Appeals court rules card companies must provide overseas guarantees

Appeals court rules card companies must provide overseas guarantees

	Published : Thu, 23 Mar 2006 09:25 By : James Rowe Print this Story

LONDON: Credit card companies are liable to extend the guarantees for goods and services purchased abroad by credit card holders, the Court of Appeal has ruled, setting aside an order of the High Court.

The decision Wednesday is on an appeal preferred by the Office of Fair Trading and will prove to be a boon, especially to online shoppers.

Lord Justice Waller of the Appeal Court said in his ruling, "We have reached the conclusion that connected lender liability under Section 75 of the Act attaches to all transactions entered into using credit cards issued under consumer credit agreements regulated by the Consumer Credit Act 1974, whether they are entered into in the UK or elsewhere."

The High Court had previously held in a case raised by the OFT that goods-and-services guarantees did not extend beyond Britain. The OFT had appealed against the decision.

Three credit card companies -- Lloyds TSB, Tesco Personal Finance and American Express -- opposed the appeal.

Normally card companies meet the bill for unsatisfactory purchases made in Britain if they are between 100 and 30,000 pounds. Most of these companies did not extend this guarantee if the goods or services are purchased abroad, or bought over internet.

However, some card companies like HSBC, HBOS, MBNA and Sainsbury's Bank meet claims on overseas transactions as a gesture of goodwill. While lenders including NatWest and Royal Bank of Scotland look at cases individually, Barclaycard meets claims only to the extent of amount spent on the card.

The court was told that U.K. consumers make purchases worth 13 billion pounds overseas every year.

The credit card companies claimed that the ruling can bring forth scores of foreign claims, which could affect their business. They cited the instance of services availed in a hotel. As most travellers settle hotel bills by credit cards, the ruling could effectively mean the card companies will have to act as insurers of the services provided at the hotel abroad.

The Appeals Court refused permission to the card companies to appeal to the House of Lords. However, they have the option of going directly to the Lords. At least Lloyds TSB said it would consider such an option.

Lord Justice Waller said in his judgement that he acknowledged that card companies may face 'practical difficulties' in recouping money from foreign companies who sell faulty goods, but these could be overcome.