When it comes to making those big purchases, many of us rely on Section 75 to provide us with cover, should something go wrong?
Unfortunately, a loophole in the Consumer Credit Act means that we may not be protected by this crucial piece of legislation if we pay via a third-party payment service. But could this be about to change?
What exactly is Section 75?
Under Section 75 of the Consumer Credit Act, if you buy something on your credit card that costs more than £100 and less than £30,000, both your credit card company and the supplier of the goods are liable, should something go wrong.
So, if you’re unhappy with your purchase – if it doesn’t work, for example, or never arrives – and you’ve used your credit card to buy it, you can contact your credit card provider to ask for your money back.
You have the right to make a claim against your credit card company and/or the retailer you bought the goods from. This is because the supplier and the credit card company are jointly and severally liable.
Essentially, this means that you can choose to pursue a claim through both your credit card provider and the supplier, or just one of them. If the supplier goes bust, for example, you should be able to claim through your credit card company under Section 75.
Section 75 can be used in the UK and abroad. This can be particularly useful if, for example, something went wrong with your goods that you bought from another country, where you don’t speak the language. Section 75 should enable you to pursue your claim via your credit card company, instead of the supplier.
In some instances, you could make a claim under Section 75 up to six years after you’ve made the purchase.
You can use Section 75 even if you’ve closed your credit card since buying the goods in question.
You should also be covered for the item, even if you only use your credit card to pay a deposit towards the goods that you’re buying (as long the item you’re buying costs more than £100 and less than £30,000).
Additionally, you may be able to make a claim for any further losses you’ve suffered as a result of what went wrong with your purchase.
In a nutshell, this is a pretty invaluable piece of legislation for anyone who’s thinking of making a big purchase. Indeed, many people use their credit cards for this reason alone, so the fact that there is such a big loophole is pretty frustrating.
The third-party payment loophole
Right now, if you pay via a third party firm, a middle man, if you like, you may not be covered by this protection.
This is because Section 75 only applies when there is a direct relationship between the debtor (you), the creditor and the supplier. If your payment is processed by another payment handler, you may not be able to use Section 75 to claim your money back from your credit card provider.
As more and more of us start to shop online, this loophole is becoming a much more common problem. According to a publication released by the Financial Ombudsman Service, many people may not even realise that the usual protections don’t apply when a third party is processing their payment online.
PayPal is one example of this type of third party firm. There are various websites that use PayPal to process their payments and if you pay with your credit card via PayPal in this way, Section 75 probably won’t cover you.
SagePay is another example of a third party payment firm.
Many people unwittingly find themselves unable to make a claim under Section 75 because sometimes it isn’t particularly clear that you’re paying through a third party payment firm.
As well as payments made online, you may not be aware of how a retailer is processing your payment taken over the telephone. If in doubt, check.
Financial Ombudsman Service proposed reform
Back in October 2016, the Financial Ombudsman Service requested that the Law Commission consider reforming the Section 75 rules around third-party payments.
The Law Commission has reportedly included this in its shortlist of proposed legal reforms and may present this, together with other proposed reforms, to Parliament in autumn this year.
However, there is no guarantee that anything will change. Proposed reforms are not always enacted, so this loophole may remain fully open for some time to come and may never be closed.
Until it’s closed, you need to be aware.
If you make a purchase with your credit card and intend to rely on Section 75 protection (and why wouldn’t you, it is a very useful piece of legislation), it’s important to check how your chosen retailer processes payments.
Although this is probably something you don’t want to add to your ever-expanding ‘to-do’ list, it’s especially worth it if you’re purchasing a high-value item online or over the phone, such as a tablet or a laptop.
If you make a claim under Section 75 and you think your card provider has unfairly rejected it, you can go to the Financial Ombudsman Service, who will then review your complaint.
You could also try to claim via the chargeback scheme, which applies to various credit and debit cards.
However, unlike Section 75, chargeback is not a legal requirement as it’s part of MasterCard, Visa and Amex’s internal rules.
When it comes to reforms of legislation, things rarely happen quickly.
A loophole that, because of an increase in remote shopping, could potentially affect so many people, surely needs to be closed up.
It seems quite unfair that just because a third party payment processor was involved in your purchase (and sometimes it’s not immediately obvious if this was the case or not), you may not be covered under Section 75, should something go wrong.
We await the outcome with interest but until then, check how your payment is being processed if you want to rely on Section 75 protection for your credit card purchases.