Banks keep liability for credit cards used abroad

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BANKS and building societies cannot duck liability for faulty goods or services bought overseas on their credit cards, Sir Bryan Carsberg, director general of fair trading, said yesterday.

He rejected claims that the Consumer Credit Act 1974 might not apply to overseas purchases, and said he believed the law was clear and unambiguous on the point.

Section 75 of the act makes credit card companies jointly liable with the suppliers of goods or services if there is misrepresentation or breach of contract. If the supplier fails to reimburse a customer for a faulty product or a service not delivered, the card company must pay up.

Banks say they cannot control the risk of loss in overseas shops and so should not be liable in the same way as in the UK. But the OFT has concluded that, as they market their cards heavily for use abroad, they should abide by the UK legislation.

In a report to the Government on section 75, Sir Bryan said he was sympathetic to a minor change in the law requested by banks as long as it did not remove their obligation to pay up if customers could not get redress elsewhere.

Instead of being equally liable with a defaulting supplier, banks have asked to be put 'second in line', taking responsibility for faulty goods or services only if the original supplier failed to pay.

Sir Bryan said he might accept this if there was a clear agreement by card issuers about how far consumers had to go in pursuing suppliers before they were entitled to ask the card company for money.