Under our remit we can deal with certain complaints that involve the quality of goods or services bought using particular types of consumer credit.
This is not because we cover suppliers of goods and services under our remit. The businesses we cover provide financial or payment services, or carry out consumer credit activities.
Instead, it is because some consumer protection laws make the provider of credit liable in certain circumstances for some problems with goods or services obtained using credit.
The law in this area is complicated. These web pages do not give legal advice or set out all the relevant consumer law. The aim of this section of our website is to explain:
While we can consider complaints about any sort of goods or services bought with certain types of credit, we have also included some extra information about credit purchases we receive many complaints about - such as motor finance, holiday-club membership and furniture and kitchens.
Section 75 of the Consumer Credit Act 1974 is complex and this section of our website is not intended to provide a full explanation of the law.
Instead, this web page explains the main requirements of section 75 and how we usually approach the types of complaints consumers bring to us in this area. We also look at some of the common misunderstandings that businesses and consumers have about section 75.
Section 75 only applies where goods or services are bought using types of consumer credit where arrangements are already in place between the supplier of the goods and the provider of the credit. When the consumer uses that credit to make a purchase, this creates the necessary connection between the consumer, the lender and the supplier.
For section 75 to apply, the provider of the credit and the supplier of the goods need to be separate businesses. Occasionally we see a complaint where the supplier of the goods has itself made the loan to the consumer to buy the goods - so no claim is possible under section 75.
Complaints referred to us are usually about problems with goods bought using a credit card or with a "point of sale loan" (a type of loan arranged through, and paid direct to, the supplier of the goods).
In some cases we see, the consumer has bought online, using a credit card on a website that uses a secure third-party payment system to process credit card payments.
Section 75 may not always apply to transactions made this way, because this payment mechanism can break the chain of arrangements that must be in place between the consumer, the lender and the supplier.
But there are many different types of payment mechanisms used on suppliers' websites and not all of them prevent section 75 from applying. Where there is a dispute on this point, we look at the specific payment mechanism used and decide whether section 75 applies in the particular case.
Section 75 sets a number of financial limits for the transactions it covers. It does not apply to a claim which relates to any single item to which the supplier has attached a cash price of less than £100 or more than £30,000.
In some cases we see, the consumer and the credit provider disagree on whether or not the transaction falls within these limits. Where this happens, we consider this point first - and then go on to look further into the complaint, if we decide that the transaction is within the limits.
Mr McF used his credit card to buy a travel voucher for £220 that was valid for ten single trips. He had made three trips using the voucher when the travel provider went into administration.
The credit card provider argued that the value of each individual trip under the voucher would be less than £100. It said this meant it could have no potential liability under section 75.
We disagreed. Mr McF had not purchased ten individual trips costing £22 each - he had purchased a single voucher costing £220. As the item purchased under the contract was above £100, it was covered by the provisions of section 75.
Miss L entered into an agreement to buy a new-build holiday apartment in Cyprus, costing €125,000. She was required to provide a deposit of €5,000, which she paid using two credit cards - one to pay €3,000 and the other to pay €2,000.
For various reasons, the deal fell through, and Miss L lost her €5,000 deposit. She complained to each of the credit card issuers, making a claim under section 75 on the basis of misrepresentation by the developer.
Neither of the card issuers was willing to refund the amount paid towards the deposit. Each one said this was because the transactions were not covered by section 75, as the total cost of the apartment exceeded £30,000 (the maximum limit under section 75 for the cash price of the goods or services bought). Miss L argued that the transactions were covered by section 75, as her claim related to a deposit of €5,000 rather than to the total price of €125,000.
We did not agree. Among other things, for section 75 to apply, the cash price of the goods or services bought must be above at least £100 and no more than £30,000. We could understand why Miss L had focused on the €5,000 that she had paid for the deposit, seeing that as the "price". But Miss L had not bought a deposit. She had bought an apartment, for which she had paid a deposit of €5,000 towards the total price of €125,000.
As €125,000 was considerably in excess of the upper limit of £30,000 applying under section 75, we were satisfied that section 75 did not apply in Miss L's case. And so neither of the card issuers was under any liability to refund the payments she had made for the deposit.
