Questions Of Cash: Mattress was a pain in the back

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Q. In May 2004, we bought a Slumberland double mattress for £569.50 from Allders in Oxford, which arranged credit with Allders Card Services. A year later, after we had bad back pains, we realised the mattress was faulty.

This was confirmed by Slumberland, but it said we had to take this up with the retailer. However, by then, Allders had stopped trading. The Citizens Advice Bureau told me that the credit card company should give me a refund under Section 75 of the Consumer Credit Act 1974. But this is also Allders and I couldn't get an answer from Allders Card Services. KB, Oxford.

A. We spoke to the administrators of Allders store; they advised us that Allders Card Services was not affected by the collapse of the Allders chain. The administrators referred us to Creation Financial Services as running Allders Card Services. Creation refused to discuss your situation with us, claiming data protection grounds, saying it would communicate directly with you.

We subsequently contacted you to find out that Creation told you that it was not liable, as another company - Ikano - was running the Allders cards at the date of your transaction.

This was clearly information that could have been notified to us without any risk of breach of data protection regulations.

We then contacted Ikano, which has fully refunded you with the £569.50.

Q. My bank phoned us in September to say that KLM was trying to process a second payment of £1,362 through our credit card - an earlier payment having been processed a few days earlier.

On the advice of our bank, our credit card was cancelled and reissued and we completed a fraud form. But we find this disturbing and strange - the card was never out of our possession and the payments were processed at identical times on different days. MC, by e-mail.

You are right to be suspicious, but not for the obvious reason. Fraud was not involved. KLM says it processes its transactions initially in US dollars, before converting this to a local currency a few days later - resulting in two notifications. In your case, the original transaction had not been cleared from your account before the sterling payment was processed.

KLM says the initial payment was never authorised for processing and was not intended to be processed, but this was not made clear to your bank - which understandably believed a fraudulent transaction was being conducted. KLM apologises for the difficulties and inconvenience this has caused you and is sending you a £75 voucher that can be redeemed on any KLM, Air France or Northwest Airlines flight.

Q. I understand that risk-free bonds can be included within the £4,000 stocks-and-shares part of an individual savings account (ISA). But I cannot find any high street bank offering bond ISAs - only cash or equity ISAs. Can you advise? GL, by e-mail.

Mark Dampier, of independent financial adviser Hargreaves Lansdown, says: "You are correct that you could put £4,000 into an ISA into bonds. However, the word 'bond' is badly misused in financial circles. I presume the reader means corporate bonds (loans to companies) and government gilts (loans to government). But these aren't risk-free. There is an interest rate risk with gilts, and with corporate bonds you have an added credit risk.

"True, with government gilt if you buy at under par (under a hundred) it will mature at one hundred if held to maturity - but before maturity it will fluctuate in price. The reader needs to decide whether to buy government gilts or corporate bonds directly or through a fund. If it's through a fund, most fund supermarkets - including our Vantage - can help, as can self-select ISAs from stockbrokers such as Killick. Avoid high street banks as they can be expensive."

Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; cash@independent.co.uk.

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