Saturday, 17 November 2007

Shopping: credit card, not PayPal

The quickie

If UK consumers buy goods or services using a UK credit card, and they have a valid claim against the seller for a refund or reimbursement etc due to the seller's breach of contract or misrepresentation (defective products, lying about the features etc), there's good news - they can now also claim against the credit card company, even if they bought the goods or services outside the UK, e.g. from an online vendor or while travelling.

It's obviously very handy to be able to go against your credit card issuer if there's a problem and the original seller is now bankrupt, or won't answer your emails or return your phone calls.

The long & slow

This case has been widely reported, but it's worth a reminder. A few weeks back the top judges in the UK, the House of Lords, unanimously ruled that if UK consumers use a credit card to buy goods or services from a non-UK supplier, e.g. internet shopping from a foreign online vendor or while abroad on holiday outside the UK, they are still protected under section 75 of the UK Consumer Credit Act.

Section's 75 magic for us consumers is that it provides a kind of "guarantee". If you paid by credit card and the cash price of the goods or services you bought is over £100 (but not more than £30,000), and the seller was in breach of contract or guilty of a misrepresentation - e.g. they delivered the wrong things or nothing at all, or the stuff was duff, or they got you to buy the goods or services by misleading you about them, etc - then, if the seller has gone bust or is obstructive, you can go against your credit card company instead to get your money back, or compensation and the like. The credit card issuer is equally responsible along with your supplier, wherever the supplier is based.

The big high street banks had tried to argue that this protection only extends to domestic purchases, i.e. UK consumers buying goods or services in the UK, but the good ol' Office of Fair Trading took the fight all the way up to the Lords, who said no, that's not so - it covers consumers with UK credit agreements, whether they ordered from a UK shop or a foreign (that's "non-UK" if you're not a Brit) supplier.

So the tip is this: whether you're buying in person in the UK or travelling overseas, or whether you like to buy over the phone or the Web and you order from a UK or a non-UK website over the internet, if you're paying for something that's within the price band of over £100 but not more than £30,000 then, all other things being equal, you should be better off paying with a credit card rather than cash or PayPal etc - because then you get the card company's "guarantee" or "insurance", as long as it's a credit card from a UK credit card company that is (and if you're also in the UK. I've no idea what the position is if a non-UK resident uses a card issued by a UK credit card company!).

One gotcha to note: this protection only applies if you use a "real" credit card, NOT a charge card like many Amex cards where you have to pay off the whole balance every month. If you have a real credit card, where you can make a minimum payment of less than the full amount, you're OK even if you choose to pay it in full sometimes or indeed all the time - but if you use a "charge card" for the purchase, then you won't be covered.

Another questionmark: I don't know if this includes software downloads. Does anyone know?

Surely this is a good thing for e-commerce as well as consumer rights. In a way, it will give credit card issuers a slight competitive advantage over PayPal and the like. Even though it will hit the pockets of the credit card companies first, I've no doubt that eventually it'll hit us consumers too, in the form of even higher overall charges or interest rates; and that will be what it will be, so you may as well get yourself that extra protection when you're buying from abroad, in my view.

Usual blurb - I'm not a consumer lawyer, this is very general and isn't legal advice, blah blah, if you are on the cusp of the price range and aren't sure if you're covered, if you find yourself in a situation involving needing to claim against your credit card issuer, you should consult your own legal advisers.

More info:

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