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The Consumer Credit Rules: What they mean for you
The Financial Conduct Authority has recently taken over responsibility for the regulation of consumer credit in place of the Office of Fair Trading. The Consumer Credit rules and the Consumer Credit Act 1974 provide protection to UK borrowers. So, if you own a credit card, have a loan or any form of borrowing – or if you’re thinking of taking out credit – it’s important you understand the protection it offers you.
Our guide helps make things a little clearer:
What is it?
The Consumer Credit Act was the first Act of Parliament to really put consumers of credit at its centre. Up until that point, the rules surrounding consumer credit were a little hit and miss, and rather than there being an all-encompassing set of guidelines, there were different rules for different borrowing.
Just a few of the things covered included the method used for calculating APR, how credit is advertised, the form credit agreements take and the information consumers have to be provided with, and Section 75 – more of that below.
Section 75 – it’s got your back
Perhaps the most well-known protection offered by the Consumer Credit Act comes in the form of Section 75. But what is this?
Section 75 is a set of laws that protects you for free on any purchases you make using a credit card that are worth between £100 and £30,000. As most credit cards don’t have an upper limit that is even close to £30k, this means that most expensive purchases you make with them are covered.
What this means
If you ordered something online and it was never delivered, you could reasonably ask the retailer to have a new item delivered or get a refund. Similarly, if you bought an item from a shop only to realise it was faulty when you got home, you have the right to have it exchanged or get your money back.
Section 75 applies the same rules to purchases you make with your credit card. It means your credit card provider has to take on a share of the responsibility if there’s something wrong with your purchase.
Why is it there?
The reason for Section 75 is to make sure that consumers are never placed in debt for something that was faulty, not what they ordered, that never arrived or that differed from what they paid for in some way. It’s one thing not getting what you wanted, but having to repay a debt for it is a position no one wants to find themselves in.
So, how does it work? Well, providing the cost of the item was £100 or more, you should be protected and offered a refund. Whether it’s flights overseas, concert tickets or a new computer – you’re covered when you pay on credit card (remember to check the exact details of your own).
An important tip to remember is that the item you’re claiming for must be worth £100 on its own. So, if you go on an online shopping spree and buy three items each costing £40 so that the total bill is £120 and they don’t arrive, you will not be covered by your credit card provider. This is because no one item cost over £100.
Section 75 really does offer great protection for consumers. If you need to make an important and expensive purchase – even if you have the funds available to pay for it in cash or on your debit card – it may make sense to pay for it with your credit card. That way, you have the benefit of the added cover Section 75 provides, even if you repay the balance on your credit card in full straight away.