In the UK, consumers paying for goods with a credit card are
protected by a provision in the Consumer Credit Act of 1974 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 but only if the cash price of an item
is over £100 but less than £30,000, and the credit limit is no more
than £25,000.
But until now there has been a question mark over whether this
protection applies to goods purchased overseas.
In the case, brought before the High Court in July, the OFT
argued that it does. Card issuers Lloyds TSB, Tesco Personal
Finance (part of The Royal Bank of Scotland group) and American
Express Services Europe Limited argued in return that there is no
such protection.
The High Court appears to agree, issuing a ruling on Friday that
domestic transactions – whether from a shop, by mail order, by
telephone or over the internet – are protected, but overseas
transactions are, in general, not protected at all.
Jill Johnstone, Head of Policy at the National Consumer Council
called the ruling "a backwards step for consumer protection."
"People in the UK are heavy credit card users and, with more and
more of us travelling abroad, [the relevant provision] gave an
extra safeguard and boosted confidence," she said. "We would
encourage the OFT to appeal the decision."
The OFT has yet to decide whether to appeal.
The court also considered the question of whether domestic
credit card transactions involving four parties – the cardholder,
the retailer, the bank issuing the card and the bank acting for the
retailer – were covered by Act. Until now there has been doubt over
whether the protection extends only to cases where the bank acts
for both cardholder and retailer.
The answer, said the High Court, is yes: the protection does
extend to domestic four-party credit card transactions.
