Overseas credit card purchases are protected

The Office of Fair Trading (OFT) has won an appeal ruling which means consumer safeguards on credit card purchases made in the UK will generally extend to cover purchases made abroad, whether in person or online.

Three judges of the Appeals Court last month overturned a High Court ruling which refused protection for overseas transactions.

In the UK, consumers paying for goods with a credit card are protected by a provision in the Consumer Credit Act of 1974, section 75, that allows them to make a claim directly against their credit card company or the supplier if they discover problems with goods or services purchased with their card.

The credit card issuer and the supplier are jointly liable if the consumer has a valid claim for misrepresentation and/or breach of contract by the supplier – provided the cash price of an item is over £100 and less than £30,000, and the credit limit is no more than £25,000.

But there has always been a question mark over whether this protection applies to goods purchased overseas, and in July 2004 the OFT asked the High Court to issue a definitive declaration that it did.

Card issuers Lloyds TSB, Tesco Personal Finance (part of The Royal Bank of Scotland group) and American Express Services Europe Limited opposed the motion, arguing that there is no such protection.

In November 2004, the High Court found in favour of the card issuers, ruling that domestic transactions – whether from a shop, by mail order, by telephone or over the internet – are protected, but overseas transactions using a credit card are, in general, not protected at all.

The OFT appealed the ruling.

Giving the opinion of the Appeals Court late last month, Lord Justice Waller ruled that the protection did apply.

"In our view the primary purpose of the section is to provide additional protection for debtors under credit agreements of the kinds to which it relates," he said.

"There is nothing in section 75(1) or (2) that provides for a distinction to be drawn between transactions entered into in this country and transactions entered into abroad, to say nothing of transactions entered into on the internet, the place of which may be quite difficult to determine," he explained.

Consumer groups were pleased at the result. Mike Naylor, principal researcher at Which?, said: "It is great news for consumers that they are now officially covered wherever the card is used."

Lloyds TSB expressed disappointment at the ruling, but explained: "The purpose of the original case was not about reducing consumer protection, but to gain legal clarity over this complex principle. Before and since the original judgment, Lloyds TSB has met valid foreign Section 75 claims up to the amount charged to its credit cards and it will continue to do so."

The bank is considering whether to appeal to the House of Lords.

See: The ruling.

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