Liability for misrepresentations in overseas credit card transactions extended to credit card entities as well as suppliers

30/11/2007

The House of Lords recently decided that consumers who use their credit cards overseas are to receive the full protection of s. 75 of the Consumer Credit Act 1974, which provides, inter alia, that creditors in credit card transactions, as well as suppliers of goods, are jointly and severally liable for losses where there is a claim for misrepresentation or breach of contract against the supplier. This means that consumers can claim against creditors as well as, or instead of, a supplier. This had long been the case in domestic credit card transactions, but the House of Lords extended the rule to overseas transactions.

The limits on the scope of the applicability of s. 75 apply equally to overseas transactions as they do to domestic transactions. For instance, this protection only applies to transactions over £100 and less than £30,000. It also does not apply to debit or charge card transactions. This is because the debit and charge card transactions do not require the same credit-giving relationship and responsibility upon the company issuing credit facilities.

The Office of Fair Trading first applied to the court for this ruling in 2004, and it was resisted by Lloyds TSB, Tesco Personal Finance and American Express.

The OFT has outlined four common situations in which consumers will now be protected by s. 75:

i) when a consumer uses a credit card to buy goods or services while abroad,
ii) when a consumer orders goods and services from a foreign supplier while abroad for delivery in the UK,
iii) when a consumer in the UK buys goods or services from overseas by telephone, mail order or over the internet which are delivered to a UK address, or
iv) when there are face-to-face pre-contract dealings with a foreign supplier temporarily in the UK, or with a UK agent of a foreign supplier, but the contract is not completed in the UK.

This decision reflects the fact that billions of pounds are spent overseas each year (over £10 billion in 2006), and that the law should offer suitable protection to accommodate this.

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