Indirect Payments

Section 75 Indirect Payments

Section 75 of the Consumer Credit Act 1974 allows you to claim your credit card company to get your money back. Section 75 applies to goods or services between £100 and £30,000, and you can claim if you believe there has been a transgression in contract or misrepresentation by the company selling the goods or services.

There are a few instances that do not apply to section 75, indirect payments and payments made with credit cards being the main two. However, if you made a payment with a debit card, then you could use chargeback instead

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Chargeback
Your bank can offer chargeback if the goods or service which you have bought with your debit card are not adequate or did not get delivered. In many ways, chargeback covers the parts that Section 75 does not cover by offering protection for prepaid card transactions of any value. As stated above, Section 75 only applies to payments made between £100 and £30,000.

However, the difference to Section 75 is that the chargeback scheme is a voluntary agreement between providers and card issuers and is not law. You can claim a chargeback for similar issues to Section 75 like if the company goes into administration or if you have purchased defective goods. Chargeback also covers instances where there has been a technical or clerical error when the item has failed to be delivered and also if you have been the victim of fraud.

Chargeback is part of Visa, Mastercard and Amex’ rules and they usually give you 120 days to put in a claim but, as stated previously, it is not a legal requirement like Section 75. You could get your money back through you prepaid or credit card provider as well as your bank or building society if you used your debit card.

Does Section 75 cover indirect payments?
You are not likely to be covered by Section 75 when you have made a payment to a company that is not the one providing you with the goods or service.

The credit card company usually states that they are not equally accountable because they did not have a direct relationship with the supplier of the product.
To take the matter up further you could say that the indirect relationship between you and the company that you have paid counts as an arrangement to pay, especially as the Court of Appeal decided this was acceptable in 2006. However, this will not be the easiest of tasks and may not always end up as a result.

The first main area of indirect payments is by an online processor such as PayPal. Websites like this and Worldpay will have their refund policies, but these are not as strong as the legally binding protection of Section 75.

There have also been instances where customers have bought goods on Amazon but through marketplace suppliers and have been turned down for a Section 75 claim because of an indirect payment. There is an argument that section 75 should cover this, but it will be a complicated process to claim a refund from your credit card company.

With PayPal, you will only be protected by Section 75 with some sellers. This depends on whether the company from which you have bought the goods or service has a Commercial Entity Agreement with PayPal. If the company does have this agreement, then you may still be able to make a Section 75 claim with your credit card company. Before that though, you should read more on the buyer protection scheme that PayPal offers because this could be a quick route for you to explore. Claiming Section 75 should always be the last resort, mainly when you have purchased through PayPal and similar websites to it.
According to the Financial Ombudsman Service, PayPal cannot be seen as the supplier in an agreement between the two parties because it appears as a merchant on the statement of the credit card holder. This is because PayPal and other sites act as the intermediary between the buyer and the seller so can be classed as a merchant rather than the supplier.

What this all means is that if you made a payment with your credit card through PayPal, this classes as an indirect payment and you would not be covered under Section 75. There could be some circumstances where PayPal may not be considered as the merchant, and it may be best to check.

Indirect Payments
Typically, indirect payments are not covered by Section 75 meaning you will not be able to get a full or partial refund from your credit card company. For instance, if you have paid with a money transfer or even a credit card cheque, then Section 75 does not apply because this is an indirect payment. This is something stated by the Financial Ombudsman Service themselves, so there is no real possibility of getting a refund if you have paid using one of these methods.

You will not be covered by Section 75 if you have withdrawn money out with your credit card and then used that to buy any goods or services. As well as this, if you have bought gift vouchers on a credit card, then this may class as a cash payment so you could be charged interest from the date of purchase. If you an unsure then you should check the terms of your card, and if this does apply to you, then you should pay off the card as soon as you can.

Vouchers, on the other hand, are covered by Section 75. This is as long as you use a credit card or store card, spend over £100 and have bought the voucher directly from the supplier and not from a third-party supplier. For instance, if you buy £150 worth of Next vouchers from the supermarket, then you will not be covered, but section 75 applies if you purchased these vouchers directly from Next.

