House Of Lords' Credit Ruling Pleases Consumers

Consumer and retail business confidence in the busy run up to Christmas received a boost when the House of Lords clarified consumer safeguards on credit card purchases made abroad. This landmark ruling gives purchasers buying from abroad, whether in person, on the phone or via the internet the same rights as UK purchasers.

In the UK, the law protects consumers paying for goods with a credit card, which effectively means credit card purchases of between £100 and £30,000 are insured by the credit card issuing company. If the consumer discovers problems with the goods or services purchased with the card he or she can make a claim directly against the credit card issuer.

However, for some years now the position where a consumer buys abroad using a credit card was unclear.

Originally the High Court ruled in November 2004 that the provisions of the Consumer Credit Act only applied to domestic purchases, whether from a shop, by mail order, by telephone or over the internet, but did not apply to foreign credit card transactions.

This decision was appealed to the Court of Appeal in March 2006 who disagreed and ruled that the provisions applied to all transactions whether they were entered into in the UK or abroad. The case was appealed once again and the House of Lords have confirmed that they are in agreement with the decision of the Court of Appeal.

The case arose because credit card companies were concerned that they are effectively acting as insurers and this could create exposure to potentially large liabilities. One example used was that if a consumer hired a car abroad using a credit card the card issuer may be liable for losses arising from a crash. The credit card companies felt this should not be the case arguing that in general there is a presumption that UK legislation only applies in the UK.

The other side of the argument said that there was nothing in the wording of the statute to indicate it did not apply to foreign transactions. The Courts felt that when a transaction goes wrong the card issuer is in a better position than the consumer to pursue a foreign supplier.

This decision is disappointing to credit card companies but it is welcomed by consumers who will now receive greater protection. For all parties it is good news as it clarifies this issue and consumers can buy-buy-buy over the internet during the busy Christmas period with full protection whether they purchase from the UK or abroad.

Published 06/11/2007. The author of this article is Kelvin Farmaner