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OFT seeks court ruling on overseas credit card purchases

PN 82/03     20 June 2003

Proceedings were issued by the OFT in the High Court today seeking clarification on whether consumer safeguards on credit card purchases apply to purchases made abroad as well as in the UK.

The OFT is asking for a declaration that Section 75 of the Consumer Credit Act 1974 applies to overseas credit card purchases, so that consumers can make a claim directly against their credit card company rather than the overseas supplier.

The OFT believes that Section 75 covers overseas purchases, but this is disputed by Lloyds TSB and Tesco Personal Finance (part of The Royal Bank of Scotland group) who are the defendants to the action.

A declaration is where a judge makes a ruling on a point of law which is the subject of disputed interpretation. A full hearing is expected later in the year.

Section 75

Section 75 sets out the concept of 'equal liability'. The effect is that card issuers are jointly liable with suppliers if the consumer has a valid claim for misrepresentation and/or breach of contract by the supplier but only if the cash price of an item is more than £100 but no more than £30,000 and the credit limit is no more than £25,000. Cardholders, therefore, may be able to make a claim against the credit card company if they discover problems with goods or services purchased with their credit card.

NOTES

1. The Royal Bank of Scotland group also includes National Westminster Bank.

2. The effect of Section 75 of the Consumer Credit Act 1974 is that when a lender provides credit to finance a purchase from a separate supplier and has pre-existing or contemplated future arrangements with that supplier, the lender is equally liable with the supplier for any breach of contract or misrepresentation by the supplier if all of the following conditions are met:

• the cash price of the item is over £100 but not more than £30,000
• the credit agreement is regulated, ie generally where not more than £25,000 of credit is advanced to an individual (includes sole traders, partnerships and unincorporated bodies)
• the creditor is in the business of granting credit and the agreement is made in the course of that business
• the credit is advanced under the arrangements between the credit grantor and the supplier, so that a bank overdraft arranged by an individual to pay for an item is not covered.

3. Section 75 does not cover debit or charge cards.

4.  HSBC, Bank of Scotland and Sainsbury's Bank have previously assured the OFT that they will honour valid claims for purchases made abroad under Section 75 of the Consumer Credit Act 1974 (see PN 60/02)

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