Consumer Credit Consultancy and Training

EQUAL LIABILITY (s.75)

Equal liability is the joint liability of the creditor for breaches by a supplier. It is easy to forget the restrictions on the effect of this Section, so be careful! Section 75 provides that :

 The key points, for Section 75 to apply to an agreement, are:

·       it must be a D-C-S agreement,

·       the cash price of any specified single item must be more than £100 and no more than £30,000, and

·       there must be a potential claim against the supplier.

Note that Section 75 does not apply in the case of hire-purchase, conditional sale and credit sale agreements. In these, the owner/seller is the creditor, the supplier merely acting as his agent. It follows that, in general, there can be no claim for breach of contract or misrepresentation against the supplier, since such action would have to be taken against the creditor. Section 75 is therefore irrelevant, and claims fall automatically against the creditor.  

It also does not apply in the case of debit cards - where recovery of a payment is made almost immediately, or at least within one month as a single payment. These cards are not regarded as "credit" and are therefore exempt from the Consumer Credit Act. However, there are limited rights for holders of

•  Visa Connect and Visa Delta cards, where there is non-supply or fraud, and 

• Maestro and Switch cards for fraud only. 

In case of difficulty over claims in such cases, it may be worth trying the Financial Ombudsman Service.

Also, beware of payments by credit card to a system such as Paypal for purchases on Ebay. There is no connection between the supplier of the goods on Ebay, and the issuer of your credit card. However, if the seller is a trader, there is a suggestion that Section 75 may apply, and this is currently being investigated by OFT. A recent opinion from the Financial Ombudsman Service and the Financail Services Authority confirms this view.

Common problems with Section 75

Credit cards agreements made before the Act came into force (1977) are not covered, although creditors have agreed with the OFT to honour claims up to the value of the debit. Use of credit cards abroad is certainly covered - the foreign supplier having indirect pre-existing arrangements (see s.12) with the UK creditor via an international network, and civil claims being met by local laws. Anyway, there are always conditions set by the international networks (eg Visa, Mastercard) requiring local banks to remedy breaches by their suppliers.

The decision in OFT v Lloyds/TSB, Tesco Personal Finance Ltd and American Express Europe Ltd confirms that overseas transactions are caught, as decided in the Court of Appeal on 22 March 2006. (It is understood that Lloyds and Tesco have given notice of appeal to the House of Lords.

Within the UK, it is unlikely that British courts would support creditors avoiding claims by suggesting that the supplier was not recruited by them to the network, on a similar basis to claims from abroad.

Other excuses include where the credit has been paid off (arguable since the claim would lie at the date of the contract), where the trader was not in existence at the time when the credit agreement was made, or where the breach relates to a long-term guarantee.

Finally, some creditors try to avoid travel claims where cards were used at travel agents, on the grounds that the agent was an agent of the consumer. It is unlikely that the courts would accept this in most cases since the agent clearly works for the travel provider.

This page last updated 21/11/2006 (c) Bob Imrie