Section 75 refunds

While every effort’s been made to ensure this article’s accuracy, it isn’t intended to be seen as legal advice and no liability can be accepted for any individual claimants who rely upon the information given.

There’s a secret phrase that turns any credit card into a financial self-defence superhero. “Section 75” laws means your plastic must protect anything you buy over £100 for free, so if there’s a problem or the company goes bust you can still get your money back.

This full detailed Q&A guide, shows you how to maximise protection, when you’re not covered, how to access it without a credit card, and includes free template letters for making a claim.

• What is Section 75?
• When should I use it?
• Which card should I use?
• Are there any exceptions?
• Pay at least a deposit
• What cost is covered?
• Overseas and web purchases
• How do I make a claim?
• Can I claim costs?
• If you don't have a credit card
• Help for debit card payments

Know how to take on the law, and win

What is Section 75?

A. It’s a vital law that was made in the seventies that means your credit card company must take responsibility if things go wrong in a purchase. In a nutshell...

Pay for something costing between £100 and £30,000 on a credit card and the card issuer's equally liable if something goes wrong.

This isn’t the credit card company being nice, it’s a legal protection put in place so that you’re never in the position of paying debt for something you didn’t receive or wasn’t as it should’ve been. Whether it’s a flight, kitchen, computer or anything else, pay on the card and the card company's responsible too.

The law behind this

This all comes from Section 75 of the Consumer Credit Act 1974, hence why this is sexily named Section 75. It rather impenetrably says…

75. — (1) If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor. Read it in full

When should I use it?

A. This piece of legalese is fantastic protection, particularly during these credit crunch times. It means if you order something and if the retailer goes kaput, you can still claim your money back from the card company.

Plus even if the problem is just non-delivery or faulty goods, you have exactly the same rights from the credit card company as from the retailer or flight company or supplier.

Some typical examples….

• You order a vase from a store overseas that never arrives
• You buy flight tickets direct from an airline that goes bust
• You buy a radio from a shop take it home and it’s faulty

In all of these your card lender is jointly liable for a refund.

Therefore if you’re buying something or ordering tickets or flights worth over £100, pay for some or all of it on the card to ensure you’re protected. Though do keep your receipts as well as the credit card statement to make it easier.

Which card should I use?

A. Just to clear this up, this protection only applies to credit and store cards, NOT debit cards, cash spending, using cheques or charge cards. Therefore you have to use a credit card to be protected.

Yet credit card companies do, of course, make their money by charging you interest. And frankly the interest cost is so large it often overrides the protection, so follow…

Always set up a direct debit to pay the card off in full each month, so you'll never pay interest.

If you don’t have a credit card or have debts on a card, and need another specially for these purchases so you can pay it off in full each month, then it’s time to apply for a new card. In which case the two best choices are:

• A cashback credit card. These pay you each and every time you spend on them. With a direct debit set up so there’s no interest, this can add £100s a year to your income, without any hassle, so you get a double whammy. Full info and best buys in the Cashback Credit Cards guide.

• A 0% for spending card. Borrowing in the current climate isn’t a good idea. Though if you are going to spend on a card you can’t repay in full, at least ensure it’s as cheap as possible. A number of cards offer 0% interest for a year on all your spending, full info and best buys in the 0% Interest Cards guide.

If your credit score isn’t good enough to get one of these, read Section 75 without a credit card.

Are there any exceptions?

A. As always with these things there are a few things that escape the safety net. They fall into two main groups, and are both caused due to the indirect nature of the payment.

• When you buy through third parties. Travel agents, paypal etc.

  You’re unlikely to be covered when payments are made to a company that isn’t the one providing you with the good or service. This is because the credit card company must have a direct relationship for them to be equally liable.

  The first main area is paying via an online processer such as PayPal, WorldPay or Google Checkout. Though these can have their own refund systems, they aren't as strong as the legal protection of Section 75.

  The other is buying through a Travel Agent, where it is simply directing you to get a flight from an airline or package holiday from a Tour Operator. You should usually have ATOL protection for package holidays anyway (see Cheap Package Holidays) but flights don’t usually have protection elsewhere.

• When you don’t pay on the card. Credit card cheques, cash withdrawn from a credit card etc.

  Pay with credit card cheques and according to the Financial Ombudsman Section 75 doesn’t apply as it’s an indirect form of payment.

