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Shop with confidence: section 75 helps consumers avoid losing out

Consumers can take steps to help protect their money against the failure of vulnerable retailers and holiday firms

This year is set to be a tough one for retailers and holiday firms. Shoe retailer Barratts Priceless, toy and gift shop Hawkin’s Bazaar and fashion chain D2 Jeans have gone into administration since Christmas, and analysts predict there will be further casualties on the high street. The travel industry is also suffering. In 2011, more than 40 travel agencies went bust and others issued profits warnings.

Consumers have been tightening their purse strings, but they still need and want to make purchases. Buying items just before a firm goes bust can cause problems – when the retail chain Focus DIY closed in May, it left 10,000 customers without £3m worth of orders – so how can you shop confidently, knowing you won’t end up out of pocket if something goes wrong?

Use a credit card

Anyone looking to make a big-ticket purchase this year would be well-advised to do so on a credit card, thanks to Section 75 of the Consumer Credit Act. This makes the credit provider jointly liable with the retailer for anything you buy, provided the item costs between £100 and £30,000. This also applies to anything bought with a credit agreement through a store, so if you sign up for an interest-free credit deal, you are covered.

The protection covers undelivered goods and those that prove to be faulty, and services such as flights, after the retailer has disappeared. You only need to put the deposit on your card, not the whole cost, and you can pay it off straight away, so you do not need to get into debt to get the protection. If you do not have a credit card, it is even worth applying for one just for this purpose.

Should you need to make a claim, the government-funded body Consumer Direct has a template letter you can download and send to your credit card provider. Bear in mind, the cover does not extend to items paid for with credit card cheques. You can compare credit cards with our comparison tool.

Pay on your other plastic

Using your debit card does not offer the same level of protection, but it may give more than you realise. Visa, MasterCard and American Express all offer a scheme called chargeback, which enables customers to claim back money spent on a debit or prepaid card if the goods do not arrive or are faulty, or where the retailer has gone bust.

Visa’s scheme has no upper limit on spending but does have a time limit on claims. This period is 120 days, which “starts from the day you are aware of a problem”, according to Visa’s terms. When an airline goes bust, the countdown starts on the day that the flight was due to depart; when a retailer goes out of business the time limit “starts from the day the cardholder is made aware that the supplier is unwilling or unable to provide the goods”.

This sounds vague, but Visa says: “Cardholders will generally become aware of the issue as soon as they don’t receive their goods. If the cardholder intends to pursue chargeback, the vast majority do so soon after the issue becomes apparent.”

If you do have a problem with something bought using a Visa debit or prepaid card, you must address any claim to your bank, rather than the card operator.

MasterCard’s scheme is similar – it sets a minimum spend of £10 but no maximum. Again, customers must contact the bank that issued their debit card, and MasterCard says the individual banks set a time limit for claims. “The issuing bank provides the cardholder with a timeframe within which to begin their claim, taking into consideration the 120 calendar days’ timeframe stated under MasterCard’s rules to initiate the chargeback,” it says. “The start date for this timeframe is typically the expected delivery date of the goods or services not provided.”

American Express also offers chargeback on its charge cards. Again, the time limit for claims is 120 days. Where a company goes out of business, that period starts on the day it announces it is going into administration.

These chargeback schemes are voluntary – unlike Section 75 which is set in law – but do not be put off if the person you speak to at the bank claims to know nothing about them.

Chargeback also covers purchases made on credit cards that are not covered by Section 75 because they fall outside the £100-£30,000 cost bracket.

Avoid paying upfront

This won’t always be an option, but is worth bearing in mind if it is. If there is no extra charge for paying just the deposit now and settling the rest when you get your hands on the goods, this might be the most sensible option – especially if you are paying in cash and have no other protection.

Going Atol

If a travel company goes bust, the Atol (Air Travel Organisers’ Licensing) scheme will give you your money back or bring you home if you are already on holiday. The scheme is run by the Civil Aviation Authority (CAA) and primarily covers package deals.

If you want to put together your own holiday but want Atol protection, you could use websites such as Expedia or, which sell flights from budget carriers alongside separate hotel deals, but are Atol protected.

You have one year from the date of the company’s failure to put a claim into Atol. You can check if a firm is covered by Atol on the CAA’s website. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds