A girl in my office was left seething today after being ripped off by an unscrupulous trader on the internet. She had made the mistake of purchasing from a dodgy website. The Michael Korrs bag she was expecting to receive was nothing more than a very cheap counterfeit.
Having realised she had used a MasterCard credit card to pay for the bag, I advised her that she was protected through purchase protection. Customer services at Halifax had advised her otherwise.
“Outrageous! You have purchase protection.” I cried. Yet upon further investigation it appeared the information given was correct. It seems there is more than meets the eye to purchase protection or as it’s also known Section 75.
Section 75? Ok let’s break it down…
Section 75 is a UK law created in the 1970’s that means your credit provider must take the same responsibility as the retailer if things go wrong with a purchase.
If you pay for something that costs between £100 and £30,000 on credit and the provider is equally liable if something goes wrong”
It is legal protection to ensure you are not indebted for something you didn’t receive, was faulty or wasn’t as it should have been. TV’s, laptops, holidays, you name it, if it was paid on a credit card, store card or a store instalment card then the credit provider is responsible too.
What does it cover?
Section 75 offers great protection, meaning if you order something and the retailer goes bust, you can still claim back your money from the credit provider. This is also applicable if you’ve since closed your credit account.
It applies to most, but not all credit agreements. The main areas covered are credit cards, store cards, store instalment credit and some car finance agreements. This does not include hire purchase.
If the issue is non delivery or faulty goods, the same rule applies to for the credit provider, retailer or flight company or supplier.
- You order a mirror and it never arrives
- You by a laptop only to find it’s faulty
- You book a holiday and the company goes bust
In all these cases highlighted your lender is jointly liable for a refund.
If you are making a purchase or ordering tickets or flights worth more than £100, pay some or all of it on a credit card to make sure you’re protected. Always keep your receipts or bank statements.
Remember that on some occasions you may not be able to protect yourself, for e.g. if you pay a monthly fee of less than £100 to a company that goes into administration. Always check to see if you can use other consumer protection, such as chargeback.
Does the bill or item have to cost more than £100?
This is where it gets a little bit more complicated. The law is clear, the £100 for the cash value of a ‘single item’ (so excluding any fees such as postage and delivery charges). However, single items aren’t always so clear so be careful not to get caught out.
Here are a few examples to guide you:
- Fly to Lanzarote, on flights costing £70 outbound and £33 back, while it’s over a £100 in total, as no single ticket was over £100, you’re not protected. Yet if you had been sold return journeys and you bought a specific £103 return ticket then you’d be covered.
- If a suit jacket and trousers were individually priced at £60 each, you’re not covered, but if you bought the suit as a whole for one price of £120, you are covered.
A trick to help – pay the deposit by credit card and you’re covered
The law’s specific on this, you get the protection for the whole cost of an item or service, even if you only pay for a part of it on credit. The only condition is that what you’re buying costs more than £100 and less than £30,000.
Therefore if you want protection…
As long as it costs more than £100, pay for even a fraction on a credit card and you’re protected.
What’s not covered by Section 75?
As always with these things, a few exceptions escape the safety net. First is anything to do with the purchase of land – this is controlled by regulation from the Financial Conduct Authority. But there’s other purchases that escape the safety net too…
- Items costing less than £100 or where you use a debit card or charge card
- Goods/services paid for by a secondary cardholder
- Goods/services bought through intermediaries – travel agent, group-buying sites, Paypal etc
- Using the credit card indirectly
- Where the credit provider & supplier are the same – eg, catalogue accounts
- Hire purchase agreements – car finance, some electrical goods etc
If you do not have a credit card due to personal choice or poor credit history you can also get the same benefits with a prepaid card displaying the MasterCard symbol.
It is a convenient way to shop online with the added purchase protection without the worry of overspending or accruing any debt. The best thing about a prepaid card is you can only spend what you have, reducing the risk of running up any unnecessary debt.