Thousands lose money because of lack of card protection

Posted in 'None' by Barry Stamp

08 August 2008

This week saw the collapse of wedding list firm Wrapit, leaving 2,000 newly weds without their already paid-for gifts, and many of the estimated 100,000 people who bought them with no prospect of getting their money back.

After suffering heavy losses, administrators KPMG were finally called in. One of the main areas that KPMG will be looking at closely is whether the directors of Wrapit continued to take orders when they had no prospect of fulfilling orders. If so, they may be prosecuted for ‘fraudulent trading’.

Unfortunately, because those customers who have made a purchase but are yet to take delivery of their presents are at the bottom of a fairly long list of creditors, there is little or no chance of them getting a direct refund. Any creditors, such as banks, with loans secured against assets will take priority.

Thankfully, those customers who made their purchase using a credit card should be able to get their money back directly from their bank - because of the extra protection offered to them by their card issuer.

Section 75 of the Consumer Credit Act 1974 holds credit card companies jointly and severally liable for purchases over £100 so if the company fails to deliver, the credit card company either has to do so, or refund the monies.

Unfortunately, the estimated 20% of customers who paid by debit card, such as Switch or Maestro, rather than by credit card, stand little chance of recompense. With 100,000 friends and family buying gifts from Wrapit’s wedding lists, this could represent a considerable loss for many. It’s not always cut and dry on purchases made by debit card as some cards, such as Visa Debit cards, may refund payments in much the same way as if the transaction had been made by credit card. It’s always worth a try – if you find yourself if this position, just ring your bank and ask.

Whilst the press would have us believe that getting a credit card with great benefits is beyond all of us in the middle of the credit crunch, we don’t think that’s the case at all. Card issuers are as keen as ever to get new business, and are rolling out ever competitive offers.

To improve your chances of being accepted first time, checkmyfile will show you cards matched to your credit rating, for free. In addition to the benefits of paying for goods with a credit card that this unfortunate collapse highlights, you can get a great deal on cashback, balance transfers or purchases for yourself at the same time.

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