Section 75 only helps the consumer where there has been either a breach of contract or a misrepresentation by the supplier of the goods and services. These are legal terms. But for the purpose of section 75 and put very simply:
We do not expect consumers to make complicated legal arguments about breach of contract or misrepresentation. Instead, we ask the consumer to tell us exactly what happened, so that we can assess for ourselves whether there are grounds for a successful claim under section 75.
In some of the cases we see, there is a question about whether the person who contracted to buy the goods is the same person who was provided with the credit.
This is important because of the connection between the consumer, lender and supplier that is necessary for section 75 to apply. Where this question arises, we consider this point first, taking into account the facts in the case - and then we go on to look further into the complaint, if we decide that the transaction is covered by section 75.
The complaints we see show that there are frequent misunderstandings by consumers and businesses about how section 75 works. Here are some of the most common misunderstandings we see:
Section 75 gives an automatic entitlement to a refund, if credit was used to fund the purchase.
No. There is no automatic entitlement to a refund under section 75. Instead, the consumer has the same claim against the lender that they would have against the supplier of the goods, if there were a misrepresentation or a breach of contract by the supplier.
You have to take the supplier to court before you can claim against the lender under section 75.
No. The consumer does not have to take the supplier to court before making a claim against the lender under section 75. In most of the cases we see, the consumer will have complained initially to the supplier - because this is usually the quickest way to get things put right. But the law does not require the consumer to pursue the supplier first, for section 75 to apply.
All purchases made with plastic cards are covered by section 75.
No. Section 75 only covers transactions made using consumer credit. So only transactions made with credit cards (including most store cards) are covered. Transactions made using other types of plastic cards - like charge cards or debit cards - are not covered by section 75.
Section 75 gives you a "cooling-off" period.
No. By itself, section 75 does not give any "cooling-off" period to the consumer. So, for example, section 75 would not allow a consumer to cancel a transaction following a change of heart about a purchase.
You can claim under section 75 if you do not get value for money.
No. Section 75 gives the consumer a right to claim against the lender in specific circumstances - where there was a misrepresentation or a breach of contract by the supplier. But there is no claim simply because, for example, you find you could have bought the same goods at a better price somewhere else - or if, on reflection, you feel the purchase was not worth the money.
If you bring a claim under section 75, the most you can get back from the lender is the amount of the credit.
No. Where section 75 applies, it gives the consumer exactly the same claim against the lender as they would have against the supplier of the goods or services, if there were a misrepresentation or a breach of contract by that supplier. This might be more than, or less than, the amount of the credit transaction - depending on what happened.
Different rules apply under section 75 if you use your credit card abroad.
No. The same rules for coverage under section 75 apply to credit card transactions made abroad as for credit card transactions made in the UK. But the sterling equivalent of the price must still be within the £100 to £30,000 limits.
Some more complex purchase contracts made abroad may specifically say that the underlying contract is governed by the law of another country. This could affect the consumer's ability to claim against the supplier (and, therefore, to claim under section 75).
Section 75A came into force on 1 February 2011 - through the implementation of the Consumer Credit Directive - but applies to regulated agreements made on or after 11 June 2010 . It supplements section 75, rather than extending it. This note is not intended to provide a full explanation of the law. But put very simply, section 75A will normally have effect where all of these things apply:
Before making a claim against the credit provider under section 75A, the borrower must first take reasonable steps to get the provider of goods or services to settle the claim.
The aim of this section of our website is to set out:
We also look at some of the common misunderstandings that businesses and consumers have about hire purchase.
This section of our website is not intended to provide a full explanation of hire purchase, or to give legal advice.
Hire purchase agreements are consumer credit contracts that give the consumer the right - but not the obligation - to buy the goods at the end of the hire purchase term. Section 75 does not apply to hire purchase.
We can deal with complaints about Consumer Credit Act-regulated hire purchase agreements - including complaints about the quality of goods obtained using hire purchase.
This is because the Supply of Goods (Implied Terms) Act 1973 says that, in a hire purchase agreement, there are implied conditions (conditions that the law says you can assume are in the contract even if they are not written there), including conditions that:
Most of the complaints we see about the quality of goods obtained with hire purchase involve motor finance.
Under a hire purchase agreement, the hire purchase business owns the goods and lets them out on hire to the consumer. The consumer may either return the goods and end the agreement - or have ownership of the goods transferred to them on completing payment.
