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149/07 31 October 2007
UK consumers will continue to be protected when purchasing goods overseas on their credit cards following a landmark ruling by the House of Lords today. The Lords confirmed that section 75 of the Consumer Credit Act 1974 applies to overseas as well as domestic transactions, and this ruling brings to an end a legal process initiated by the OFT in 2004.
Today's judgment rejects an appeal by high street banks against a similar ruling by the Court of Appeal. It confirms that credit card issuers are individually and jointly liable with suppliers if a consumer has a valid claim against the supplier for misrepresentation or breach of contract. This applies to overseas purchases where the price is above £100 but no more than £30,000.
As a result, cardholders are able to make a claim against the credit card issuer as well as, or instead of, the supplier.
Section 75 covers foreign transactions including where:
John Fingleton, OFT Chief Executive, said:
'The application of section 75 to overseas credit card purchases has long been uncertain, which is unsatisfactory for UK consumers. We are pleased that the House of Lords has resolved the issue, and particularly happy that it has been resolved in a way that gives greater protection to consumers.'
Tips for consumers on credit card purchases:
1. The OFT sought to resolve the issue of the application of section 75 to overseas as well as domestic transactions by way of a Court declaration (see press release 82/03). The OFT's position that the concept of 'equal liability' of card issuers and suppliers does apply was disputed by Lloyds TSB Ltd, Tesco Personal Finance (part of The Royal Bank of Scotland group) and American Express Services Europe Limited. The High Court ruled in November 2004 that section 75 applied to domestic credit card transactions only (see press release 186/04). That protection was extended by the Court of Appeal to overseas transactions.
2. Section 75 does not cover debit or charge cards. It does extend beyond credit cards to all connected lender liability.
3. £10 billion worth of transactions were made overseas in 2006 (this includes cash withdrawals). Figures given by APACS (the UK payments association) for 2006.
4 Over half of adults use the internet on a daily basis. In 2006 credit card use on the internet grew by 29 per cent on 2005 to 252 million transactions with £19.2 billion spent online. Figures given by APACS (the UK payments association) for 2006.
5. Section 75(1) states that card issuers are jointly and severally liable for any misrepresentation or breach of contract in relation to a transaction with a cash price of £100 to £30,000, which is financed by an agreement regulated by the Consumer Credit Act 1974.
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