Banks fail in legal battle over credit cards

Lloyds TSB and Tesco Personal Finance have been defeated in their attempt to have a key piece of consumer protection legislation overturned.

The banks had argued that Section 75 of the Consumer Credit Act – which states that purchases of between £100 and £30,000 on a credit card must be insured by the card provider – should not apply to goods bought overseas. However, the House of Lords dismissed the banks' appeal to an earlier decision that Section 75 did apply to overseas purchases.

John Fingleton, chief executive of the Office of Fair Trading (OFT), which was fighting the banks in the case, welcomed the Lords' decision. "It confirms that credit card issuers are individually and jointly liable with suppliers if a consumer has a valid claim against the supplier for misrepresentation or breach of contract.

"[We are] particularly happy that it has been resolved in a way that gives greater protection to consumers."

In response, the Association for Payment Clearing Services (Apacs) tried to put a brave face on things. "At long last we have clarity," said Sandra Quinn of Apacs. "The banks now know where they stand and there is no doubt it is good for consumers."

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