Misunderstandings around a key credit rule could hinder consumers’ chances of getting their money back if something goes wrong with a purchase, an ombudsman service is warning.
Each year, the Financial Ombudsman Service (FOS) receives thousands of complaints from consumers who have their claims for reimbursement rejected by their credit provider.
As people prepare to start their Christmas shopping, the service is highlighting misconceptions around Section 75 of the Consumer Credit Act 1974 – which covers purchases made by a credit card, point-of-sale loan (a loan arranged by the retailer to pay for goods) or other finance.
While Section 75 can offer consumers good protection, it’s important to make sure your spending qualifies before you make a claim
If a product is faulty, does not arrive or was not as described and shoppers are unable to resolve this with the supplier, they may be able to claim back the value from their credit provider.
Purchases must meet certain criteria to be considered under the rules.
The ombudsman has highlighted some myths about the Section 75 claims process.
One misunderstanding it sees is that Section 75 is only for credit cards.
The service said it can apply to point-of-sale loans used to buy goods or services, as well as some store cards and catalogue accounts.
Another misconception is that it applies to products and services of any value.
In fact, the cash price of the goods or services must be more than £100 but not more than £30,000.
This is the cost per item, the ombudsman service said, and a purchase of multiple items which added up to more than £100 would not qualify unless they were sold as a set.
The ombudsman said another myth that arises is that the whole amount must have been paid by credit.
It said in reality, it is the cash price of the goods or services that matters and Section 75 can apply even if a part-payment was made using credit.
In addition, Section 75 only applies if the primary cardholder uses the credit card to purchase something for themselves, the service said.
If you think your purchase meets the criteria but your credit provider rejects your claim, you can complain to them and ask them to look into the matter further
Viv Kelly, ombudsman director for consumer credit at the FOS, said: “While Section 75 can offer consumers good protection, it’s important to make sure your spending qualifies before you make a claim.
“If you think your purchase meets the criteria but your credit provider rejects your claim, you can complain to them and ask them to look into the matter further.
“If you’re unhappy with their final response, you can refer your complaint to the Financial Ombudsman Service.”
To help improve consumers’ understanding of the issue, the FOS also highlighted cases it has dealt with.
In one, a man contacted the service when his bank refused his Section 75 claim.
His wife, a secondary cardholder on his credit card account, purchased a dress which was sold as being part of a new collection.
She later found out that it had also been sold the previous year.
The man’s wife felt that the dress had been misrepresented so submitted a Section 75 claim, but the bank refused it.
The ombudsman agreed the bank was right to reject the claim as the primary cardholder was not involved in the purchase.
In another case, around 18 months after buying a sofa on credit, a woman experienced problems with the product.
The warranty company conducted a report and the consumer was happy to accept a repair, but by that time, the company she had purchased the sofa from had entered administration.
She approached the credit company for a refund.
They refused the claim, but the ombudsman said that the sofa was not of satisfactory quality and upheld the complaint.
In another case, a man’s credit card company refused a Section 75 claim for a comedy event which was cancelled when the organiser entered administration.
He had spent £209 in total – made up of four tickets costing £45 each, £10 for “premium parking” and a £19 booking fee.
The credit card company refused his claim as none of the tickets cost more than £100.
The ombudsman agreed the company was right to reject the claim for this reason.
Another case involved cancelled holiday accommodation paid partly by credit card.
After a holiday accommodation provider cancelled a booking and did not provide a refund, a consumer made a Section 75 claim.
Of the total £5,000 cost, she paid £1,250 by credit card and the remaining £3,750 by bank transfer.
Her credit card company refused the claim, but the ombudsman found that they should give the customer all of the money back with interest.
