Huge change to credit card rules for millions – what it means for shoppers
A CRITICAL rule allowing customers to get a refund from their credit card company is to be axed and replaced with new rules.
The government announced its plans to scrap Section 75 of the Consumer Credit Act this morning - along with ditching the rest of the legislation it includes.
Under the Section 75 law, consumers can claim a full refund for faulty goods or services bought on their credit card from their card provider if the retailer won't pay up.
It means there is a double layer of protection for customers buying big ticket items which go wrong.
The current rules will remain in place for the moment and shoppers will be given plenty of notice before they change.
Exactly what will replace them has not yet been decided.
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New rules usually have to be passed into law before they take effect, which can take some time, often years.
There will be a further consultation about moving the responsibility to ensure consumers are protected to the Financial Conduct Authority.
Sarah Coles, personal finance expert at , said losing the right to a full refund on holidays is just one example of what consumers might lose when the Act is given the chop.
"At the moment you can pay the deposit for a holiday on your card, and as long as it’s for between £100 and less than £30,000, the whole cost of the holiday will be covered," she said.
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"A change might mean you need to put the whole lot on plastic to get the same protection."
Another example would be if you bought a ticket for a concert that was cancelled.
"At the moment you also claim for your train ticket and hotel," Sarah said.
"But some of those quoted in the government's paper argued this shouldn’t be included within the new rules.
"There were also questions over whether people should be able to claim from their credit card without pursuing the vendor first, which could make reclaiming cash more complicated and time-consuming."
However, the new rules could still strengthen consumer rights, depending on what's decided.
Why get rid of the Consumer Credit Act?
The government response to its consultation "Reforming the Consumer Credit Act 1974" claims the rules are no longer fit for purpose.
Andrew Griffith, economic secretary to the Treasury, said that back in 1974, the Consumer Credit Act (CCA) was a "landmark piece of
legislation" .
He called it "a new and comprehensive set of protections for
consumers".
But he added: "The world has been transformed since 1974.
"The existing legislation is ill adapted to technology that was
not conceived of almost 50 years ago.
"The time is now right to be as ambitious as our predecessors in 1974 and fundamentally reform the approach to the regulation of consumer credit in the UK."
The Sun has asked the Treasury for a comment.
Sarah Coles, head of personal finance at Hargreaves Lansdown, called the move "unsettling."
“The Consumer Credit Act has ridden to the rescue for millions of people," she said.
"Section 75 has pulled them our of a dark hole, when goods or services haven’t been delivered, and they’ve been able to turn to their credit card company to save the day."
"So the fact the government is planning to axe the act is bound to be unsettling."
How are shoppers protected now?
For the moment Section 75 remains in place meaning you're entitled to a full refund from either the retailer where you made your purchase or the credit card provider you used when you paid.
What is Section 75?
Section 75 of the Consumer Credit Act is one of the most important bits of consumer legislation in the UK.
It means that if you pay for a big purchase on your credit card and something happens - like the goods aren't delivered or the the shop goes bust - your card provider is just as responsible as the retailer to refund you.
There are a few caveats to the legal protection - the purchase you are making must cost between £100 and £30,000 and it's important to remember that it only applies to credit cards - but it has helped countless Brits get their money back after they've been let down.
What is covered by Section 75?
The protection applies to most credit agreements, so as well as credit cards, it applies to store cards and store instalment credit deals too.
So if the retailer you're buying from goes bust or your goods aren't delivered or the items are faulty, you have the legal right to go to your card provider to get your cash back.
You're even protected if you haven't paid for the item fully - say you've paid a deposit you'll still be covered, as long as the total cost of the item is more than £100.
Section 75 also applies to goods bought online, over the phone or mail order which are delivered to the UK from abroad too.
Remember that you aren't covered by Section 75 if you pay for items with your debit card.
How can I make a Section 75 claim?
To make a claim, contact your credit card provider - your first port of call should be its customer services phone number - and tell them you want to make a claim under Section 75.
It should then send you a claim form which you can fill-in and your provider will use to process your application.
Your card firm might ask you to provide evidence such as a receipt or a report verifying that the item is faulty.
In cases where the retailer hasn't gone bust, you should complain to them first but if they aren't treating your care with the proper attention, you should contact your card provider.
What should I do if my claim is rejected?
If you find that your card company has been unhelpful and refused your claim - even though you have a legal right to the refund - you should take your case to the Financial Ombudsman Service (FOS).
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Consumer group Which? says that you should ask your so you can take it to the FOS, who will decide if you have been treated fairly or not - and if you should be refunded.
If more than eight weeks have passed since you submitted your claim to your card company, you can go to the FOS without needing to bother with a letter.