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Creditfix LB 03-2017

Credit Card Loophole Denies Consumers Refunds

Banks and financial institutions are denying credit card customers refunds for faulty goods and services purchased by using a loophole in the system.

It is widely known that credit card companies are made liable by the Consumer Credit Act to refund consumers if the product or service they purchased with their credit card is found to be faulty or not delivered.

All credit card purchases between £100 and £30,000 are covered by this protection under section 75 which allows the consumer to claim a refund from their credit card company if the supplier of the faulty goods or service fails to reimburse them, or ceases trading.

Consumers often make sure that they use their credit cards for larger purchases simply to benefit from the extra cover provided by the legislation.

However, it came to light during a joint investigation by MoneySavingExpert and TV show Good Morning Britain that there are instances where claims are being rejected due to a rule that invalidates purchases made through third parties.

An example was quoted where a man paid for £6,000 of plastic surgery on his credit card. However, when he was unhappy with the standard of the work and sought a refund from American Express, the company rejected his claim on the grounds that the payment to the surgeon was collected via a third-party firm called iZettle.

The Financial Ombudsman Service which deals with such disputes under Section 75, was unable to provide clear guidance to consumers of when purchases would not be protected.

It is also not clear how consumers could know whether their payment is being steered through one of many third-party payment companies, therefore possibly invalidating the cover provided by the Consumer Credit Act.

Martin Lewis of MoneySavingExpert commented: ‘Companies and payment processors should be made to clearly state when Section 75 doesn’t apply.’

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