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Last Updated: Tuesday, 2 October 2007, 08:51 GMT 09:51 UK
Lords to decide credit card case
Credit card
The Lords must decide if the law extends to purchases abroad
The House of Lords is to decide if credit card companies must refund customers when goods bought abroad are damaged or are not delivered.

The Consumer Credit Act suggests that cover applies on goods worth between 100 and 30,000, just as it does to goods bought in the UK.

But banks, led by Lloyds TSB, are challenging this.

They say it is unfair and are asking for a final decision after previous High Court and Appeal Court hearings.

The card companies argue that they are being placed in the position of an insurer for possibly millions of foreign suppliers of whom they may know nothing.

"Clearly it is far more difficult for the lender, who can obtain redress in turn from the supplier, on the borrower's behalf effectively, to do that overseas," said Eric Leenders of the British Bankers' Association.

Overseas

Section 75 of the Consumer Credit Act says a credit card issuer is liable, along with the supplier of goods or services, if there is a problem.

Lawyers say there is a grey area where the card was used abroad.

The law came into effect in 1974 when credit card use was much less common.

Nowadays people frequently use their cards when travelling abroad.

"More and more people are discovering those rights, and more and more credit card companies are becoming a little more worried about fraudulent clams," said Hugh Evans of law firm DLA Piper.

Martyn Hocking, the editor of Money Which? magazine criticised the banks' approach.

"British consumers spend about 12bn on their credit cards overseas each year on holiday and credit card companies make a lot of money back from those transactions," he said.

A further complication has been thrown up by the increasing purchase of goods over the internet, where credit cards are used where it is not obvious where the supplier is based.

The House of Lords hearing, which is a test case brought jointly with the Office of Fair Trading, is expected to last two days.

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