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28 June 2007
The Financial Ombudsman Service has announced that it will be issuing guidelines to make Section 75 of the Consumer Credit Act 1974 clearer in relation to the protection that consumers can receive through making credit card purchases.
The decision to make these guidelines clearer comes after years of confusion from both credit card companies and consumers over the level of protection that cardholders can benefit from.
Over the years credit cards have taken some flack over their contribution to the high levels of consumer debt in the UK, but recent reports have indicated that those getting into severe debt through credit card spending are in the minority, and the majority of credit card holders are actually sensible and responsible about using and repaying their credit cards.
A recent report has actually highlighted just how beneficial credit cards can be for those that make purchases on them and repay them sensibly and responsibly.
Credit cards offer convenience, ease, and flexibility to cardholders, but they also offer protection to those that make purchases on their cards.
Poor service, failure to receive goods that have been purchased on the card, and faulty goods that have been purchased via the credit card can all be covered by the card issuer according to the regulations in Section 75.
However, according to the Financial Ombudsman there is a great deal of confusion over the details of Section 75, with some consumers assuming that they are protected against things that they are actually not covered for and some credit card companies believing that they are not responsible for issues that they are actually supposed to take responsibility for.
An official from the Financial Ombudsman Service spoke about these misconceptions, and stated: "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."
He 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.
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