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Personal finance

Credit-Card Issuers Face Scrutiny over Overseas Liability

Strategic Insights

— 1 min read

The Office of Fair Trading (OFT) has issued a report that may force credit-card issuers to take responsibility for transactions gone wrong outside the UK. According to the report, card issuers who deny liability for breaches of contract or misrepresentation by foreign retailers are themselves in breach of their legal obligations. The OFT's director-general, Sir Bryan Carsberg, has clarified that the law relating to disputes between card issuers and customers is clear and not ambiguous. Consumer groups have welcomed the OFT's stance, but credit-card issuers such as Lloyds and Barclays are still uncertain about changing their policy.

Key Takeaways:

  • The Office of Fair Trading (OFT) has issued a report stating that card issuers who deny liability for breaches of contract or misrepresentation by foreign retailers are in breach of their legal obligations.
  • The OFT's director-general, Sir Bryan Carsberg, has clarified that the law relating to disputes between card issuers and customers is clear and not ambiguous.
  • Consumer groups such as the Consumers' Association have welcomed the OFT's stance, but credit-card issuers such as Lloyds and Barclays are still uncertain about changing their policy.
  • The OFT recommends that customers exhaust all means of redress against the retailer before approaching the card issuer with claims.
  • A public hearing will be held later this year to thrash out the details of what constitutes exhausting all claims against the retailer.
  • Credit-card issuers have been persistently arguing that section 75 of the Consumer Credit Act only applies in the UK.
  • The OFT's view is not binding, but it may persuade credit-card issuers to change their stance.

Statistics:

  • 75: The section of the Consumer Credit Act that the OFT says card issuers are jointly liable for misrepresentation or breach of contract.
  • 100% uncertainty: The OFT's view is not binding and it is uncertain if credit-card issuers will change their stance.
  • 1 public hearing: Scheduled to be held later this year to thrash out the details of what constitutes exhausting all claims against the retailer.

Sources:

  • The Sunday Times, 1994

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