Over the years we have produced a number of articles covering the protection afforded by Section 75 of the Consumer Credit Act 1974. Without spending too much time going over the act in detail, basically S75 provides protection for credit card purchases over £100 but not exceeding £30,000. The legislation covers the full purchase price not just any deposit made with a credit card. So if you pay a £100 deposit by credit card for a £5,000 TV and pay the remaining balance by bank transfer, if the TV blows up, a S75 claim may be presented for the full £5,000 not just the £100 deposit.
There are a number of rules and a number of pitfalls that claimants need to be aware of as these claims are not as straight forward as some financial advice websites would have you believe.
It is certainly a fact that claiming using S75 is a fabulous piece of consumer protection legislation but it is definitely not as simple as it used to be, maybe this has something to do with the estimated cost of £53bn that banks and credit card companies have paid out to put right the PPI scandal. In this article we propose to delve a little deeper and go under the bonnet of S75 to explain the problem areas likely to involve the rejection of a claim.
Under the Bonnet
The DCS Link
Initially let’s get familiar with the terms that credit card companies use. They often refer to DCS, this is an acronym for Debtor, Creditor, Supplier.
- Debtor – You
- Creditor – The credit card company
- Supplier – The person or company you purchased goods or services from.
So having got the first piece of jargon out of the way let’s look at the primary reasons allowed to make a claim, they are as follows:
- Faulty goods.
- Mis selling.
- Misrepresentation.
- Breach of Contract.
- Fraud.
Although it is not a requirement within the law, in the event of a claim, many creditors will ask if you raised the complaint with the supplier before presenting the claim. Although this doesn’t really have any significance, if you have evidence that the supplier is not responding or accepting liability this may assist in the final decision from the creditor.
The Statute of Limitation
The next piece of jargon you may encounter is the “Statute of Limitation” this refers to the Limitations Act 1980 which basically states that you have up to 6 years to lodge a claim, this is far from straightforward. Most creditors would argue that if you have received faulty goods, felt you were mis-sold or have been the victim of fraud or misrepresentation then you most certainly would, or should have raised a complaint long before the expiry of the limitation period.
Breach of contract is an entirely different matter, the law states that the limitation period commences from the date that the breach occurred. For example, you paid a not insignificant sum to purchase a long term timeshare 10 years ago, then the resort went into liquidation last year, your contract was established 10 years ago but was breached one year ago, the 6 year statute starts from the date of the liquidation so you would technically have 5 more years to make a claim. This may also be adjusted because the law also states that the limitation period may likewise commence from the date you became “reasonably aware”. Using the example above, it may be that you received no communication from either the resort or the receiver and so only became aware of the problem when trying to book your holiday for this year, thus the six year limitation starts this year from the date you became aware.
The DCS Link Revisited
We referred to the term DCS earlier, this itself is a potential serious problem when presenting a claim. The law requires that there must be a visible link between the debtor, creditor and supplier. Simply put, if you purchased a widget from Smiths Ltd then the supplier is Smiths Ltd. If Smiths is not the name of the company stated on your credit card statement then a problem occurs as the creditor will say the DCS link is broken.
This problem is far more evident than you may think. Many small companies who do not qualify to have their own credit card facility (Merchant Account) and will often use what are termed “merchant acquirers” these are third party clearing houses so although you purchased through Smiths Ltd your credit card statement shows DEF Ltd.
This would also apply to people, for example, who have booked concert tickets through a third party ticket agency and the concert was cancelled. The card provider could argue that as the payment wasn’t made directly to the supplier of the goods or service, Section 75 doesn’t apply. Below is an extract from a true customer enquiry to a respected money website:
“I paid for a Greek hotel using Hotels.com. The hotel wasn’t as described: for example, the swimming pool wasn’t in use, there was no air conditioning and no sea view.
I complained to the credit card company (Co-op Visa) but it responded that as I paid through a third party they are not liable under Section 75 of the Consumer Credit Act 1974.
Is this true? If so I believe that more people need to be aware of this.”
Here are some of the third party payment gateways that may present DCS problems and hinder a S75 claim;
- World Pay
- Global Payments
- First Data
- Eco
- Cardstream
Another surprising addition to this list is PayPal, although PayPal does offer it’s own payment protection scheme, below is an official comment from the Financial Ombudsman Service:
“Although PayPal appears as the merchant on the cardholder’s statement, it cannot be seen as the supplier in a debtor-creditor-supplier agreement under Section 75 because it merely acts as the payment intermediary by transferring the money from the buyer’s account to the seller’s account. Therefore it breaks that chain to be considered under Section 75.”
Section 184 Consumer Credit Act 1974
This is another section which often presents problems concerning owners and directors. As another example of where the DCS link will flounder. Philip and Colin are old friends and are both carpenters with separate businesses in the same town, Philip has a credit card facility and allows Colin the use of it. Colin sells a wardrobe to a customer and takes payment by credit card using Philips credit card facility. The customer complains about the wardrobe but does not receive satisfaction, he raises a S75 claim with his creditor. The card company ask if there is any co-director relationship or family relationship between Philip and Colin, the answer is no. S184 states if they are not relatives and neither of them is a co-director of each other’s company then the DCS link is broken and the claim will go no further.
Financial Ombudsman Service
If your S75 claim is rejected by the creditor and you firmly believe that they are in the wrong, you have the right to lodge your complaint with the Financial Ombudsman Service (FOS) who will investigate and deliver their decision. The FOS will only invigilate on the evidence provided by both parties, so it must not be taken that they will automatically uphold your complaint. Another factor with the FOS is the investigation time scale, it is not unusual for a complaint to be held in a queue for in excess of a year or more! As a final point, if the FOS rejects your claim it is closed for good with no right to reply.
Conclusion
At the risk of being boring we have not covered the full chapter and verse in relation to the problems and pitfalls ready to stand in the way of a successful claim, but believe us there are many more spurious reasons given by creditors to reject claims.
The Financial Conduct Authority (FCA) now regulates claims companies and it stipulates that all these companies must state:
“You do not need to use a claims management company to make your complaint to your bank, and if your complaint is not successful you can refer it to the Financial Ombudsman Service yourself for free.”
Or similarly, we would strongly suggest that you engage the services of an FCA regulated Claims Management Company (CMC) that will represent your interests on a no-win no-fee basis. Claims of this nature may also be handled by solicitors, who in turn are regulated by the Solicitors Regulation Authority. It is also possible to engage the services of an EU lawyer as defined in the European Communities (Services of Lawyers) Order 1978 (2).
Given the £53+ billion repayments on PPI, banks and creditors are using the full weight of the legislation to reject claims. We have only highlighted some of the potential pitfalls of the DIY route but believe us there are many more.
As you are visiting the Timeshare Consumer Association website and reading this article we can only conclude that you may be contemplating compiling a S75 claim relating to a long term holiday product. If that is the case, let us know and we will direct you towards a recommended regulated no-win no-fee Claims Management Company. Sure they will require a split of the winnings, but the law stipulates that this type of claim can only be handled on a no-win no-fee basis and X% of something is worth a darn sight more than 100% of nothing.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk