Banks test the law on overseas credit card purchases
by Gill Montia
A case to establish whether credit card companies must refund customers when goods purchased abroad are damaged or are not delivered will be heard by the House of Lords.
A group of banks, led by Lloyds TSB, is challenging the view that under the Consumer Credit Act the same cover applies to goods purchased from an overseas source as it does for goods supplied from the UK.
The Act states that purchases worth between £100 and £30,000 are covered for non-arrival or damage by the credit card provider used in their purchase, however legal experts maintain that there is a grey area when it comes to overseas purchases.
The case has already been heard in the High Court and Appeal Court and will now be considered by the House of Lords.
Section 75 of the Consumer Credit Act states that in the case of loss or damage to goods, a credit card issuer is liable, along with the supplier of goods or services.
The credit card companies are basing their argument on the fact that the current interpretation of the Act leaves them in the role of insurer to foreign suppliers about which they have no knowledge.
The legislation came into effect in 1974, before the arrival of the Internet and when the use of credit cards was still in its infancy.
Since then there has been an enormous increase in credit card purchases overseas and there are also concerns that wider awareness of the law has led to fraudulent claims.
However, Martyn Hocking, the editor of Money Which? magazine has pointed out that “British consumers spend about £12 billion on their credit cards overseas each year when on holiday and credit card companies make a lot of money back from those transactions.”
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