  It’s also worth pointing out, that if you withdraw cash on the card, a bad thing to do anyway as you’ll pay interest even if you clear the card in full, then the protection doesn’t apply for things you buy with the cash.

What if I only pay the deposit on the credit card?

A. The law’s very specific, you get the protection for the whole thing even if you only pay for a part of it on the card, provided what you pay for costs more than £100 (and less than £30,000).

Here’s a quick example of how it works…

Savvy Salma spots the high tech TV she’s been planning to buy at half price for £500 including delivery in a high street sale. Yet she’s only got £10 left on her card limit (don’t worry, it’s a cashback card, she’s going to pay it off in full).

Salma pays £10 of the cost on her credit card and the rest on her debit card. Sadly the next day the store goes bust, before her telly is delivered. Yet she can claim the WHOLE £500 back from the credit card company, because she paid in part on the card.

Therefore if you want protection…

As long as it costs more than £100, pay for even a fraction on a credit card and you’re protected.

Is it the bill that has to be over £100 or the item?

A. This is where it gets quite tricky. The law is plain; the £100 is for the cash value of a ‘single item’ (so excluding any fees, and charges such as delivery). Yet, single items aren’t always that straightforward.

Here are a couple of examples to help:

Fly to Traveltown with Holidayair on flights costing £99 outbound and £9.99 back, and while it’s over £100 in total, as no single ticket was over £100 you’re not protected. Yet if Holidayair had only sold return journeys and you bought a specific £109 return ticket then you would be covered.

Alternatively if a suit jacket and trousers are individually priced at £60 each, you’re not covered, but if you buy the suit as a whole for one price of £120, you are covered.

Sadly this rule defeats Section 75 claims for mobile phone cashback, as each monthly bill payment is considered a separate amount, so unless your monthly agreement is £100 or more a month, you can’t claim against your credit card company for your cashback money. For alternative techniques, read the Mobile Cashback Collapse guide.

This can get more complicated though. If the company links the transaction together, for example by giving a special offer if two flights are purchased together, then you should be covered.

This hasn’t been tested yet

This information is based on conversations with eminent legal brains and Trading Standards yet this part of the law doesn't have any case law behind it.

Therefore, if in doubt it’s always worth contacting your credit card company to make a claim and if you consider it to be a ‘single item’ do ensure that’s how you phrase it to the card company. Please report your experiences in the single item claims thread to help others in a similar boat.

Are overseas and web purchases protected?

A. Yes. This used to be a hot potato, but in 2006 this got to the Court of Appeal and it confirmed this applies to everything you buy. Whether it’s in the UK, abroad or on a foreign website, Section 75 applies.

This is a real boon, as often if you buy something abroad it’s much more difficult to get in touch with the retailer. So don’t bother, simply make a claim directly against the credit card company.

How do I make a claim?

A. The first thing to do is remember this is a legal right. I’ve claimed under Section 75 a couple of times myself, once it was easy, once they kicked up a fuss, and while card companies are getting better, many will still talk about their own procedures.

To make a claim, you need to contact your credit card company, not visa or mastercard or amex, e.g. if you’ve got a Egg Mastercard, you claim from Egg not mastercard. Yet the experience can be slightly different depending on the scenario:

• If the retailer/supplier has gone bust

  Here it is quite clear cut, you can’t go to anyone else so the only option is to claim off the credit card company. Call it up and politely explain what you’re doing, do ensure you invoke the rules though, actually say “I am making a claim under Section 75 of the Consumer Credit Act”. It should then send you a claim form in the post.

  Sometimes the card company will tell you it will try and reclaim the cash from the company in administration. You can simply answer, “great news, I wish you the best of luck. However you are completely liable for my goods yourself, and I would like the full amount I’m entitled to please, regardless of that claim.”

• Complaints about a product and the retailer/supplier isn’t bust

  Here you will commonly be met by a “that’s not our business, go to the retailer”. Actually you don’t have to, it is their business and you’ve a legal right to redress. The law makes clear that the credit card company is jointly responsible so there’s no 'first point of call'.

  However, frankly unless you need to (e.g. the supplier/retailer is overseas) it’s much easier to deal with the retailer.

  If you are claiming from the card company, be firm but polite, and request a claim form. Again, on the claim form state it is a claim under "Section 75 of the Consumer Credit Act".

