Credit Cards

Credit Card Refund Rules

If you use your credit card to buy something that is between £100 and £30,000 then if something goes wrong you can claim on your credit card. This is because your credit card company is jointly liable for any misrepresentation under Section 75 of the Consumer Credit Act.

This gives you additional credit card purchase protection if the goods your purchase are faulty or damage and the retailer will not replace it, or if the retailer goes bankrupt. This credit card purchase protections allows you to get a full refund from your credit card company even if only part of the payment was used with your credit card.

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Section 75

As stated above, your credit card is jointly liable if something goes wrong with a service or product that you’ve purchased with your credit card under Section 75 of the Consumer Credit Act. You can put a claim to the credit card company for any breach of contract by the retailer or company from which you’ve bought your products.

You can also make a claim to both the retailer and the credit card company at the same time. This means that you do not have to reach an agreement or stalemate with them first before contacting your card provider. If you have claimed under section 75, then this is very useful if you are getting no response from the trader or if the company has gone into liquidation.

A credit card was used only for the deposit

There are limitations for the liability of credit card companies along with the retailer. This, as already stated, is whether the item or service was more than £100 and less than £30,000. Anything to do with the purchase of land is not covered by section 75 and the Financial Conduct Authority instead regulates this.

However, what is most important is the value of the goods that you are buying, not how much was paid on your credit card. Therefore the credit card company is liable even if you only make part of the payment, which usually is when you pay a deposit.

For instance, if you were to put down a £500 deposit for something on your credit card and were paying the £5,000 balance by check, then under section 75 of the consumer credit act you would be covered for the whole sum of £5,500 if the company went bust.

You have the same consumer protection rights against the company or trader as you have against your credit card company. This also means that if you had claimed under section 75 for a repair, then you would not be able to ask for a full refund from your credit card provider, they would only be liable to cover the refund costs.

I used my credit card via PayPal

If you used PayPal, then this means that the company that dealt with your credit card payment is different from the one that provided the goods or service. If the funds go directly to the seller, then this is fine as long as the company from which you are buying from has a ‘Commercial Entity Agreement’ with PayPal. If this is the case, then you could still be able to claim breach of contract under section 75.

It is also worth noting that PayPal offers a service called PayPal Buyer Protection, which is its buyer protection scheme. It could be that you could be covered by that even if the company from which you have bought goods has not signed a ‘Commercial Entity Agreement.’

Debit Card Payments

Section 75 of the Consumer Credit Act does not apply to debit cards or to charge cards; it only applies to credit cards where chargers must be settled by the end of the month. This means that it does not provide visa debit card protection. However, it is possible that you could get some or all of your money back through a chargeback.

This is a voluntary visa debit card protection scheme that covers Maestro, Visa and Visa Electron debit cards which are operated by Visa and MasterCard. The exact refund rules may vary between American Express, Maestro and Visa debit cards. It is not a legal requirement like section 75 of the consumer credit act, but the Financial Ombudsman Service deems it to be good banking practice.

Chargebacks

If you want to claim a chargeback scheme, then it must be done 120 days after your purchase. Chargeback will let you debit card payments from your bank if the goods or service is damaged or fails to arrive. This means that for smaller payments under £100 you do have visa debit card protection as long as the claim is made within the time limits, which is 120 days.

Chargebacks can be made due to many circumstances. This is generally because of the usual instances of a faulty item or the item not being delivered. However, they too can be made if the company goes into administration, if there is a clerical error or if you have been a victim of fraud and did not authorise the purchase.

Financial Ombudsman Service

If you have claimed under section 75 and are unhappy with the outcome, then you can complain to your credit card company who then have eight weeks to deal with the complaint. If the issue is still not resolved, or if you are still unsatisfied, then you can ask for a letter of deadlock from your credit card provider so that you can take matters to the Financial Ombudsman Service.

If the eight weeks have been and gone since you claimed your credit card company, then you can directly refer the case to the Financial Ombudsman Service without the need for this letter. There is also the possibility of going straight to the Financial Ombudsman Service if your credit card company is happy for you to do so.

Internet Purchases

There is some uncertainty as to whether you will still be covered under section 75 if you are purchasing something online or from another country. The Court of Appeal has confirmed that the rule counts with every purchase that you make. Put short; Section 75 applies if you buy something in the UK, abroad or online.

This can be particularly helpful for you as when purchasing something from a foreign company it could be difficult to get in touch with them. Because of the credit card refund rules covered by section 75, you can make a claim directly to your credit card company, and they can do the rest.

It is also legal to claim associated costs. This could be for when a concert is cancelled, but you had paid for hotels and transport. The credit card company is liable so long as what went wrong forced you to pay for additional goods or services.

Credit Card Purchase Protection

Credit card refund rules mean that credit card purchase protection is covered by UK law. Whereas in other circumstances it could be costly this protection is free with every type of credit card but not with debit cards or charge cards. It does not matter what kind of credit card you have as it is the same for every credit card in the UK.

Credit card purchase protection can be beneficial in many situations but there are strict credit card refund rules governing it, and it is essential that you abide by them. Section 75 under the consumer credit act is particular in that any single object with a total purchase price below £100 does not count. So if you were to buy a phone for £90 and paid separately for a £15 sim card, then this would not be covered under section 75. However, if you bought the phone with a sim card that cost £105, then you would be covered.

Why do I get protection?

When the Consumer Credit Act of 1974 was first implemented, credit cards were not as popular as they are now and the actual law had little to do with credit cards. Before this credit card protection, the goods and services that you purchased as well as the credit card used to buy them were easily separated. This resulted in you as the consumer being legally liable for any debt repayments on the goods that you had purchased even if they never arrived or were damaged when delivered to you.

It was Section 75 of the Consumer Credit Act that created the credit card purchase protection that you receive today. Unlike previously where they had been separate, Section 75 ensured that there was a direct link between the goods supplied and credit used to buy them. As stated in previous sections this means that if you have claimed under section 75 then the credit card company is directly liable for any issues regarding the product and the purchase of it.

What is ‘enhanced’ purchase protection?

Some premium credit cards, such as American Express, offer enhanced credit card purchase protection. This protection goes beyond the standard credit card refund rules which are implemented courtesy of Section 75 and enables the consumer to claim purchase costs back from your credit card company if something is stolen or lost. This enhanced protection often covers goods that cost less than £100, so it can be beneficial.

It is different from the credit card purchase protection of section 75 because it is limited to 90 days and can only protect you if there is no other alternative. For instance, you can use it to claim if you have items stolen from your house as long as you do not have a home contents insurance policy.

Some credit cards even offer you free identity theft cover as well as the enhanced credit card purchase protection which is detailed above. This means that you are protected from any credit card debt if your personal information is used fraudulently. The Financial Conduct Authority regulates all of the financial service industry, including debit card and credit card companies.