A new area of indirect payments is through third-party websites purchases like those used on Groupon. With sites like this, you buy a voucher for something through them, because it is a good deal, and then redeem that with another company or retailer. The indirect payment means that Section 75 protection is difficult to get. If this has happened to you, then it may be best for you to use the chargeback scheme which is discussed at the start of this article.

Travel agents and indirect payments
Another case of indirect payments which may not be covered by section 75 is when you have bought through a travel agent. This is when you have purchased something through them, but they have just suggested which flight to get or which package to purchase from a tour operator.
Normally you should have ATOL protection which should cover package holidays as well as flights, accommodation and car hire booked from the same company booked within one day of each other. ATOL protection applies even if you have purchased all three things outside of a package.

Flight delays are not typically covered elsewhere, but if ATOL does not cover you, then a claim to your credit card company for Section 75 could work if you paid with your credit card. Remember that those travel companies are an agent of the tour operator so this may not always be successful for you, but it is still worth checking out if this will work for you.

Additional cardholders
Goods/services paid for by a secondary cardholder

If the products or services were paid for by a secondary cardholder, whether that be a partner or a friend, then you will need to show that as the primary cardholder you benefited from the purchase. If you are unable to do this, then you will not have section 75 protection.

If you have an additional card for a partner, child or friend and this card is used to make a payment for an item you subsequently need to claim for, you’ll need to show the item/service provides some benefit to the primary cardholder to be covered. A family holiday is an example of something that should be covered by Section 75.

This is not legislation, but it is based on a ruling made by the Financial Ombudsman Service established in 2007. This means that it is best for the primary cardholder to make the more significant purchases if you want to be sure to be covered by Section 75 rather than a friend or partner.

I withdrew cash with my credit card
If you have paid for a good or service that you believe you are entitled to a refund for with cash withdrew using your credit card, then you will not be covered under section 75. Once again this is because of an indirect payment as there is no link between the retailer and the credit card firm. Cash withdrawals with a credit card are generally best to avoid because of the high interest and large fee that they command.

The provider and supplier are the same
If the credit supplier and the lender are the same company, a catalogue account for example, then section 75 protection does not apply. This is because Section 75 of the Consumer Credit Act depends on there being a three-way relationship. This is between the consumer of the goods or service, the supplier and the lender.

This is a very rare circumstance though and would only really apply to non-credit card lending. Section 75 would not apply, for example, if you bought something from the Next catalogue using the catalogue credit.

Hire purchase agreements
It is always worth checking if section 75 would apply for car purchases if you have made a large purchase with associated credit. This is because ca finance is not always provided by the dealership. If you are unsure, then you should use a credit card because banks do not supply goods and you may be able to claim under Section 75.

Section 75 does not apply to hire purchase, but if you have a complaint about something to do with the hire purchase, then it is best to try and resolve it with the supplier. This is because they are obligated to ensure that the goods are of satisfactory quality and as described under the Supply of Goods (Implied Terms) Act.

If you are unable to resolve your complaint with the supplier, then you should take things up with the company to who you are making repayments. Under the Supply of Goods Act, they too are obligated to put things right with you although the terms of which depend on the nature of your complaint about the hire purchase.

If you have tried to resolve things with both the supplier and finance provider and are still not happy with the outcome, then you should take your complaint to the Financial Ombudsman Service who can take matters from there for you.

Financial Ombudsman Service
If you are unsure about an indirect payment and whether you can claim under Section 75 then the Financial Ombudsman Service can always offer help and advice. There is no timeframe on credit card firms to resolve a Section 75 claim or even a chargeback, but you should complain to the Financial Ombudsman Service if you are unhappy with how the claim is being handled. Once you have contacted them, they then have eight weeks to process and deal with your complaint.

If it has been eight weeks since you have submitted the claim to your credit card company, then you can refer to the Financial Ombudsman Service immediately and without something called a deadlock letter. This deadlock letter only applies if your credit card company does not accept that you have a claim. If this is the case then you can ask for this letter of deadlock as this then allows you to take your claim to the Financial Ombudsman Service. As well as this, if your credit card provider gives you their consent, you can approach the Financial Ombudsman Service before the eight week period is up to escalate your complaint.