Taking A Chance On Section 75 (Consumer Credit Act 1974)
Monopoly players know that if you are lucky you can be dealt a “Get out of Jail Free Card”. Increasing numbers of consumers are becoming aware that, by paying with a credit card, they may avoid many of the problems that can arise with retailers.
Section 75 of the Consumer Credit Act provides that, for certain types of debtor-creditor-supplier arrangements, any claim the debtor may have against the supplier in respect of misrepresentation or breach of contract, he can also maintain against the creditor who will have the same liability for it as the supplier.
The types of arrangement that provide this form of consumer protection depend on there being a pre-existing arrangement between the creditor and supplier to provide credit to the debtor for certain goods or services. So it covers credit or store card purchases, but not items paid for with debit cards or charge cards such as American Express. Certain types of agreements for financing items such as motor vehicles or furniture will also come under Section 75 protection.
A classic example of the application of Section 75 is where goods are bought by a credit card from a retailer who then goes into administration before the goods are delivered. In the absence of those goods the credit card company would be liable to the customer for a refund of the purchase price.
Section 75 does not only apply to goods. Services are also covered. So if building work is carried out and found not to be up to standard then, if payment was made by credit card, the credit card company can be liable for the remedy. Basically if goods or services fail to materialise, are faulty or mis-sold in any way, then the creditor can end up being responsible for problems it played no part in creating.
Of course, any creditor caught in this way will be entitled to be indemnified by the supplier, but that is of no comfort if the supplier has gone out of business.
Section 75 imposes financial limits on transactions. It does not cover claims relating to a single item of less than £100 or more than £30,000. But even these restrictions can carry a sting in the tail. A motorist buys a new car. He pays £100 on his credit card as a deposit to secure the vehicle and arranges for a bank loan (not covered by Section 75) for the balance. The dealer goes bust. Payment of part of the transaction by the credit card would enable the motorist to claim all his money back from the credit card company. He will not even have to pass Go!