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ombudsman news

issue 28

May 2003

credit cards: card rules can't take away contractual rights

In order to be able to issue credit cards to their customers, firms must agree to abide by the rules of the relevant card scheme (such as Visa or MasterCard). Firms often cite these rules as authority for their own actions if customers have a complaint relating to their credit card.

But customers never see the card rules. So the rules cannot take away the customer's rights under their contract with the card-issuing firm. If that firm's contract does not reflect the rules, that is the firm's problem - not the customer's.

The following two case studies illustrate this situation.

case studies - credit cards: card rules can't take away contractual rights

credit card - sums debited for which customer not liable

Mr W hired a car while on holiday and authorised the car-hire company to debit his credit card "for the rental and any excess payable". On the rental agreement, he named two additional drivers and confirmed that his signature would constitute his authority to debit his card "with the total amount due".

The booking form said, in relation to insurance and damage: "[The hire company] covers the hirer with Collision Damage Waiver/Theft loss Waiver. In the event of accident or any damage to a vehicle, the renter will be responsible for the excess applicable on the hired vehicle. In the event of an accident occurring or damage being caused to the vehicle where no co-driver has been nominated and a person other than the hirer was driving the vehicle, the hirer will be liable for the full value of the loss. It is the responsibility of the hirer to return the vehicle in a reasonably clean condition. Should the vehicle require a valet, the hirer will be liable".

The car was damaged in an accident while one of the additional drivers was driving. No other vehicle was involved. The car-hire company provided a replacement car and Mr W continued with his holiday.

After he returned to the UK, the car hire company sent Mr W an invoice for a sum that comprised not only the hire cost and insurance, but also approximately £5,000 for damage (the full value of the vehicle). The total sum had been debited to his card account in four separate amounts.

When Mr W complained to the firm, it told him that its actions were justified under the card scheme rules, so he brought his complaint to us.

complaint upheld
We pointed out to the firm that:

  • the rental agreement did not mention liability for damage in cases where no other vehicle was involved.
  • Mr W had agreed only that sums for which he was liable under the contract could be debited from his credit card.
  • the invoice had not been generated until after Mr W returned home. So there was no evidence that he had authorised the debit, or that he was even aware of the amount concerned.

The firm agreed to rework Mr W's account as if it had not debited the disputed costs. It also paid him £200 for inconvenience.

credit card - card wrongly debited - firm says customer took too long to notify it of the error

When Mr G was completing his tax return he discovered that, nearly a year earlier, his credit card had been debited with transactions he had no knowledge of - totalling £1,000.

He contacted the firm and it agreed that he had probably been the victim of fraud. However, it noted that Mr G had taken a very long time to spot the transactions and it said it was now too late, under the rules of the credit card scheme, for it to "charge back" the transactions. So it told Mr G that he would have to bear the loss himself. Dissatisfied with this response, Mr G brought his complaint to us.

complaint upheld
Mr G, who was self-employed, told us that he had not spotted the fraudulent transactions earlier because he received his statements quarterly and did not check them in detail until he completed his tax return.

We thought this was a reasonable explanation. And since Mr G was unaware of the rules of the credit card scheme, he could not be expected to be aware of, or to comply with, any timescales they might impose.

The firm agreed to refund Mr G with the value of the disputed transactions.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.