Consumer Rights: The Spanish table hasn't come. Will the card firm step up to the plate?
Sunday 13 July 2008
Q. I bought an expensive mosaic table on holiday in the Costa Brava last year. The shop was supposed to ship it to the UK, but it hasn't arrived. I thought I was covered by my credit card company for problems such as this, but it is dragging its feet. What are my rights?
A. This has long been a controversial area. The issue boils down to section 75 of the Consumer Credit Act 1974, which states that if someone uses a credit card to purchase an item or service, and then has a valid claim for breach of contract, the card issuer has joint liability.
For a long time, credit card firms said section 75 should not apply to goods and services bought abroad. But in October last year, the House of Lords confirmed that section 75 does apply to overseas purchases.
Frank Shepherd of the government-backed Consumer Direct advisory service says this means that if a consumer uses a British credit card to pay for goods while abroad – and provided that the purchase price is above £100 but no more than £30,000 – then the card company becomes jointly liable with the supplier if the consumer has a valid claim against the supplier for breach of contract, as you do.
Section 75 does not absolve the supplier that has let you down of their responsibility, so in the first instance you should always try to get your money back from them. However, you should then be able to pursue a claim against the credit card firm.
You should go back to your credit card company immediately and inform them of this and ask them for a refund.
Michelle Meyer of industry body the Association for Payment Clearing Services says: "Assuming you have already contacted the Spanish furniture company and have attempted, unsuccessfully, to receive a refund directly from them, you can refer the matter to your card issuer. There is no specific time limit that they need to keep to, but you can always get in touch with the card company and ask for a progress update to ensure they have all the documents they require."
Q. Many years ago, my insurance man advised me to contract out of Serps (the state earnings-related pension scheme). I did what I was advised. However, I have never fully understood how this system works and if opting out was in my best long-term interests. I was recently contacted by a company that said I may be owed thousands of pounds if the scheme isn't working well. What should I do? LH, London
A. Put simply, contracting out means you have chosen to receive a rebate on your national insurance contributions (NICs). This is paid into a private pension scheme.
A few basic rules apply. First, by contracting out, you would have hoped your new investment performed better than the state pension you were giving up. While the insurance man would probably have suggested this would be the case, the reality has varied from company to company. What's more, by contracting out of Serps – and the state second pension (S2P), which replaced it in April 2002 – you also took the risk that when the time comes to convert your private pension into an annuity (income for life), you won't get enough bang for your buck. You don't have this risk in the state system.
Over the past few years annuity rates have been falling. This could mean that the NIC rebate may not be enough to buy you a sufficiently large income.
Bruce Wilson, managing director of financial planning group Helm Godfrey says: "Because of the ways the rebates have been set up, the Association of British Insurers now recommends that both men and women should contract back in to the S2P at about age 43."
I would be wary of any company offering to "help out". It could well take a hefty chunk of any settlement.
A financial planner will be able to provide a realistic appraisal of your situation and will not be motivated by commission. Try www.financial-planning.org.uk for someone in your area.
Q. We are in the fortunate position of having just sold our house. We plan to rent for at least six months to see what happens to the property market. In the meantime, we are sitting on quite a large sum in cash and want to make sure it works hard for us. Also, after Northern Rock, should we put it in lots of different accounts? TR, Northampton
A. I'm glad to have found at least one person in the UK who has actually managed to sell a house of late. Being out of the market was a risky game when property prices were soaring, but no expert is predicting a resurgence in the foreseeable future.
As you will have seen, the small print on savings accounts rivals that of the most complex legal documents. "Instant access" can mean forfeiting interest for a month on withdrawals, for example.
Many of the best headline rates are only available on regular savings accounts, and not suitable for lump sums such as yours. Equally, interest can be paid daily or monthly and this will affect the final amount you receive. On larger sums, scrutinising the finer details can pay off.
You are understandably nervous about a repeat of Northern Rock. Michael McCroddan of advisory group The McCroddan Partnership, says: "We still advise spreading lump sums round banks and building societies in £35,000 chunks. [This is the current limit set for compensation if a financial institution goes bust.] Be wary, too, of banks that are subsidiaries of a larger bank – such as Birmingham Midshires and the Halifax or First Direct and HSBC – because the compensation amount is aggregated, which means the £35,000 limit applies across the whole of the group regardless of how many accounts you hold."
Visit www.Money-SavingExpert.com for an up-to-date list of banks and subsidiaries. If you must exceed the £35,000 limit, do it with a well-known name that isn't appearing too much in the press for the wrong reasons, such as profit warnings. Finally, don't forget National Savings. The government-backed organisation is offering some attractive rates.
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