MSE News: Ombudsman requests reform of Section 75 credit card protection as more caug

Former_MSE_Ben_S

A loophole in Section 75 consumer credit card protection could be reviewed in the next Parliament...

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'Ombudsman requests reform of Section 75 credit card protection as more caught out by loophole'

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eskbanker

When this was being highlighted in a recent MSE piece and associated forum thread, I was under the impression that the third party payment processors being referred to were largely the likes of WorldPay or other similar independent commercial organisations.

However, based on what's been said to MSE since then (albeit only by disgruntled customers), it would appear that some companies are processing payments via separate legal entities who are clearly closely affiliated with the merchant concerned:

[claim against] Banners Broker [...] was rejected by M&S Bank on the grounds the payment was processed by ‘EW’, the digital e-wallet of Banners Broker.

[claim against] Cottages4you [...] was rejected as the payment was processed by third party Wyndham Vacation Rentals UK I]note that cottages.com is the new home of cottages4you (Cottages for You)....cottages.com is a trading name of Wyndham Vacation Rentals (UK) Ltd[/I

[claim against] Scarlet Reclaim [...] was rejected by MBNA because the payment had been processed by 'payment gateway' AWscarlet.

Would it be too cynical to suggest that card companies could 'encourage' merchants (e.g. via preferential commercial terms) to set up or use separate legal entities solely to handle credit card payments, thereby eliminating the card company's s75 liabilities as they can seemingly just claim a broken D-C-S chain?

molerat

I see MSE salivating over the banks shouldering (justifiably) more responsibility over this but not proposing their liability should, in some cases, be limited and not footing a £20K bill from a £1 payment !

jonesMUFCforever

I do think the act should be reformed - my own personal opinion is that the liability of the card issuer should be limited to the amount paid by any particular card - with the option of taking the wrondoers to court for any damages.

eskbanker

molerat wrote: »

I see MSE salivating over the banks shouldering (justifiably) more responsibility over this but not proposing their liability should, in some cases, be limited and not footing a £20K bill from a £1 payment !

Perhaps it's just semantics but I don't read the article that way, to me it comes across more like aiming to stop the banks from establishing new loopholes that would reduce their liabilities rather than actually seeking to increase them as such.

But let's face it, review of this legislation is long overdue given the massive changes to the credit landscape (and the roles within it) since 1974!

Doc_N

This is a reform which so obviously needs to be made (and urgently) that it needs a manifesto commitment.

And since Theresa May and the Conservatives seem so keen to revise theirs at the drop of a hat, maybe they'd like to add this to it too?

molerat

eskbanker wrote: »

But let's face it, review of this legislation is long overdue given the massive changes to the credit landscape (and the roles within it) since 1974!

Agree with that one

HornetSaver

Assuming this goes ahead, this is one of those very rare occasions where applying the law retrospectively would be appropriate.

People who prior to new rules coming into place, and in every other respect had a valid section 75 claim, should be made whole again.

HornetSaver

jonesMUFCforever wrote: »

I do think the act should be reformed - my own personal opinion is that the liability of the card issuer should be limited to the amount paid by any particular card - with the option of taking the wrondoers to court for any damages.

I disagree - not because I think the card issuer should bear the costs, but because they are the party best able to enforce the solution.

In such a situation I think they should reimburse the claim up to the amount paid by the customer, and hold any further claimed amount in escrow until one party or the other takes the matter to court or relinquishes their claim. In practise that would mean making deductions from future payments to a particular merchant in order to build up the escrow amount.

There should also of course be admin fees payable by the customer in the event of spurious compensation claims - i.e. ones so obvious that the business takes the customer to court and wins. There should also be hefty penalties payable to the card issuer in the event of businesses dragging their heels during the escrow process, and yet when taken to court do not contest the matter - a common practise as the threat of court itself is considered low risk due to the high upfront cost and !!!-backwards nature of our legal system. In other words, create a vested interest on both sides to resolve the situation between themselves. The card issuer is simply there to use its position to wait for the two sides to come to an agreement; using its position to ensure that both sides have an interest in doing so.

quaybab

Financial Services and Markets Act 2000 para 228(1) says the FOS decide a case on fair and reasonable - no laws, rules, terms and conditions etc.
The FOS should just stick to final decisions that do just that?

eskbanker

quaybab wrote: »

Financial Services and Markets Act 2000 para 228(1) says the FOS decide a case on fair and reasonable - no laws, rules, terms and conditions etc.
The FOS should just stick to final decisions that do just that?

The legislation states (with my bolding) "A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case."

The specification of 'fair and reasonable' clearly doesn't and can't exclude pertinent laws, rules, terms and conditions (which will obviously be circumstances of the case) and indeed http://www.financial-ombudsman.org.uk/faq/businesses/answers/decide_cases_a7.html clarifies that

The law requires us to decide each complaint on the basis of what we believe is fair and reasonable. In doing so, our rules require us to take account of the law, rules and good practice in the industry. This is the way in which parliament specifically intended us to operate.

It seems eminently sensible to me that FOS should highlight difficulties impeding its ability to arbitrate complaints and request some reviewing of the relevant legislation....