Credit card trap: when Section 75 refunds can be reversed or delayed (2024)

Think you're protected when buying goods using a credit card?

By law, if you've spent between £100 and £30,000, providers should refund you if there's a problem with your purchase.

But this vital consumer protection, known as "section 75" claims after the relevant clause in credit law, can be denied to customers, even after a refund has gone through.

This is due to a little-known loophole that means section 75 claims can be reversed.

Other borrowers complain that drawn-out compensation claims have left them without any goods or their money back under section 75, due to the lack of a legal time limit when resolving claims.

The Financial Ombudsman Service, which said it receives a significant amount of section 75 complaints by consumers each year, said that even savvy consumers commonly misunderstand when they are due compensation.

Common misconceptions include that you are not protected if you use your credit card abroad (you are) and that you must need to take the retailer to court before making a claim (you don't).

Your refund rights under section 75

Shoppers who use a credit card are protected by laws dating back to the Seventies, which apply to goods or services bought online, in person or over the phone.

Under "section 75" of the Consumer Credit Act, the credit provider is equally liable with the provider of goods or services where there is a breach of contract or misrepresentation.

"When a credit card provider makes a refund, it is surprisingly common that it doesn't claw back any money from the retailer," said Andrew Leakey, a consumer solicitor with firm Stephensons. "Essentially this is because the credit card company may regard it as more effort than it's worth.

But what banks don't tell you is that any reversed transaction can be charged back, if a retailer raises a dispute.

There is also no legal time limit for card providers to consider claims, meaning a section 75 dispute can last several months – or years.

"However, in practice, as card providers are regulated by the Financial Conduct Authority, then they must respond to complaints in accordance with their policy," Mr Leakey said.

"So if there is no response then it is best to raise the issue as a complaint to try to force a response."

'Our £13,000 kitchen nightmare'

Many Section 75 claims turn into lengthy disputes - especially where it is difficult for consumers to prove how their purchases have failed to be supplied as promised.

In one such case, a Telegraph Money reader complains that their card provider has taken months - so far - to deal with a Section 75 claim over a kitchen which failed to live up to its description.

Patrick and Karen O'Brien, from Twickenham, spent £13,000 to install a specially-equipped kitchen to cater for Mrs O'Brien's disability.

But Mrs O'Brien, who is in a wheelchair, is unable to use the kitchen because of mismatched doors, botched shelves and incomplete work – prompting the couple to make a refund claim, also to Nationwide Building Society.

They were told in June by the Nationwide call centre that there was a backlog of section 75 claims, and that there would be a delay.

But after six further months of unanswered calls and letters, their claim has yet to be resolved.

Nationwide insisted that Mr O'Brien pay £650 for an independent assessor to prove that the kitchen was not as described.

"It's yet another delay tactic, anyone can see the kitchen is not fit for use" said Mr O'Brien, a retired copywriter.

A Nationwide spokesman said "the customer has experienced some customer service issues during the course of his claim" and offered £250. He added: "Mr O’Brien is in the process of arranging the independent report via the furniture ombudsman. If his claim is successful, then Nationwide will reimburse the cost of the report."

The section 75 rules you didn't know

Under these conditions, the lender will have equal liability for misrepresentation or breach of contract by the merchant.

But watch out for these added rules around section 75:

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