When you purchase goods or services with a credit card you are legally provided free protection on your purchases.
Extra protection when paying with a credit card
In a nutshell the law states that if you pay for something on a credit or store card, and the value is between £100 to £30000, the credit provider is equally liable if you have a problem with the goods or service. This protection can last for up to 6 years from the moment of purchase.
This protection comes from the Consumer Credit Act 1974 and it is Section 75 of this act that we are referring to.
Section 75 – What’s Covered
- Section 75 applies to most credit card agreements, store cards and some car finance agreements.
- Section 75 applies as long as the price of the goods/service is over £100 and between £30000, excluding fees like delivery charges etc.
- Section 75 applies when you have paid for the goods using your card directly to the trader, creating a 3-party agreement between you, the trader and the credit card company.
It is worth mentioning that you do not have to pay the FULL AMOUNT on the credit card as a deposit will still afford the same protection. For example:
You purchase a used car from a dealership with a value of £7500. You pay a deposit on your credit card and the rest with cash. The ratio of each payment method is irrelevant as you are still protected as the value of the goods is over £100. If you like you could pay 1p on your credit card!
Don’t forget – You can still claim from a credit card, even if you no longer use the account!
What’s not covered?
- The purchase of land
- Goods/services that are less than £100 in total value
- Purchases made by secondary card holders where the item has no benefit to the primary card holder
- Cash withdrawals from your credit card and then using the cash to buy goods/services
- Hire purchase agreements
- Third Party payment providers like PayPal
When you use your credit card to pay for goods through a third-party payment provider it adds another party into the agreement taking the overall parties to 4 (you, trader, credit provider and the third party payment provider). Section 75 ONLY applies in 3 party arrangements
- Goods purchased with a debit card or charge card.
There are different rules for this called Chargeback. This is NOT a legal requirement like Section 75 and is part of the internal rules of the bank. With Chargeback you only have 120 days from when you first notice the problem to claim
How to make a Section 75 claim
If you have a problem with goods or services that you have purchased with a credit card (and it meets all the requirements relating to time, minimum amount and debtor/creditor link) then you can consider that the credit card company are equally as liable as the trader. They will need to refund you or find another way to resolve the problem. If the item you have purchased has:
- Not been delivered
- Become faulty
- Not met the description you were told about
Or the company have gone out of business
You should have a valid claim against the credit card provider under Section 75.
You should contact the credit provider i.e the lender not Visa, Mastercard or Amex and explain the problem that you are having with your purchase. If the company are still trading you may be asked to try and resolve it with them in the first instance – See our page on how to write a good complaint letter for more information. Technically you do not have to do this but in most instances you will have tried anyway.
If the trader will not provide a suitable resolution the bank may ask you to provide independent proof of the faults. If this external verification costs you money then it will also form part of your claim against the card company.
If the company have gone bust then it should in theory be easier to make a quick claim if you have proof of the companies trading state. You should find that in this instance the bank will reimburse you for the losses incurred because of the complaint.
Financial Ombudsman Service
If you have been refused a resolution to your problem by the credit card company then all is not lost. The Financial Ombudsman Service can look into complaints where you feel that you have not been treated fairly or reasonably. This can also include regulator or industry best practice guidelines. This is a FREE service to the consumer.