The credit card sector's best kept secret - Section 75 of the Consumer Credit Act - came into force 40 years ago.
As we head towards the UK's busiest online shopping weekend of the year, new research released today from comparison website money.co.uk reveals that Black Friday and Cyber Monday credit card shoppers could be left out of pocket if things going wrong with an online purchase.
In fact, over the last three years, just over one in five (21%) of the UK's 30 million credit card customers have made a claim under Section 75 of the 1974 Consumer Credit Act, but almost a quarter (23%) of claims were declined by credit card providers.
Section 75 Protection is part of the 1974 Consumer Credit Act which stipulates that credit card providers must take the same level of responsibility as the retailer if something goes wrong with a purchase, an order doesn't arrive or a retailer goes bust.
It will cover consumers for credit card purchases for single items worth between £100 and £30,000 and extends to everything from travel bookings, cars and electrical items to clothing - even if the credit card account has been closed post-purchase, or was only used to pay a deposit.
Consumers that are declined by their credit card provider when they submit a claim can approach the Financial Ombudsman Service (FOS) to investigate the case if a satisfactory resolution cannot be reached.
With credit card holders set to spend almost £10 billion on credit cards in December, knowledge of this free protection could save shoppers millions of pounds in the event of goods or services they purchase not being as described, faulty or failing to arrive, or suffering any other breach of contract.
However, with over four out of five (81%) credit card holders claiming they've never seen any advertising or literature from their provider promoting this free protection it's hardly surprising awareness is so low.
Despite reaching its 40th birthday this year, 11 million credit card holders (37%) do not know that their credit card provider is legally obliged to reimburse them if things go wrong with a £100+ item that they've paid for on the card. In fact, only 7% of credit card holders correctly cited that Section 75 is free protection from credit card providers for purchases between £100 and £30,000.
When it comes to understanding how the protection actually works, 6% believe it only comes with credit cards that levy a fee and a further 6% believe it's an insurance that credit card holders must pay for. Almost one in four (23%) simply don't know what Section 75 protection is.
Section 75 should be top of the list for credit card holders if a supplier or retailer goes out of business; goods or services purchased are not as described; they're faulty or fail to arrive; or in the event of any other breach of contract. In short, Section 75 is an alternative way of securing refunds for goods or services paid for by credit card that individually cost more than £100.
However, two million credit card holders would be happy to sit back and do nothing in this instance, accepting that they'd lost the money as they "can't be bothered with the admin". Almost one million would opt to put the problematic item on an auction website instead.
Hannah Maundrell, Editor in Chief, money.co.uk comments:
"As we head towards the biggest online shopping weekend of the year, many consumers will use their credit card to pay, safe in the knowledge that if anything goes wrong with the booking or purchase they will be covered by Section 75 Protection.
"Whilst this is an amazing free benefit that has been protecting consumers for four decades, 11 million credit card holders are completely unaware that it exists. Despite consumers claiming that one in four of their applications for a refund have been rejected by providers, under no circumstances should people stop making claims.
"However, they should approach their provider 'armed with their rights' and fully understand Section 75 Protection. Even if the card account is no longer open, the claim is still valid in the eyes of the law. For consumers that feel they are being fobbed off by their credit card provider in the event of a rejected claim, the Financial Ombudsman Service (FOS) is at hand to fight their cause."