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Last Updated: Friday, 12 November, 2004, 16:35 GMT
Setback for UK credit card users
A couple on a beach
The UK trading watchdog sought clarification from the courts
UK consumers using credit cards abroad should not be covered by UK payment protection rules, a court has ruled.

The High Court has said Section 75 of the Consumer Credit Act 1974 does not apply to overseas purchases.

Under the rule, shoppers have the right to claim against the card issuer if a purchase is unsatisfactory, faulty, or the seller refuses to compensate them.

The Office of Fair Trading (OFT) asked the court for an official ruling, as some lenders were refusing to pay out.

The OFT has argued the rules should cover transactions made abroad or on goods purchased from overseas suppliers through the internet, over the telephone or via mail order - and not only on goods bought in the UK or from UK-based shops.

Section 75 provides that for credit purchases with a cash price above 100 and not more than 30,000 the consumer is entitled to claim form the lender if things go wrong. For example, if the supplier breaches the contract

Its view was opposed in court by Lloyds TSB, Tesco Personal Finance and American Express.

Grey area

Section 75 has become a useful safety net for British consumers, as foreign travel and online shopping have increased in popularity.

But there was increasing uncertainty if the rule, which is based in UK law, applied on purchases made outside the UK's borders.

This confusion meant that some lenders were not compensating consumers while others were.

Some lenders said it had become too expensive to underwrite purchases in this way.

The OFT said it was considering whether to appeal the ruling, which will apply not only to purchases made abroad but also from overseas suppliers, via the internet, for example.

We believe credit card companies should protect their customers wherever they buy
Teresa Perchard, Citizens Advice

Citizens Advice Director of Policy Teresa Perchard said she found the court's decision "disappointing".

"It means that travellers and holiday-makers buying goods and services in another country will not automatically have the same protection as those making purchases at home," she said.

"We believe credit card companies should protect their customers wherever they buy."

She advises consumers to check their terms and conditions before they purchase a credit card and to switch to those companies who have said they will provide this protection.

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