Many of the consumers who refer complaints to us about hire purchase do not realise that what actually happened when they "bought" the goods was the following:
Because they are unsure how these arrangements work, many consumers initially contact the original supplier - rather than the hire purchase business - if there is a problem with the quality of the goods supplied. This may sort out the problem. But the hire purchase business remains responsible if things are not resolved.
We also see complaints from consumers who have bought goods using "conditional sale" agreements. A conditional sale agreement is in some ways similar to hire purchase. But there are also some significant differences, which we will take into account when dealing with individual complaints.
The complaints we see show that there are frequent misunderstandings by consumers and businesses about responsibility for the quality of goods provided under hire purchase agreements. Here are some of the most common misunderstandings we see:
A hire purchase business has no control over the quality of the goods supplied, so can't fairly be held responsible if there are problems with the goods.
No. The Supply of Goods (Implied Terms) Act 1973 provides certain protections for consumers. It says that a contract for hire purchase will be taken to include terms that (among other things) require:
So the law makes the hire purchase business liable in these circumstances.
If there are problems, a hire purchase business will do what it can on a goodwill basis to try to sort things out with the supplier. But there is little more it can do - after all, it is a finance business not a goods manufacturer.
No. The hire purchase business has legal responsibility (under the hire purchase contract) for the quality of the goods, so it is obliged to put things right for the consumer if there are problems with quality. What "putting things right" means will, of course, depend on the individual facts of the case.
The goods I got on hire purchase belong to me - I can do what I like with them.
No. Consumers who obtain goods on hire purchase do not own them, unless they exercise the ownership option at the end of the hire purchase term (which may involve an additional payment over and above the monthly hire purchase instalments).
Hire purchase agreements typically place restrictions on what the consumer can do with the goods during the term of the hire purchase agreement - particularly in relation to altering or modifying them.
If problems arise because of changes the consumer has made to the goods without the agreement of the hire purchase business, then the business is unlikely to have any responsibility to put things right. It may even mean the business is entitled to be compensated by the consumer, if the changes cause damage to the goods.
Most of the complaints we see about the quality of motor vehicles bought using consumer credit involve either hire purchase or a "point of sale loan" (a type of loan arranged through, and paid directly to, the supplier of the goods - and usually called "fixed-sum loan agreements" in the motor finance trade).
But we also see complaints from consumers who have bought vehicles using credit cards.
Under all these types of consumer credit, the loan, credit card or hire purchase business may be liable to put things right for the consumer if there is a problem with the quality of the vehicle. For hire purchase this is because the satisfactory quality of goods is a term of the hire purchase agreement. For fixed-sum loans, it is because the transaction is covered by section 75 of the Consumer Credit Act 1974.
Where something goes wrong with a motor vehicle bought with credit, consumers often contact the garage they got the car from - as the first step in getting things put right. This can often be the sensible first step, to see whether things can be sorted out quickly and easily.
In the complaints we see, the consumer is often of the view that the garage did not put things right. Or there may be a series of problems, requiring repeated visits to the garage, going beyond what the consumer feels they could reasonably be expected to accept.
Where this happens, the consumer may be uncertain whether to pursue the complaint with the hire purchase or loan business or with the garage - and which business to complain about to us, if things remain unresolved.
We find that some hire purchase and loan businesses strongly encourage consumers to complain to the garage - sometimes suggesting (mistakenly) that any problem with the quality of the vehicle is not something they can help with.
Complaints about the quality of the vehicle can only be brought to the ombudsman service as complaints against the provider of the credit, not as complaints against the garage.
We also consider complaints against credit providers from consumers who say they bought a vehicle because the garage misled them about something important - for example, significantly understating the mileage of the vehicle.
The garage itself will be covered by the ombudsman only in relation to any consumer credit activity it carries out. Usually this will be for credit broking (arranging the hire purchase or loan). This means we can consider complaints directly about the garage only if they involve the way the consumer credit was arranged - and are not about the quality of the vehicle obtained with the consumer credit.
Consumers are entitled to expect a brand-new vehicle to be free from even minor faults, including cosmetic ones.
