves from losing money on the goods and services they buy, in the event of the company not delivering on what they promised.

This is all thanks to Section 75 of the Consumer Credit Act 1974.

According to Consumer Direct, a government funded advice service, if you have purchased goods or services using a form of credit, e.g. a credit card, "you may have an equal liability claim against the credit firm under section 75 of the Consumer Credit Act 1974 provided the contract amount is over £100 but less than £30,000".

What's more, if you pay for part of the purchase on your credit card and then pay for the rest in cash, you will still be covered for the purchase as long as it was for a product/service costing between £100 and £30,000.

One of the things likely to put off consumers using a credit card in these hard times is the thought of getting into debt. But, if consumers are sensible about it they can bear in mind that it was probably a purchase they were already planning to make and so should already have the money budgeted for it. This means they can pay the credit card bill off straight away after the purchase, meaning they won't accrue any interest charges and won't be left with debt.

The key difference with using a credit card in this case is that consumers will get the added protection of Section 75 for free, which could prove invaluable in the coming months.

If consumers do need a bit of time to pay off the debt, they could get a 0% purchase credit card and, with a bit of discipline, pay it off in monthly installments, without paying any interest, for around 6-12 months.

Credit cards, like many other things in life, do serve a very useful purpose, but ONLY if they are used sensibly and the protection offered by section 75 is one obvious plus point for considering using a credit card to recession-proof their purchases."
 

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