March 23, 2006

A ruling was made yesterday forcing credit card companies to extend their credit card guarantee scheme to purchases made abroad.

In a unanimous decision, the ruling overturned a previous court order in 2004, which was in favour of credit card companies who had argued that their credit card insurance should not cover purchases for faulty goods abroad. The new ruling confirms that Section 75 of the Consumer Credit Act does indeed apply to overseas transactions.

The credit card companies argued that they cannot possibly be made liable for the behaviour of foreign and overseas companies and that they do not have the resources to monitor the expected flood of claims.

The decision taken yesterday by Lord Justice Waller, Lady Justice Smith and Lord Justice Moore-Bick is seen as a victory for the Office of Fair Trading. On studying Section 75 of the Consumer Credit Act, the judges could not find anything that confined the credit card guarantee protection scheme to Britain. Lord Justice Waller said, “In some respects it would be productive of great uncertainty and inconvenience if it were, since it would then become necessary to determine precisely where the transaction in question had been entered into,” Lord Justice Waller did concede that credit card companies may face practical difficulties in clawing back claims from companies overseas, however, he felt these could be overcome.

A spokesman from The Office of Fair Trading said, “"We welcome the judgement today. Its really good news for consumers,"

Of the three credit card companies involved in the dispute, Lloyds said it would consider appealing the decision. In a statement Lloyds said, “The ruling means that a credit card customer can, for example, make a purchase abroad for 30,000 pounds, put just one pound of the purchase price on their credit card and then claim against the credit card company for millions of pounds in consequential losses,"