But the position is different where a consumer buys a used vehicle. Vehicles suffer from wear and tear during their working life and the price of a used vehicle is expected to take this into account.
Regardless of its age and price, a used vehicle must have a working engine and be safe to drive, unless it is sold with a clear statement to the contrary.
Consumers are entitled to expect that all vehicles sold will be of "satisfactory quality". What constitutes satisfactory quality for a vehicle will usually depend on all the relevant circumstances, including:
When we consider the complaints that consumers refer to us, we use the available evidence to make our own assessment as to whether or not the vehicle was of satisfactory quality when it was sold.
Miss Z obtained a new car using hire purchase. Very soon after she drove it home, the car developed a recurrent fault. Although Miss Z took the car back to the garage and had the fault fixed on several occasions, it did not seem that the garage was able to stop the fault.
Miss Z had made a note of each visit she had been required to make to the garage, and she had kept all the paperwork from the repairs. She then got a report from a mechanic who specialised in the make of car she had bought. In his opinion, the fault was significant and potentially serious. As the hire purchase business did not resolve her complaint about the quality of the car, Miss Z complained to us about it.
Looking at the evidence that Miss Z had provided, we were satisfied that the car was not of satisfactory quality. It was a new car, and in the circumstances we considered that she was entitled to reject it, end the hire purchase agreement, and receive a refund of the money she had already paid to the hire purchase business.
Mr P obtained a five year old car using a "fixed-sum loan" arranged through the car dealer. Six months later he complained to the garage that the car was unreliable as he sometimes had trouble starting it. The garage checked the car over and made some minor adjustments to the engine, which it said should resolve the starting troubles. It also noted that there had been unusually high mileage since Mr P had taken the car.
Mr P continued to argue that the car was unreliable, and complained to the garage and to the loan business. He said he should not have to pay any further loan instalments. He wanted to give the car back and get a refund from the loan business under section 75. The loan business did not accept that the car had not been of satisfactory quality, and so Mr P brought the complaint to us.
We asked Mr P for details of the problems he had experienced with the car. He was unable to provide any convincing information and had no records, for example, of the occasions on which the car had not started. In all the circumstances, we were not satisfied that he had a reasonable claim against the loan business under section 75.
Depending on what has gone wrong, the type of information and evidence we are likely to ask for in cases involving the quality of motor vehicles may include, for example:
If we decide that the vehicle was not of satisfactory quality, and that the credit provider is liable for putting things right, we assess what should be done to put things right in the particular case. To do this, we will consider the individual facts and circumstances - and decide what the fair outcome should be.
For many of the cases we uphold, the fair outcome might include requiring the consumer credit business to do one or more of the following:
Complaints about the sale of holiday-club membership make up a significant proportion of the cases that are brought to us against consumer credit providers, where a claim is made under section 75.
In the cases we see, many of the consumers have paid for their holiday-club membership using a credit card.
Consumers normally complain that the holiday-club membership did not provide what they had been led to expect from the contract or from the discussions they had in the run-up to buying the membership.
For section 75 to apply, there must be an unbroken connection between the consumer, the lender and the supplier. Without this connection, the law says that section 75 cannot apply - and so we could not find that the credit card provider was liable to put things right for the consumer.
In many of the holiday-club complaints we see, it is not immediately clear whether or not this connection exists. For example, the sale may have been made in the following circumstances:
Another typical sales situation we see is where:
Not surprisingly, consumers who come to us often find it difficult to:
The Consumer Credit Act says that for a claim under section 75 to be successful, the consumer must have a claim for breach of contract or misrepresentation against:
In the ordinary use of the word, we could say that any of the various companies involved in the examples above could be described as "associates" of one another.
But the Consumer Credit Act does not use the word in the ordinary way. It provides a legal definition of who are "associates" for the purposes of section 75. This definition is quite complicated - but it is what we have to use, when we consider whether the necessary "consumer-lender-supplier" connection is in place to make section 75 effective.
Because many of the companies involved in these arrangements are based outside the UK, it may not always be easy to prove that they are "associates".
We do not have the power to make any of these overseas companies or individuals answer our questions. So we rely on the information that the consumer and credit card provider give us, and on information that is publicly available (for example, information held at Companies House - where UK companies are registered - or the equivalent body in the country where an overseas company is registered).
