Consumers told of rule – which can also mean people can use method to gain extra protection without paying it all on card
Martin Lewis has explained a £100 rule which is vitally important for anyone who uses a credit card to make purchases. The personal finance expert spoke out in a new video today – and said the rules mean that people are far better protected if something goes wrong for people using credit cards like those from Lloyds, Halifax, Bank of Scotland, NatWest, HSBC Santander, and Nationwide.
The ITV and BBC star said the ‘Section 75’ rule means people have greater protection – if the item costs from £100 up to a whopping £30,000. He said: “There’s a hugely powerful piece of consumer rights voodoo and it is called section 75. It’s a law that says if you pay or even part pay for something on a credit card and the item costs between £100 and £30,000 then the credit card company is jointly liable with the retailer.”
The money man said that people can split payments and can also mean you don’t have to get the whole sum on your credit card – but you still get the same protection. He explained: “Two things we need to explore from that. First, I did say part pay. And yes, that does mean if you pay for just a penny on the credit card and the rest another way, the credit card company is still liable for the whole amount even if it was 10 grand. And I have had people who have got their money back using just that technique. Then joint liability. It means exactly what it says. It means you have exactly the same rights with the credit card company as you do with the retailer.
“So if an item’s faulty, you can take it to the credit card company. If the company goes bust, well, you can see how powerful it is to have that second right with the credit card company to get them to deal with it. Or maybe you bought an item abroad. It’s too far away to take it back. You can deal with your UK credit card company.
“Overall, you can see why it’s just such a powerful extra protection if you’re making an important purchase. But of course, if you’re putting a lot of money on a credit card, make sure you pay it off in full at the end of the month so that there’s no interest. Slight caveat here, section 75 is normally great, but there are a few technical holes in the rules when it doesn’t work. It’s still better for you to try and use it than not, but I need to warn you of that. And I put a link so you can read further details in the post.”
Customers have been previously given warnings about paying for items purely on debit cards. The consumer advocacy group Which?has pointed out that this payment method does not provide the same safeguards as Section 75 of the Consumer Credit Act. This legislation holds credit card companies accountable for problematic purchases and ensures refunds.
Those opting to use debit cards or credit cards also have the advantage of the chargeback scheme at participating retailers. Which?, said. Money editor Jenny Ross advised: “We’d urge consumers to think carefully before using [pay by bank] to book events or make substantial purchases – for now, your good old-fashioned credit or debit card may be the best option.”
She further warned: “Innovations like pay by bank present opportunities for businesses and consumers alike, but they’re not without risk, particularly as they lack the rigorous purchase protections you get when paying by card.”
While pay by bank users still have basic rights under the Consumer Rights Act, which requires goods to be fit for purpose, accurately described, and of satisfactory quality, Which? has expressed that these rights are not always straightforward to enforce. In some instances, customers might find themselves having to pursue claims through a small claims court.
Particular concerns arise if a business goes bust, especially for future-dated purchases like flights, festivals, or expensive household items. In such scenarios, consumers paying by bank transfer may find it much harder to recover their money compared to those using credit cards, which are protected by Section 75.
Ms Ross continued: “We’re calling on the regulator to act to ensure consumers can use pay by bank with confidence, but in the meantime, we’d urge consumers to think carefully before using it to book events or make substantial purchases – for now, your good old-fashioned credit or debit card may be the best option.”
A spokesperson for banking and finance industry body UK Finance said: “There are a range of options for making payments online which provides customers with choice as to how they wish to pay. Different payment methods do come with different levels of protection and it’s worth being aware of these when shopping online, particularly when making higher value purchases.”
Consumers may encounter problems if a business goes under, according to the consumer group. Section 75 of the Consumer Credit Act 1974 provides protection for consumers who make purchases between £100 and £30,000 using a credit card.
If the goods or services are faulty, fail to arrive, or the seller breaches the contract, the credit card company can be held jointly responsible with the seller. This means that consumers could potentially claim their money back from the credit card provider, even if the seller has gone out of business or is uncooperative.
The Financial Ombudsman Service in the UK stated that it receives thousands of complaints annually from consumers whose claims for reimbursement have been denied by their credit provider.
Which? says if you use a debit card, it’s possible that you may be able to use chargeback instead to get some or all of your money back – for more information read its guide to the chargeback system.
