Huge change to credit card rules for millions – what it means for shoppers | The Sun

A CRITICAL rule allowing customers to get a refund from their credit card company is to be axed and replaced with new rules.

The government announced its plans to scrap Section 75 of the Consumer Credit Act this morning – along with ditching the rest of the legislation it includes.

Under the Section 75 law, consumers can claim a full refund for faulty goods or services bought on their credit card from their card provider if the retailer won't pay up.

It means there is a double layer of protection for customers buying big ticket items which go wrong.

The current rules will remain in place and shoppers will be given plenty of notice before they change.

Exactly what will replace them has not yet been decided.

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New rules usually have to be passed into law before they take effect, which can take some time, often years.

There will be a further consultation about moving the responsibility to ensure consumers are protected to the Financial Conduct Authority.

Sarah Coles, personal finance expert at Hargreaves Lansdown, said losing the right to a full refund on holidays is just one example of what consumers will lose when the Act is given the chop.

"At the moment you can pay the deposit for a holiday on your card, and as long as it’s for between £100 and less than £30,000, the whole cost of the holiday will be covered," she said.

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"A change might mean you need to put the whole lot on plastic to get the same protection."

Another example would be if you bought a ticket for a concert that was cancelled.

"At the moment you also claim for your train ticket and hotel," Sarah said.

"But some of those quoted in the government's paper argued this shouldn’t be included within the new rules.

"There were also questions over whether people should be able to claim from their credit card without pursuing the vendor first, which could make reclaiming cash more complicated and time-consuming."

Why get rid of the Consumer Credit Act?

The government response to its consultation "Reforming the Consumer Credit Act 1974" claims the rules are no longer fit for purpose.

Andrew Griffith, economic secretary to the Treasury, said that back in 1974, the Consumer Credit Act (CCA) was a "landmark piece of
legislation" .

He called it "a new and comprehensive set of protections for

But he added: "The world has been transformed since 1974.

"The existing legislation is ill adapted to technology that was
not conceived of almost 50 years ago.

"The time is now right to be as ambitious as our predecessors in 1974 and fundamentally reform the approach to the regulation of consumer credit in the UK."

The Sun has asked the Treasury for a comment.

But consumers aren't happy about losing the valuable guarantee they'll get a refund if goods are faulty.

Taking to Twitter, one said: "We are already being shafted by retailers and supermarkets, imagine the damage to our basic rights caused by this new legislation?"

Another tweeted: "Another move that helps the lenders and not the consumer. Bit by bit, the power of the major corporation's is getting unbreakable!!"

And a third said: "Once more, a proposal to make our lives a bit sh****r."

Paul Lewis, consumer champion and presenter of Radio 4's Money Box, pointed out the government plans to replace the Section 75 law with rules overseen by the Financial Conduct Authority instead.

He tweeted: "It will take years but a dreadful blow for consumers who have a clear and unambiguous right."

Sarah Coles, head of personal finance at Hargreaves Lansdown, called the move "unsettling."

“The Consumer Credit Act has ridden to the rescue for millions of people," she said.

"Section 75 has pulled them our of a dark hole, when goods or services haven’t been delivered, and they’ve been able to turn to their credit card company to save the day."

"So the fact the government is planning to axe the act is bound to be unsettling."

What protection could consumers have next?

Sarah said some of the changes could be positive. Here she takes us through what's coming.

Hire purchase

In 1974 consumers typically bought lower value and lower risk items using finance.

Now it has taken centre stage for motorists, with most people leasing their cars on finance for a few years before switching to a new car.

Vulnerable people rely on it for domestic items such as washing machines, fridge freezers and sofas.

That means there’s now a strong argument that users should have the same sorts of protection as other borrowers.

However, reading the consultation responses shows this view was far from unanimous, so there are no guarantees.

Vulnerable people

One positive development is the opportunity to consider the needs of more vulnerable people in new regulations.

For those who wrestle with more complex numerical calculations, there is the chance that information will be written in pounds and pence rather than using percentages.

There’s also the chance to ditch reams of jargon, so people aren’t baffled by how their lender talks to them.

For those who are facing mental health struggles, there could be the chance to revisit Notices of Sums in Arrears and Default Notices -both of which can be overwhelming.

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In their current form they can be so alarming they actually put people off asking for help from their lender.

More flexibility in the language and content could allow lenders to be more sensitive to people’s needs.

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