Law Lords: Banks liable for overseas purchases

The Law Lords have upheld a Court of Appeal decision that banks and credit companies should be liable for overseas purchases where the goods fail to arrive or are faulty.

Business people and consumers purchasing goods from foreign websites, or abroad, will now enjoy the same protection as if they were purchasing in the UK.

The value of goods that fail to arrive will now have to be refunded by credit card providers. Goods with a value between £100 and £30,000 will be covered for overseas transactions under section 75 of the Consumer Credit Act 1974, the Law Lords decided on Wednesday.

The ruling decided a long-running legal dispute between the Office of Fair Trading (OFT) and Lloyds TSB, Tesco Personal Finance (part of The Royal Bank of Scotland group) and American Express Services Europe. In November 2004, The High Court ruled that section 75 of the Act applied only to domestic credit card transactions. However, that protection was then extended by the Court of Appeal to overseas transactions. The credit card providers took an appeal to the House of Lords.

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John Fingleton, OFT chief executive, said: "The application of section 75 to overseas credit card purchases has long been uncertain, which is unsatisfactory for UK consumers. We are pleased that the House of Lords has resolved the issue, and particularly happy that it has been resolved in a way that gives greater protection to consumers."

The OFT said that if people pay by credit card they can claim their money back from the credit card company if the seller fails to honour the contract; if the item is faulty; if the seller wrongly describes it; or if the supplier goes out of business. Transactions made by debit and charge cards are not covered by section 75.