Section 75 protection - why?

redpete

Does anyone know the reasoning behind section 75 protection being given to consumers - i.e. making the CC provider jointly responsible with the retailer for fulfilling the contract if any payment has been made using the card?

It just seems odd, is it because the money is a loan for the express purpose of making the purchase? If so then why doesn't the same apply if you use a debit card to pay for something from a bank overdraft?

Maestro.

I think it's probably just a case of "that's the way it is" but I can imagine it is in a lender's best interest to do this as when you buy on a CC you are not spending your own money, it's the lenders money until you pay it.

Tixy

I believe it was originally set up to mean that you couldn't end up in debt and paying for something that you never actually received (or got the benefit of).

I suppose (and I'm just guessing) that with a debit card and overdraft the retailer does not know whether its a payment from an account with money in or a payment from an account with an overdraft - so it can't be classed as three way agreement between the retailer, bank and customer.

And its legislation from the consumer credit act, which doesn't cover overdrafts anyway.

Road_Hog

redpete wrote: »

Does anyone know the reasoning behind section 75 protection being given to consumers - i.e. making the CC provider jointly responsible with the retailer for fulfilling the contract if any payment has been made using the card?

It just seems odd, is it because the money is a loan for the express purpose of making the purchase? If so then why doesn't the same apply if you use a debit card to pay for something from a bank overdraft?

To maybe ensure that Visa/Mastercard do some basic checks on who they sign up, rather than just adding any fly-by-night company.

chattychappy

Tixy wrote: »

I believe it was originally set up to mean that you couldn't end up in debt and paying for something that you never actually received (or got the benefit of).

I think that's precisely it. It is a throwback to a bygone era (1974) when "consumer credit" didn't really mean credit cards but a bloke arriving at your doorstep and flogging you a hoover on the never-never. (Other vacuum cleaners are available.) Just an alternative to HP. The finance provider was often closely related to the product provider.

Personally I think it's all got a bit out of hand - but it will be a brave regulator/politician that argues for the removal of S75.

thenudeone

The credit card companies choose the suppliers with whom they do business (by allowing them to use the VISA or MC merchant network).

It's not that unreasonable to expect them to take some care in who they allow to do business, and if they don't, they have to pick up the tab when it fails.

thenudeone

The credit card companies choose the suppliers with whom they do business (by allowing them to use the VISA or MC merchant network).

It's not that unreasonable to expect them to take some care in who they allow to do business, and if they don't, they have to pick up the tab when it fails.

InsideInsurance

My knowledge of the merchant account system is fairly limited I have to admit but to the best of my knowledge vetting and liability tends to sit much more firmly with the banks than the networks.

If I make a section 75 claim for something I bought on my Barclays Visa card then I make it against Barclays who issued my Visa card not Visa and it is Barclays that are liable to pay it out not Visa.

If I apply for a merchant account through HSBC it is HSBC that vet my suitability.

As far as I know Barclays cannot then counter claim my monies from either Visa (as the network) nor HSBC (who vetted the merchant). The clause therefore does not create a situation that encourages Visa/ Mastercard/ AmEx etc to vet the merchants that are signed up.

I would agree with others that it is more originally intended as an ethical thing that a consumer shouldnt be paying credit for something they dont have/ is faulty etc.

chattychappy

thenudeone wrote: »

The credit card companies choose the suppliers with whom they do business (by allowing them to use the VISA or MC merchant network).

It's not that unreasonable to expect them to take some care in who they allow to do business, and if they don't, they have to pick up the tab when it fails.

Disagree with this. Whilst they might have some culpability:

1) CCs are effectively payment cards, not "insurance" cards. People expect universal acceptance and expect to use them in the way they use debit cards, cash or used to use cheques. You do say "some care" - true, perhaps. But joint and several liability for every transaction over £100 seems somewhat disproportionate given the little real involvement CCs have in the sale.

2) S75 is a UK thing, but Visa/Mastercard are international. How can Halifax (for example) really "take more care" if the network decides to give a facility to a fake handbag manufacturer in China? Halifax are still on the hook. Unless S75 is adopted worldwide, then due diligence won't be consistent down the chain. Instead of taking more care, the cost of "being on the hook" will be simply be recouped from UK merchants/UK cardholders.

I would prefer to see S75 repealed. CCs could then offer insurance to those consumers that wish to take it up. As it is, I feel I am subsidising other cardholder's carelessness.

flashg67

chattychappy wrote: »

I would prefer to see S75 repealed. CCs could then offer insurance to those consumers that wish to take it up. As it is, I feel I am subsidising other cardholder's carelessness.

Not all S75 claims are due to card holders carelessness. I've used it once and although I'm many things, careless isn't one of them!

redpete

thenudeone wrote: »

The credit card companies choose the suppliers with whom they do business (by allowing them to use the VISA or MC merchant network).

It's not that unreasonable to expect them to take some care in who they allow to do business, and if they don't, they have to pick up the tab when it fails.

I don't think this could be the answer - why would that be any different to who the banks decide to offer the ability to take debit card payments, or cheques? (same response to Road_Hogs similar suggestion)

chattychappy wrote:

It is a throwback to a bygone era (1974) when "consumer credit" didn't really mean credit cards but a bloke arriving at your doorstep and flogging you a hoover on the never-never. (Other vacuum cleaners are available.) Just an alternative to HP. The finance provider was often closely related to the product provider.

That rings true. I suspected it was an unintended consequence of some previous legislation, I wouldn't argue against tidying up this particular piece of legislation. I agree with others that the obligation seems to put an unfair burden on the CC lenders (and comments like "it's only fair payback against the money-grabbing lenders" don't count, I'm genuinely interested in the reasons for the legal obligation).