Your rights under Section 75
Under Section 75 of the Consumer Credit Act 1974, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader.
This means it is just as responsible as the retailer or trader for the goods or service supplied, allowing you to also put your claim to the credit card company.
You don't have to reach a stalemate with the retailer or trader before you can contact your credit card provider - you can make a claim to both the retailer and credit card provider simultaneously, although you can't recover your losses from both.
This right is particularly useful if the retailer or trader has gone bust, or it doesn't respond to your letters or phone calls.
Section 75 of the Consumer Credit Act also applies to foreign transactions as well as goods bought online, by telephone or mail order for delivery to the UK from overseas.
What are the benefits of using a credit card?
Aside from offering you Section 75 protection, credit cards have other advantages. Some credit cards offer rewards, including cash back or air miles - the more you spend, the more benefits you can earn.
If you’re hoping to take out a substantial loan in the future - for example, to buy a house - you’ll need to establish a track record of using a credit card, which is measured by your credit score. Paying by credit card and then clearing the debt in full will help build this up over time.
Credit cards can also help you manage your cash flow. Payment will be due more than a month after purchases were made, so you may be able to delay paying for big-ticket items. But you need to make sure you don’t spend more than you can afford to pay back.
While credit card companies allow you to make a minimum payment, your credit score will be damaged if you don’t pay off your balance in full each month. You’ll also end up paying interest on the balance, which will cost you more the longer you carry it.
If you have credit card debts, you’re less likely to be approved for loans - banks will take into account any outstanding debts when deciding how much to lend you.
Making a Section 75 claim
There are some limitations to when a card company is liable along with the retailer or trader. The goods or service you bought must have cost over £100 and not more than £30,000.
Section 75 protection also requires your credit card provider and the seller of goods to be different parties. Section 75 will not apply if the lender is also the supplier.
However, to claim under Section 75 you don't have to have paid more than £100 or the full amount on your credit card – the card company is liable even if you made only part of the payment (a deposit, say) on your card.
It's the value of the goods you're buying that is key - not the amount paid on the card.
For example, if you ordered a new sofa from a furniture store and paid a £60 deposit with your credit card and the balance of £600 by cheque, you would be covered for the whole £660 if the dealer went out of business and you didn't get your sofa.
Section 75 gives you the same rights against the card company as you have against the retailer.
So if your claim against the trader is for the cost of fixing or repairing an item, this would be the claim you could bring under Section 75 against the card provider.
However, if you bought two items that together cost more than £100, but each cost less than £100, Section 75 would not apply and the card company wouldn't usually be liable.
Remember that you can make a claim even if an account is closed and that Section 75 can apply to credit card transactions made abroad.
If the item or service you've bought was under £100, you may still be covered by chargeback.
What if I paid by debit card?
Section 75 applies only to credit cards and not to debit cards or charge cards (where all charges must be settled at the end of the month).
If you use a debit card, it's possible that you may be able to use chargeback instead to get some or all of your money back - for more information read our guide to the chargeback system.
- Section 75 of the Consumer Credit Act means that you can claim against your credit card company to get your money back
- The price of the goods or services that you wish to claim for must have been between £100 and £30,000
- Section 75 doesn't apply to debit cards, but you could use chargeback instead
Payments through an agent or third party
It's not unusual for a business taking payment to be acting as an agent for the actual supplier. In this circumstance, Section 75 may not apply and you may not be able to claim against the credit card provider.
A good example of this is when you buy concert tickets. If you buy direct from the venue, then Section 75 may apply if the cost is over £100. If you buy through a ticket agency, then it may not.
This is because the card provider may argue that as payment wasn't made directly to the supplier of the goods or service, Section 75 doesn't apply.
So where possible, make any credit card payment direct to the company actually supplying the goods or services.
Payments through PayPal
There are legal arguments that having another party involved in the transaction process takes away the Section 75 protection. However, if you use your credit card to pay for something through PayPal and the funds go direct to the seller, then as long as the company you're buying from has a 'Commercial Entity Agreement' with PayPal you may still be able to claim against your credit card company under Section 75 for any misrepresentation or breach of contract by the seller.
There are arguments that having another party involved in the process takes away the Section 75 protection.
PayPal also offers its own buyer protection scheme, called PayPal Buyer Protection, so it's worth checking if you'd be covered by that if you have a problem with your purchase.
If you particularly want to have the protection of Section 75 then try to pay the trader direct with your card.
If somebody else such as your partner has a credit card and has added you as an additional cardholder, it's usually best to get the main cardholder to make any big purchases, rather than using the extra card yourself.
This doesn't mean that purchases made by a secondary card holder will never be covered, but it's best for the primary card holder to make larger purchases if you want to be sure of protection under Section 75.
If, however, the purchase is made with the primary card holder's authority and if they expressly request the purchase and will benefit from it - a family holiday, for instance - they will still be covered under Section 75.
Cash withdrawals using your credit card
If you use your credit card to withdraw cash for a particular purchase, you won't be covered by Section 75 as there's no link between the credit card company and the retailer.
Cash withdrawals usually attract a fee and a much higher interest rate anyway, so they're best avoided on the whole.
Financial Ombudsman Service
There’s no set timeframe for your card provider to resolve a chargeback or Section 75 claim, but if you’re unhappy with the outcome of the claim, or how long it’s taking, you can complain to your provider, it then has eight weeks to deal with this complaint.
If your credit card company doesn't accept that you have a claim and refuses to pay up, you can ask for a letter of deadlock so that you can refer your dispute to the Financial Ombudsman Service (FOS).
If more than eight weeks have passed since you submitted your claim to your credit card provider, you can refer your claim to the FOS straight away without the need for a deadlock letter.
You can also approach the FOS before the eight weeks are up if your provider has given consent for you to do so.