Credit card companies liable for overseas purchases

(via OUT-Law) The English Court of Appeals has finally ruled in the long running case of the Office of Fair Trading v Lloyds TSB Bank & Others [2006] EWCA Civ 268. The dispute was initially brought by the OFT against several credit card comanies to make sure that they fulfilled their obligations under s75 of the UK Consumer Credit Act, which states that credit card suppliers can be sued by their customers in case of breach of contract or misrepresentation on the part of the supplier of goods and services for transactions between £100 and £30,000. This is an extremely useful tool because it allows consumers to make their claims against a company with which they already have a contractual relationship, instead of having to chase a merchant.

The dispute arose because credit institutions claimed that the provisions of s75 did not apply to international transactions. They argued that there was no contractual relationship between UK banks and overseas companies. The case was initially won by the UK card suppliers, [2004] EWHC 2600 (COMM), but the OFT appealed. The new ruling concludes:

“…we have reached the conclusion that section 75(1) does apply in cases where the supply transaction was entered into abroad. In our view the primary purpose of the section is to provide additional protection for debtors under credit agreements of the kinds to which it relates. One of the difficulties in the way of the banks’ argument is that although under modern conditions card issuers do not, and for commercial reasons cannot, restrict the provision of credit to transactions entered into in this country, there is nothing in section 75(1) or (2) that provides 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 may be quite difficult to determine.”

This is interesting because it is a recognsition of the difficulty of drawing borders in a global e-commerce environment. A very sensible ruling in my opinion.

Tip of the day: If you have aUK credit card and you are booking a holiday abroad, use your credit card!