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Coronavirus: should you choose Section 75 or chargeback right now?

Coronavirus: should you choose Section 75 or chargeback right now?
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If something goes wrong with a purchase you make on a debit or credit card, and the seller won’t refund you, what happens next? Well, depending on how you paid and what you purchased, you could claim a chargeback or a Section 75 refund. Here’s what you need to know.

What is a chargeback?

A credit card chargeback lets you recover money from your bank or credit card company if you don’t get the goods or services you paid for. In other words, the seller broke their contract with you. So, you can get a chargeback if:

  • The company goes bust before they deliver goods or services
  • Your items don’t arrive, or they’re not as described 
  • You are billed for the wrong amount

What can I claim back?

You can recover the purchase price, even if it’s a small amount, like £10. 

  • You can use a chargeback for credit card purchases under £100 (e.g. concert tickets).
  • There’s no upper or lower limit on debit card purchases. 

You can’t claim for any other losses incurred due to the failed delivery. So, for example, if you book flights on a debit card and your airline goes bust before you return home, you can’t recoup the cost of a new flight through chargeback. 

Am I legally entitled to a chargeback?

No. There’s no legal obligation for banks or credit card companies to honour a chargeback request, but most of them do. Still, there are some things you need to prove before you claim. 

  • Essentially, you must show that the seller breached the contract. Usually, this means you didn’t get what you paid for.
  • You must also show that you’ve asked for a refund and the seller won’t give you one. 

Chargebacks are a great way to protect your finances during Covid-19. If, for example, an organiser cancels a concert and refuses to offer a refund, you can often request a chargeback. Just check the terms of your contract – you might be refused a refund if lockdown restrictions or some other exceptional circumstances are to blame. It varies from contract to contract. 

If you’re unhappy with how the seller has handled your request, you can always complain to the Financial Ombudsman.  

How does Section 75 work?

Section 75 of the Consumer Credit Act 1974 (CCA) applies to credit cards only. You can ask for a refund from the card company if you paid between £100 and £30,000 and:

  • The company goes out of business
  • Your item doesn’t arrive, or the company doesn’t deliver services
  • It’s a faulty product or it’s not as described

So, you’re legally protected if something goes wrong with a credit card purchase. You can’t use it if you decide not to go on holiday, even if it’s because you’re sick or shielding.

What can I claim under Section 75? 

It varies, but you can usually recover:

  • The original purchase price 
  • Reasonable expenses incurred due to the seller’s breach of contract – this might include paying for a new flight home, or hotel accommodation

What’s reasonable varies on a case-by-case basis, so these extra losses can sometimes be tricky to prove. Still, it’s really useful protection during Covid-19. You can make a section 75 claim if:

  • Your holiday is cancelled and you can’t get a refund 
  • The holiday company goes bust  

All that said, you should contact the services provider in the first instance. You should only make a Section 75 claim if you can’t resolve matters with them. 

Is there anything I can’t claim for?

Yes, actually. You can’t use Section 75 if you:

  • Pay through a third-party processor, like PayPal 
  • Use a third-party services provider, like a travel agent 

Don’t worry, though – these platforms usually have their own payment protection schemes in place. Contact them directly to learn more about their terms. 

Chargeback or Section 75: which should I use right now?

Well, it all depends on:

  • How much you spent 
  • Your contract of sale 
  • The payment method

Essentially, you can use either option if you pay by credit card, but Section 75 offers you greater legal protection. What’s more, your credit card provider must deal with your claim, whereas they might reject your chargeback request. So, in many cases, Section 75 claims are easier, and quicker, than initiating a chargeback. 

Takeaway

Covid-19 is causing a huge amount of uncertainty, and it’s important you know your consumer rights if something doesn’t go to plan. If you want to make a claim, simply contact your bank or credit card company and they’ll tell you what to do. 

One final thing: if you’re travelling, always take out travel insurance or book an ATOL-protected holiday. This might offer you greater protection if you can’t travel, there’s a travel ban or your holiday is cancelled due to lockdown restrictions. 

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