Credit card companies battle to reduce levels of consumer protection overseas

Posted in 'Personal Finance' by Richard Catlin

10 October 2007

A number of leading credit card providers have appealed to the House of Lords to challenge legislation that protects consumers when using credit cards abroad.

Section 75 of the Consumer Credit Act 1974 give consumers protection for goods or services purchased using a credit card.

For purchases of between £100 and £30,000, your credit card company is jointly responsible with the seller of the goods, if there be a problem with them.

Lloyds TSB, Tesco Personal Finance and American Express are now arguing that the law is dated, as it was enacted in 1974, when there were only a small number of foreign transactions. Today, they argue, millions of transactions are carried out abroad each year.

Lenders feel that they are effectively forced by Section 75 of the Act to become insurers for foreign transactions. This is the latest in a number of attempts to get the provisions of the Act amended. The Court of Appeal has already rejected one challenge. At the time of writing, a decision is still pending on the latest challenge.

Although card issuers are challenging the Act based on what they feel are dramatic changes to the credit card environment in recent years, this particular section of the Consumer Credit Act 1974 was one of the few that was very clearly defined, without room for ambiguity, and with clearly laid out exemptions. Cards such as Visa and MasterCard have always been marketed on the basis that they are accepted worldwide. Although there may not have been such a choice of cards in issue in the mid 1970’s, most people – an estimated 16 million consumers - had a Barclaycard Visa card or a MasterCard issued by NatWest, Lloyds or Midland (now HSBC), or both.

It is widely believed that if the card companies lose the battle to restrict their liability, this will prompt a significant increase in the surcharge imposed on foreign transactions – usually 2.75% - by the card companies. Only the Post Office do not currently charge an extra fee for use of cards abroad - the Post Office card is our best buy.

We’ll be carefully monitoring the outcome of the case, and we’ll publish news on any ruling as soon as it is released. In the meantime, if you are looking to switch credit cards, you can see which lenders are matched to you based on your credit score, by using our free Find a Lender Service – simply click here.