Three judges of
the Appeals Court last month overturned a High Court ruling which
refused protection for overseas transactions.
In the UK, consumers paying for goods with a credit card are
protected by a provision in the Consumer Credit Act of 1974,
section 75, that allows them to make a claim directly against their
credit card company or the supplier if they discover problems with
goods or services purchased with their card.
The credit card issuer and the supplier are jointly liable if
the consumer has a valid claim for misrepresentation and/or breach
of contract by the supplier – provided the cash price of an item is
over £100 and less than £30,000, and the credit limit is no more
than £25,000.
But there has always been a question mark over whether this
protection applies to goods purchased overseas and in July 2004 the
OFT asked the High Court to issue a definitive declaration that it
did.
Card issuers Lloyds TSB, Tesco Personal Finance (part of The
Royal Bank of Scotland group) and American Express Services Europe
Limited opposed the motion, arguing that there is no such
protection.
In November 2004 the High Court found in favour of the card
issuers, ruling that domestic transactions – whether from a shop,
by mail order, by telephone or over the internet – are protected,
but overseas transactions using a credit card are, in general, not
protected at all.
The OFT appealed the ruling.
Giving the opinion of the Appeals Court late last month, Lord
Justice Waller ruled that the protection did apply.
“In our view the primary purpose of the section is to provide
additional protection for debtors under credit agreements of the
kinds to which it relates,” he said.
“There is nothing in section 75(1) or (2) that provides for a
distinction to be drawn between transactions entered into in this
country and transactions entered into abroad, to say nothing of
transactions entered into on the internet, the place of which may
be quite difficult to determine,” he explained.
Consumer groups were pleased at the result. Mike Naylor,
principal researcher at Which?, said: "It is great news for
consumers that they are now officially covered wherever the card is
used."
Lloyds TSB expressed disappointment at the ruling, but
explained: “The purpose of the original case was not about reducing
consumer protection, but to gain legal clarity over this complex
principle. Before and since the original judgment, Lloyds TSB has
met valid foreign Section 75 claims up to the amount charged to its
credit cards and it will continue to do so.”
The bank is considering whether to appeal to the House of
Lords.
