Consumers will still be able to claim refunds on goods
from credit card companies even if their purchase was made abroad,
the House of Lords has said.
Section 75 of the Consumer Credit Act allows people to claim
refunds from their credit card issuer as well as the seller of the
goods if they have been misrepresented or if there has been a
breach of contract.
The current case began in 2004 when the Office of Fair Trading
(OFT) asked the courts to rule once and for all on whether section
75 applied to goods bought overseas. The High Court said it did
not, ruling in favour of Lloyds TSB and others, but the OFT
appealed and won.
The House of Lords has backed the Court of Appeal's ruling. That
could cost the credit card industry significant sums, but the OFT
has welcomed the decision.
"The application of section 75 to overseas credit card purchases
has long been uncertain, which is unsatisfactory for UK consumers,"
said John Fingleton, chief executive of the OFT. "We are pleased
that the House of Lords has resolved the issue, and particularly
happy that it has been resolved in a way that gives greater
protection to consumers."
UK consumers spent £10 billion a year according to the payment
cards industry body APACS. That spending will be subject to the
Section 75 rules as long as the sum spent is between £100 and
£30,000.
Lloyds TSB said in a statement: "This ruling gives the
clarification of the law we were seeking regarding the application
of Section 75 of the Consumer Credit Act 1974 to foreign credit
card transactions. We are disappointed with the decision as we have
long believed that Section 75 has no validity in relation to
foreign credit card transactions. However, given that the House of
Lords has confirmed the Court of Appeal ruling, we will continue
our policy of paying valid claims for overseas transactions."
APACS also welcomed the certainty that the ruling gives its
members. "From a customer’s point of view, this decision means no
change as card companies had been meeting valid overseas claims
anyway," said Sandra Quinn, APACS' director of corporate
communications. "Clearly the card industry will need to consider
the implications of today’s ruling for their individual
businesses."
Had the ruling gone the other way it could have dented
confidence in e-commerce, which relies more heavily than off-line
business on cross-border consumer trading.
The five law lords were unanimous in their decision. Lord
Hoffmann, Lord Hope of Craighead, Lord Walker of Gestingthorpe,
Lord Brown of Eaton-under-Heywood, and Lord Mance ruled in the
case.
"There is nothing in the language of section 75(1) to exclude
foreign transactions," said Lord Hoffman's ruling.
"The answer to the question whether the right of recourse under
section 75(1) does extend to foreign transactions is to be found in
the words of the statute, not in any presumption either way as to
its application extraterritorially," said Lord Hope. "The words 'in
relation to a transaction financed by the agreement' … are
unqualified."
"They are to be understood as extending to whatever was in
contemplation when the agreement between the debtor and the
creditor was entered into. In 1974 the use of credit cards issued
by United Kingdom providers for foreign transactions was limited to
Barclaycard," he said. "I do not think that it can be said that
Parliament did not envisage the possibility of transactions being
entered into abroad, linked to the relationship between the issuer
of the card and the cardholder, of the kind that is now
commonplace."
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