Reference Case Number: FOI8136
Freedom of Information: Right to know request:
I would be grateful if you supplied me with any information you hold, whether current or historical, on how s.75 of the Consumer Credit Act 1974 applies to payments for travel services made via a travel agent.
The reason I am interested in this issue is that it seems to be a widely held belief that if I pay a travel agent for an airline ticket, or a package holiday or a hotel then I have no rights against the airline, the tour operator or the hotel under s.75 even if they are in breach of contract. The reason given for this is because the credit is supplied by the travel agent not the travel company - and so long as the travel agency does what they are contracted to do e.g. make the booking, that exhausts my rights under s.75.
So if the FCA, or in the past the OFT, has considered this issue I would be interested in seeing any assessment of whether this view is correct or not. Information I would be interested in includes but is not restricted to: working papers, reports, advice, consultations, emails, memos, conference papers etc.
FCA response:
Relevant information relating to your request can be found in our March 19 Final Report on our ‘Review of retained provisions of the Consumer Credit Act’
This report takes into account the views of stakeholders including from responses to the interim report which we published in August 2018.
https://www.fca.org.uk/publication/discussion/dp18-7.pdf[2]
The final report was submitted to HM Treasury. The report did not include formal recommendations to the Treasury but provided analysis and evidence to enable decision making by the Treasury.
In the report we reference the issue that you have enquired about, acknowledging the uncertainty of the scope of s.75 where payment is made to an intermediary. We also state our view that, whether a debtor-creditor-supplier relationship exists or not, will depend on the specific arrangements and effect of the commercial structures, which can vary between cases.
The particular paragraphs likely to be of interest to you are detailed in Annex A below.
The content of these paragraphs reflects the FCA’s views. No decisions regarding the future of the CCA have as yet been made by HM Treasury.
The uncertainty around s.75 provisions leads to queries being received by the FCA from press and other interested parties. We attach a model response to general queries received, which may be of interest to you- again the opinions expressed reflect the content of our March 2019 report.
Annex A
Relevant paragraphs of our March 2019 Final Report
Paragraph 5.34 references payments to intermediaries as being one of the areas of uncertainty with the application of s.75. It reads:
5.34 There may be uncertainty about the scope of section 75 where payment is to an intermediary which is not itself providing the relevant goods or services and may not be acting as agent of the supplier (for example, travel agents).’
Paragraphs 5.32 and 5.33 are also relevant to your enquiry:
5.32- However, we recognise that technology and payment methods in the credit market have developed considerably since section 75 came into force, and issues not specifically within focus when the provision was framed have emerged. This has led to issues concerning the scope and application of the provision and uncertainty for both firms and consumers.
5.33- For example, the use by suppliers of third party payment processing firms has raised questions about whether this breaks the necessary link between the debtor, creditor and supplier, and so may make section 75 inapplicable. Whether a debtor-creditor-supplier relationship exists or not will depend on the specific arrangements and the effect of the commercial structures, and these vary. Ultimately, only a court can provide a conclusive view on whether a debtor-creditor-supplier relationship exists in an individual case.
Note 2- Model Response to General Queries on the scope of s.75
Overview of Section 75 and Chargeback (on background)
| Payment methods |
Protection |
Eligibility Criteria |
Customer Claims Process |
|---|---|---|---|
|
Credit Cards* |
Section 75 of the Consumer Credit Act The credit card issuer has joint and several liability with the seller, if the seller fails to supply the goods or services, or has supplied faulty goods, or misrepresented what it is supplying. This means the customer can pursue a claim against the seller or the credit card issuer or both. The credit card issuer cannot insist that the customer claims first against the seller. |
Customer used credit card to pay for goods or services with a cash price of between £100 and £30,000. A claim can only be made if the purchase using the card was by the ‘debtor’ under the card agreement rather than by an additional card holder or authorised user added to the account. There must be arrangements between the credit card issuer and the supplier, against whom there is a claim for misrepresentation or breach of contract. If those arrangements are broken by the involvement of an intermediary or third party in the payment chain, Section 75 protection may not apply. Claims will be time barred after 6 years under the Limitation Act 1980. |
Customer writes to the credit card issuer, stating what they bought, where and when they bought it and how much they paid. They also include proof of purchase. Customer explains why they consider the supplier to be in breach of contract or misrepresentation with any supporting evidence and that they want compensation from the credit card issuer, for example to refund the purchase price under Section 75 of the CCA. |
|
Debit Cards and Pre-Paid Cards* |
Chargeback Chargeback is a voluntary scheme for refunds of debit card payments, in which Visa, Mastercard, Maestro and American Express participate. |
The scheme enables customers to claim a refund from their card provider if the goods or service is not provided or is faulty. Usually no minimum spend requirement. Time limits apply for making a claim – usually up to either 45 or 120 days from making the purchase, depending on the type of card. |
The card issuer tries to claim money back from the seller by reversing the transaction. Chargeback claims can take some time to process because the card issuer has to obtain the money to be refunded before it can refund the customer. |
On background:
- If a provider of goods or services has failed to provide the contracted goods or service, and the consumer made a credit card payment to purchase the goods or services, the consumer has a right under S.75 of the Consumer Credit Act 1974 (CCA) to pursue either the supplier or the card issuer, who are both jointly and severally liable for any breach of contract or misrepresentation.
- A claim can be made if the cash price of the goods or service is over £100 and less than £30,000. So a £25 deposit on the card can fall within a s.75 claim.
- For example, most travel insurance policies are designed to cover customers where they have suffered a financial loss resulting from the cancellation of travel arrangements. In order to determine whether there has been such a loss, it is usually reasonable for the customer to find out if they can obtain a refund from their travel provider, before claiming on their insurance. However, there could be circumstances where it would be unfair to ask the customer to pursue a refund before making a claim. We expect firms to treat customers fairly where they become aware of such circumstances.
- All travel insurance policies are different, however, most are usually designed to cover customers where they have suffered a financial loss resulting from the cancellation of travel arrangements in specified circumstances, for example, this may be where they have had their travel cancelled as a result of Covid-19 but have been unable to claim a refund from their travel provider or their card provider.
- If the travel has been cancelled, a customer should speak to their travel provider directly about a refund as this may be the quickest and easiest route to claim. If the travel provider is a UK firm, they are expected to offer a full refund, under Competition and Markets Authority guidance.
- The CMA have clearly stated[3] that customers, in the context of coronavirus, are entitled to a refund in the event that ‘a consumer cancels, or is prevented from receiving any services, because Government public health measures mean they are not allowed to use the services. We would encourage you to speak to the CMA on the impact of coronavirus on consumer contracts and consumers rights in the event of cancellation.
- Whether or not a customer can claim (on a chargeback or Section 75) if they have decided not to travel may depend on contractual arrangements, and therefore, will be decided on a case-by-case basis.
- The Money Advice Service[4] has published some information to help consumers understand their rights and options available to them in these circumstances.