The High Court has ruled that legal protection for UK credit-card users does not apply to foreign purchases. This is bad news if you use your card abroad or buy from overseas websites!
Things are about to get much tougher for credit-card users who buy goods abroad, either in person, by mail order, by telephone or via the Internet!
This follows a High Court ruling last week that Section 75 of the Consumer Credit Act 1974 does not cover overseas purchases. Under Section 75, you have valuable rights when you use a credit card to buy anything with a cash price of between £100 and £30,000.
Essentially, your card issuer "wears the supplier's shoes" - so, if goods don't turn up or prove to be faulty, or if the supplier misleads you, breaches the contract or goes bust, you can seek compensation from your credit-card issuer. This 'joint liability' is especially useful when suppliers go out of business, as occasionally happens with, say, travel companies! However, Section 75 does not apply to debit or charge cards.
The Office of Fair Trading argues that this protection extends to transactions made outside of the UK, including online, telephone and mail-order shopping. Indeed, some lenders have always compensated customers for overseas Section 75 claims. However, American Express, Lloyds TSB and Tesco Personal Finance (a joint venture with Royal Bank of Scotland) all disagreed and won their case in court. The OFT may appeal the High Court's decision, but its chance of success may be low, given that the legislation in question was drafted over thirty years ago!
This a major worry, because we Brits spend huge sums abroad. According to the Association of Payment Clearing Services, overseas purchases accounted for almost a tenth (9.6%) of our entire credit-card spending in 2003. In total, we spent over £9.8 billion in 142 million overseas purchases last year. Then again, the average foreign purchase weighs in at around £69, which means that most of our overseas spending falls below the £100 minimum at which Section 75 kicks in.
So, if you travel abroad often for business or pleasure, or buy from businesses based outside of the UK, be aware that your credit card won't give you the same protection that you enjoy in the UK. Nevertheless, in our increasingly online world, I believe that card issuers shouldn't discriminate between UK and overseas purchases we should be protected wherever we shop. My advice would be to check with your credit-card issuer to see if it will continue to provide this protection voluntarily.
A Foolish challenge!
Of course, the best banks will gain a competitive advantage over their rivals by voluntarily extending Section 75 to cover overseas purchases. As we showed in Holiday Money Horrors!, the best credit cards to use abroad are Nationwide BS Classic VISA and Liverpool Victoria VISA (also marketed as the SAGA card).
I'm going to send a copy of this article to leading credit-card issuers, asking if they are prepared to extend Section 75 to cover overseas purchases, regardless of any court action. Nationwide BS has already told me that, as part of its commitment to service excellence, it will consider any valid Section 75 claim, regardless of where purchases are made. I'll let you know which other enlightened plastic providers rise to my challenge!
More: Find a better breed of plastic in our Credit Card centre.