We can only go on to consider the consumer's claim for breach of contract or misrepresentation, if we are satisfied that the necessary "consumer-lender-supplier" connection exists.
In many of the holiday-club cases we see, the necessary connection does not exist and so we are unable to help further. We know this is very disappointing for the consumer, who may feel they have been caught out by a "technicality".
But what we are looking at is the claim against the provider of the credit - and the provider of the credit can only ever be liable if section 75 applies to the transaction.
For the credit card provider to be liable, there needs to have been:
We do not expect consumers to make complicated legal arguments about breach of contract or misrepresentation. Instead, we will ask for copies of the holiday-club membership contract, together with any other documentation the consumer received about the membership - so that we can see for ourselves what these documents say.
We also ask the consumer to tell us exactly what happened, including any discussions they had before taking the holiday-club membership. We use all this information to assess whether, in our opinion, there are grounds for a successful claim under section 75.
Mr J attended a presentation about holiday-club membership, while on holiday in the Canary Islands. After hearing about the features of the club, he decided to go ahead and pay for membership using his credit card.
After Mr J got home, he received his membership certificate and documents. He began to think about the benefits provided by the club (which gave various deals on flights and accommodation in the Canary Islands). And he discovered that, by spending some time online to research and book independently, he could get deals at least as good as those available through the holiday club.
He contacted his credit card provider and explained that he felt he had been rash in taking the holiday-club membership, which he thought gave little in return for the fee. He asked the credit card provider to refund the money he had paid, under section 75. The credit card company did not agree that there had been any breach of contract or misrepresentation and so would not refund any money. Mr J brought his complaint to us against the credit card provider.
Even on Mr J's own account of the information he had been given in writing and orally about the holiday club, there had been no misrepresentation about what the club membership would provide. While the club membership did not appear to represent a good bargain, there was no doubt that the club was prepared to provide the benefits promised under the contract. We decided that Mr J did not have a successful claim under section 75.
Mrs M attended a presentation about holiday club membership. The membership was sold and arranged by company A, but the membership itself was provided by company B. In addition the membership package included a cash-back guarantee provided by company C. The paperwork which Mrs M signed at the time made it clear that neither company A nor company B was responsible for the performance of the guarantee.
When Mrs M received the guarantee paperwork, she realised that the amount of money she would get back (if any) was dependant on investment returns and on her meeting a number of strict conditions.
We accepted Mrs M's evidence that she had been assured by company A's representative that she would definitely receive all her money back from company C - and that, had it not been for this assurance, she would not have bought the club membership. We decided that she did therefore have a claim for misrepresentation against company A - and a similar claim under section 75 against her credit card supplier.
Most consumers who refer complaints to us about holiday-club membership bought with credit cards want the credit card provider to refund the cost of the membership.
Where a successful claim is made under section 75, the credit card provider will be liable for exactly the same claim that the consumer could have brought against the holiday club - even if only part of the cost was paid using the credit card.
If the consumer used more than one credit card to pay the cost of membership, then potentially each of the credit card providers is liable for the whole of the claim. Of course, the consumer cannot expect to receive overall redress totalling more than the value of their claim. So if a consumer brings complaints to us about two or more credit providers in relation to the same holiday-club purchase, we may apportion redress between them if we uphold the complaints.
If we are satisfied that there has been a misrepresentation or breach of contract, we assess what we consider is the fair way to put things right in that particular case - taking into account the individual facts and circumstances. This might be the cost of the holiday-club membership - but it could be more, or less, than that amount.
We also see complaints from consumers who have responded to approaches (usually over the phone) from companies who offer to find a buyer for a consumer's existing holiday time-share. The consumer has typically paid an administration fee by credit card, but then the time-share re-sale does not happen.
As with complaints about holiday-club memberships, in these cases we consider whether there appears to have been a misrepresentation or breach of contract - creating a claim under section 75.
Because much of the communication between the consumer and the time-share re-sale company in these cases was often oral, and not written down, we frequently have to decide what was probably said during those conversations.
We deal with a significant number of complaints about the quality of furniture and kitchens bought using credit - usually where the consumer has paid with either a credit card or a "point of sale loan" (a type of loan arranged through, and paid directly to, the supplier of the goods).
