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ombudsman news

issue 52

April 2006

ask ombudsman news

update - section 75 of the Consumer Credit Act and transactions made abroad - the manager of a citizens advice bureau emails …

Around a year ago, in issue 43 of ombudsman news, you answered a query from my colleague. This was about whether section 75 of the Consumer Credit Act applies to transactions made abroad. I’ve heard there’s recently been a further decision in the courts on this. Can you confirm what approach the ombudsman now takes on disputes involving overseas credit card transactions and section 75-

Section 75 of the Consumer Credit Act says that credit card providers are jointly liable with suppliers if a consumer has a valid claim for misrepresentation and/or breach of contract. There had long been confusion about whether this applied to transactions made abroad. When the matter was taken to court in an attempt to clarify the legal position, the first instance court decision was that section 75 did not apply to foreign transactions. Shortly afterwards, the Office of Fair Trading said it would appeal the decision.

A number of large card-issuers decided to continue applying the old (voluntary) policy to credit card transactions abroad. This meant that if the issuers were satisfied there had been a breach of contract or misrepresentation by the supplier, they would reimburse the customer – but only to the extent of the amount of credit used. This differed from the provisions of section 75, where compensation could be claimed for all the loss caused by a breach of contract or misrepresentation.

We regarded this continued application of the voluntary policy as representing good industry practice, and have taken that into account when considering cases brought to us.

The Court of Appeal has now overturned the earlier court decision and decided that section 75 does apply to foreign transactions. So the current state of the law is that no differentiation should be made between UK and foreign credit transactions when applying the provisions of section 75. As the law is one of the things we must take into account when considering complaints, we now expect card-issuers to apply the new law where we uphold a complaint of this type.

Because we operate an informal dispute-resolution service, complaints about transactions made abroad can sometimes present difficulties of evidence that mean we are unable properly to decide them. The recent court decision does not make any difference to that. It is also important to remember that the court decision does not mean the consumer is now automatically entitled to a refund from the credit provider for a foreign transaction. Section 75 only applies where there has been a breach of contract or misrepresentation.

We will not be re-opening old cases where there has already been a full and final settlement, or which we have determined under the previous law which was applicable at the time.

Walter Merricks, chief ombudsman

ombudsman news issue 52 [PDF format]

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.