Cutting your costs, fighting your corner
For immediate release 26 APRIL 2017
Revealed: Section 75 credit card protection failure that’s leaving shoppers £1,000s out of pocket
MoneySavingExpert.com investigation discovers loophole that lets card providers reject seemingly valid claims
The UK’s biggest consumer help site can reveal a major flaw in Section 75 protection which means that claims by shoppers are being rejected by credit card firms because the retailer they bought from used a third-party payment processing firm to collect their payment.
Under Section 75 of the Consumer Credit Act a credit card provider is jointly liable with the retailer foranything bought using the card that subsequently goes wrong - such as non-delivery or faults. This strong legal protection leads many people to pay for major purchases on a credit card so they're covered if the worst happens.
Yet, as part of a joint investigation with ITV’s Good Morning Britain, MoneySavingExpert.com has spoken to a number of people who've been rejected from seemingly valid claims and in some cases left £1,000s out of pocket.
In February 2016 'Nick' (not his real name) paid for a family member’s £6,000 breast surgery on an Amex credit card, in order to qualify for Section 75 protection. However the patient was left unhappy with the work and Nick sought a refund.
Amex rejected Nick’s Section 75 claim on the grounds the payment to the surgeon was collected via third-party firm iZettle (something he could never have known) See more about Nick’s case in the news story.
Technically, for section 75 to apply there must be a direct link between the customer, thesupplier and the credit card company. If that relationship is deemed to be broken by the involvement of an intermediary or third party, Section 75 protection WON'T apply.
Martin Lewis, founder of MoneySavingExpert.com says: "If you're buying anything costing over £100, I've always suggested you pay for at least some of it on a credit card to get the hugely valuable Section 75 protection. Yet we now have the bizarre situation that if you pay on a company's website, or get given a machine in a shop, some hidden nebulous detail about the way it's done can invalidate your protection.”
Even worse, MSE’s investigation shows that the Financial Ombudsman Service, which arbitrates Section 75 disputes, is unable to provide clear guidance on when protection may be void. It says buying from a retailer using a third-party processing firms will void your usual Section 75 protection in some but not all cases - and it won't say which type of payment is or isn't protected, leaving shoppers in the dark.
Bizarrely, it told MSE it's unable to provide a list of different third-party payment mechanisms, or say which ones qualify for Section 75 protection. A spokesperson told the site: "The payment mechanism often runs in the background so without doing a full investigation into how exactly a payment has been made in each circumstances we can’t say which ones are and aren’t protected."
Martin adds: “We need clarity on this. Companies and payment processors should be made to clearly state when Section 75 doesn't apply. At the moment, not only do they not tell you, they don't even know themselves.”
There are dozens of specialist payment processing companies worldwide, providing retailers with card terminals and/or the ability to accept online orders made with a credit or debit card - Big names include Paypal, Worldpay, Sage Pay, Creditcall and Stripe.
Martin says consumers shouldn’t be put off paying on credit cards for the cover. "I wouldn't stop using a credit card to get Section 75 for this - though be aware the problem sadly seems more likely to happen at smaller independent retailers. If you do find your Section 75 case rejected, always appeal it to the Financial Ombudsman as card firms may just be trying it on. And remember there's a second lesser protection called chargeback that isn't affected by this.
"This is only the beginning of this tale, and MoneySavingExpert will be raising the issue with regulators and politicians to try and get some clarity."
Notes to editors
· Section 75 of the Consumer Credit Act 1974 is a vital UK law that means that when you buy something costing between £100 and £30,000, and you pay for any of it on a credit card, your card firm's liable for the whole amount just as much as the retailer if things go wrong.
· MSE guidance to consumers is always to pay off credit card balances in full to avoid any interest charges.
· Read the full news story at MoneySavingExpert.com.
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About Martin Lewis: Martin Lewis OBE, Money Saving Expert, is the journalist and consumer campaigner who created MoneySavingExpert.com and is now the site’s Executive Chair. Martin also founded and chairs the Money and Mental Health Policy Institute charity.
He’s the UK’s most-googled man, Citizens Advice’s Consumer Champion of the Year, and has spearheaded major financial justice campaigns including bank charges reclaiming (over seven million template letters downloaded), PPI reclaiming (over six million) and a successful large-scale campaign to get financial education in schools. He has his own prime-time ITV programme, The Martin Lewis Money Show, as well as a range of other regular media slots. He was appointed OBE in the Queen’s Birthday Honours in June 2014.
About MoneySavingExpert.com: MoneySavingExpert.com is dedicated to cutting consumers’ bills and fighting their corner. The free-to-use consumer finance help resource aims to show people how to save money on anything and everything, and campaigns for financial justice. It was set up in 2003 for just £100, and its free-to-use, ethical stance quickly made it the UK’s biggest independent money website, according to internet ranking site Alexa.com, and the number one ‘Business and Finance – Business Information’ site, according to Hitwise. It has more than 12 million people opted-in to receive the weekly MSE’s Money Tips email, and more than 16 million unique monthly site users who visit more than 28 million times a month. In September 2012, it joined the MoneySupermarket.com Group PLC.