You could find the call-centre person hasn’t a clue what you're talking about, so be polite but firm in the fact that you have a legal right to make a claim. If your card provider tells you to put your request in writing here’s a template letter to help:

Sample Template Letter: Section 75 Refund
Problems opening the letter?

If your card provider still won't help then contact the Financial Ombudsman to make a complaint. This is completely free and well worth doing, there’s a simple claim form on its website.

Of course if the credit card company went bust, then while you could become a creditor, there is no protection from this. Yet for both the retailer and creditor at the same time to go bust, you’d have been very unlucky.

Can I claim costs?

A. The law allows you to claim for ‘consequential losses’ arising from the problem. In other words, if what went wrong forced you to shell out, the credit card company is liable just like the retailer would be. Obviously it’s more difficult to do, but it’s still legal.

A couple of examples should help…

Luke Malchance booked return flights under Section 75 rules. Sadly the airline went bust while he was away and he had to buy a flight home. The cost of the flight home should count as a consequential loss and can be claimed for.

Deidre Darling booked a weekend away in a holiday home by credit card. When she arrived, the home was already occupied, she had to drive home, was upset and disappointed, and had wasted her week's holiday. Legally she could even claim the emotional distress is a consequential loss, although this doesn’t mean it’d be awarded, but it’s certainly arguable.

I can’t get a credit card, how can I get this protection?

A. There is one loophole round this. Prepay cards are special plastic you load up before you spend and anyone can get one as no credit check is needed. Normally these don’t get Section 75 protection, as there’s no credit, but one specific card does include the protection. The CashPlus* prepaid card's provider itself has confirmed the protection is included.

The card isn’t free

Sadly it isn’t just a case of grabbing it, you do need to pay for the card. It costs £10 to get it in the first place, and then you can choose one of two accounts.

• The Credit Builder Account. Here you pay £4.95 a month for a minimum of a year (so £60 a year) and you get the facility that helps towards rebuilding your credit rating. There are then no fees for spending on it, but there is a further monthly fee if you do not use or top up the card for four months.

• The Flexiplus account. Here there’s no monthly fee, provided you use or top up the card every four month, but every time you pay for something on the card you pay £1. If you’re only getting the card for a few big transactions this is the cheapest way.

Is it worth it?

It’s a tough one to answer. If the protection ended up paying out for you, the cost of the card is cheap, otherwise it may feel a waste of money. If you’re making a big purchase with a company that worries you, this may give added piece of mind.

It is worth noting, you are reliant on the fact that the card company itself won’t go bust to get your money (and for the safety of the cash you load on it). Prepay cards are growing in popularity, so it is likely to have some financial strength, and it’d be quite a coincidence for the card company and retailer to go kaput at the same time, but nothing is 100%.

Is there any help for debit card payments?

A. While Setion 75 doesn’t apply to debit cards, there is something else to fall back on if you paid on a Visa debit card, or Visa credit card under £100 (otherwise go for Section 75). Known as Visa Chargeback, this is part of Visa’s internal rules and not a legal requirement.

This isn’t something you should do proactively, it’s a last resort option which gives you a chance of getting your cash back if the company has gone bust or not delivered. It was something I first pushed during the Farepak crisis and has had quite a number of successes.

It does mean though, that a Visa credit card, if you have a choice, may be a better option than a Mastercard credit card, as you'll be able to claim through Section 75 for amounts over £100 and Chargeback for amounts below.

How does Chargeback work?

Complain to your bank not more than 120 days after realising there’s a problem, and ask to dispute the transaction. Your bank can then put the procedure in motion to claim the money back from the supplier’s bank.

At this point, the onus is on it to get the money back if a transaction hasn't been adequately completed and you should get a refund. Importantly, as it’s asking for money back from the supplier's bank, not the supplier itself, that means the money should come even if the supplier itself has gone bust.

Again, it's worth noting most bank staff really won't know about this procedure, so you may need to explain it to them.

If you’re told to put your request in writing here’s a template letter to help:

Sample Template Letter: Chargeback Refund
Problems opening the letter?

Chargeback is nowhere near as strong as Section 75. The key difference is that when you complain on a credit card under Section 75, the credit card company itself is legally liable, with Chargeback it's just about the Visa process and that is nowhere near as weighty. It’s also the case that you can’t take the issue to court if your bank won’t pay up.