Credit cards could provide protection for consumers

A recent report has highlighted how credit cards could actually be providing protection for consumers when making purchases.

Over recent years credit cards have been blamed for contributing to rising levels of consumers debt, but those that use their cards sensibly can avoid the long term debt trap and can enjoy the protection, convenience, flexibility, and benefits that credit cards offer.

The protection comes if you purchase goods that do not arrive, are faulty, or if you receive poor service, as according to the law the credit card company has to take responsibility for this. This comes from section 75 of the Consumer Credit Act 1974. However, there are still many complaints that are made to the financial ombudsman each year because many people do not properly understand this law.

There are a number of misunderstandings in relation to this law, and the Financial Ombudsman Service has outlined some of these.

With regards to the misunderstandings the agency said: 'The first is the belief among some lenders that consumers can only claim against them after they have first sued the provider of the goods or services. 'In fact, no such requirement exists and consumers can choose which party to claim against.'

The agency added:  'The second is the belief by some consumers that Section 75 entitles them to a refund on any purchase made with credit. Some consumers also confuse the rights given to them by Section 75 with the automatic insurance coverage that some credit card issuers provide.'

The FOS confirmed that clearer guidelines have now been put together in relation to section 75 to make the regulations clearer to both creditors and consumers to avoid much of this confusion and cut down on the number of complaints relating to this issue.

Tom Smith
29th June 2007