The consumer watchdog has won a landmark
appeal that will give holidaymakers greater protection when
using credit cards abroad. The Office of Fair Trading was
successful in its appeal against a ruling that consumers
who use their plastic abroad are not entitled to the same
'money back' protection as in the UK when the goods or services
they have purchased turn out to be faulty.
Lord Justice Waller, Lady Justice Smith and Lord Justice
Moore-Bick overturned Mrs Justice Gloster's November 2004
decision that Section 75 of the 1974 Consumer Credit Act,
which makes the lender jointly liable with the retailer
for faulty purchases, did not apply to overseas transactions.
The judge had rejected the OFT's case against three representative
credit card issuers, Lloyds TSB, Tesco Personal Finance
(part of the Royal Bank of Scotland group) and American
Express Services Europe.
The card companies had argued that, if Section 75 applied
abroad, they would 'become the insurers of some 29m foreign
suppliers', most of whom they would never have heard of.
As the availability of a remedy under Section 75 became
better known among an 'increasingly aware' population
of consumers, the card issuers would be at risk of being
inundated with claims whose merits they would be incapable
of assessing, it was argued.
The card companies said that, as an example, they would
'become the insurer, for no premium, of the performance
of most of the hotels in the world' where bills were commonly
paid by credit card.
They would also be liable for credit card purchases over
the internet from fraudulent foreign suppliers who failed
to deliver.
The judge upheld the companies' argument that Parliament,
in passing Section 75, intended it to apply only to domestic
transactions which were subject to the jurisdiction of
the English courts.
Today, the appeal judges said that connected lender liability
under Section 75 attached to all transactions entered
into using credit cards issued under consumer credit agreements
regulated by the 1974 Act - whether they were entered
into in the UK or elsewhere.
Lord Justice Waller said that the creditor's right to
recover against the supplier was ancillary to the Section's
'primary purpose' which was to provide additional protection
for debtors under credit agreements of the kinds to which
it related.
To allow otherwise would be contrary to the intention
of Parliament. He said that although card issuers did
not restrict the provision of credit to transactions entered
into in this country, there was nothing in Section 75
that provided for a distinction to be drawn between transactions
entered into in this country and transactions entered
into abroad - to say nothing of transactions entered into
on the internet, the place of which might be quite difficult
to determine.
They were unable to find any indication within the Act
that it was intended to be confined in the way suggested
by the banks.
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