Where either of these types of credit is used to buy goods, section 75 will usually apply. So we will consider whether there was a misrepresentation by the supplier that caused the consumer to buy the goods - or a breach of contract by the supplier. If we decide this is the case, the credit provider will be liable for the losses caused to the consumer.
Furniture and kitchens bought by consumers from retailers must by law be of "satisfactory quality". Basically this means they must be fit for purpose, safe, free from defects and with a reasonable standard of durability, appearance and finish for the price.
If the goods have been bought on the basis of samples in a showroom - which is often what has happened in the cases we see - the goods that are provided must correspond with the samples. Where, for example, the retailer also agrees to fit a kitchen, the work must be carried out to a satisfactory standard.
In most of the cases we see, the consumer's complaint is that the goods they bought with credit were not of satisfactory quality - for example, that the "matching" suite of furniture that was delivered did not match, or that the fitted kitchen was poorly finished and badly installed. Where this is the case, the supplier is in breach of contract.
In some cases, the consumer says they bought the goods because of something incorrect that the supplier told them - for example, buying a table that the supplier describes as "solid oak" which is later found to be only oak veneer. This is what is known as a "misrepresentation".
We do not expect consumers to make complicated legal arguments about breach of contract or misrepresentation. Instead, we ask the consumer to tell us exactly what has happened and to provide copies of all the sales documentation they received from the supplier - which might include print-outs of web pages if information about the goods was provided online.
We also ask for any other relevant evidence from the consumer or the business - for example:
Once we have the relevant evidence, we use it to decide for ourselves whether there are grounds for a successful claim under section 75.
Mrs D bought a suite of dining table and six chairs, after choosing from samples in the furniture showroom. She paid using her credit card. When the suite was delivered, she found that four of the chairs were a different shade of wood finish from the table and the other two chairs. She pointed this out to the delivery men, who said she would have to take it up with the supplier.
Mrs D raised a complaint with the supplier, who said that she had received what she had paid for. The supplier pointed out that the contract specified a "set of table and six chairs in pine" and that is what had been delivered. Mrs D then raised a complaint with her credit card provider, which agreed with the supplier that there was no breach of contract. She brought her complaint to us, providing her copy of the sales contract and photographs of the dining room suite taken in both natural and artificial light.
We agreed that there was a very noticeable difference in the shade of the wood finish used in the furniture. Given that the furniture was sold as a "set", and that the sample set on which Mrs D had based her decision to buy had been matching, we were satisfied that Mrs D had a good claim under section 75.
We decided that the credit card business should refund the cost of the furniture, including the interest that had been charged on the credit card balance. We also directed the credit card company to arrange for collection of the dining room suite from Mrs D's home.
Mrs B bought a pile carpet for her living room, using her credit card to pay for it. When the carpet was fitted, she was disappointed to see that the appearance of the carpet did not look uniform throughout the room - with patches of shading in the pile, which altered the appearance of the carpet. Mrs B did not like the look of the carpet and felt that either the carpet was faulty, or that she should have been warned by the salesman - before being asked to pay - that this would happen.
As Mrs B's credit card provider was not willing to refund the price she had paid for the carpet, she brought her complaint to us. We were satisfied, from the evidence Mrs B had provided, that the carpet was not faulty. This particular type of pile carpet was intended to shade naturally, depending on the way the pile and the light fell. Although this was not to Mrs B's personal taste, it was not a defect and we did not agree that the salesman should have "warned" her about it. We did not think that Mrs B had a claim against the credit card provider under section 75.
Many consumers who bring complaints to us about the quality of goods bought with credit are looking to the credit business to refund the price of the goods. In some cases, that will be the fair outcome - though not in every case.
Where a successful claim is made under section 75, the credit provider will be liable for exactly the same claim that the consumer could have brought against the supplier of the goods - even if only part of the cost was paid using credit.
If we are satisfied that there has been a misrepresentation or breach of contract, we will assess what we consider the fair approach is for putting things right in that particular case - taking into account the individual facts and circumstances.
This might involve a refund of the original price of the goods - or the cost of repair or replacement. In some cases, faulty goods may cause additional financial loss which can be considered as part of a claim under section 75 - for example, if a display cabinet with faulty fixings collapses, breaking china and crystal on display in it.
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