FAQs – Chargeback rights and Section 75 and the coronavirus

These FAQs set out some frequently asked questions about chargeback rights and rights under Section 75 of the Consumer Credit Act in the context of holiday cancellations and difficulties following the recent outbreak of the coronavirus.

They are meant as a general guide only and customers should contact their card issuer for guidance on any specific issue. See LINK which takes you through to more detailed information about both of these rights.

We set out below some questions that may arise regarding the application of these rights. 

Where your trip is affected by coronavirus you may have stronger rights under other legislation, under an insurance policy or contractually against a provider. We do not cover those here.

General Principles

Generally speaking, if the supplier of your goods or services has not delivered what you have paid for through a credit or debit card, then you should be able to get your money back.

However, it is important to note there is not an automatic legal right to receive your money back through chargeback rights or Section 75, as this will depend upon all the relevant facts in each case. Key facts include the supplier’s terms and conditions, the scheme rules under which your card is issued e.g. Mastercard, Visa or Amex, applicable government laws and regulations and the approach taken by your card issuer.

To help resolve your issue as quickly as possible it might be helpful for you to first approach your supplier before making a chargeback or Section 75 claim through your card issuer

What are chargeback rights?

Chargeback exists for both credit and debit card purchases. Chargeback is a well-publicised consumer protection industry scheme that allows credit and debit cardholders the ability to claim a refund from their card issuer in a number of different scenarios including where you have not received what you have paid for.

However, chargeback rights only cover the amount of your card transaction, so you can't claim other losses or expenses you have suffered, generally referred to as consequential losses. Chargeback claims must also be made within a set time period, typically 120 days from the date of purchase or from when you expected to receive the goods or services though longer periods may apply in certain scenarios. Card issuers seek to claim back the amounts you are claiming from them from the merchant. Merchants can dispute your right to a chargeback.

What is "Section 75"?

This applies to certain transactions made by credit card. "Section 75" is an important consumer protection right that means your credit provider has a legal responsibility if things go wrong with something you purchase using credit. Section 75 rights are only available where the provider has misrepresented something to you or breached their contract with you. However, as well as the amount you actually spent on the card (such as a deposit), you can also recover your full losses, sometimes including consequential expenses. Claims will be subject to usual legal limitation rules applying to breach of contract or misrepresentation claims.

There can be complex legal and factual issues arising and each case will depend upon its own facts.

What if my flight or package holiday is cancelled?

If your flight or package holiday is cancelled due to the coronavirus outbreak, even if it's not in an area where there's a Foreign & Commonwealth Office (FCO) warning in place, generally speaking, you are entitled, under the law, to a full refund from the airline or tour operator.

However, instead of a cash refund you may decide to accept a replacement flight or package holiday, perhaps when travel restrictions are no longer in place, or a voucher or credit note for when you rebook. If you accept this, then this may well settle your current claim and you may only have a claim if something goes wrong with the replacement arrangements.

If you have rejected a replacement or a voucher/credit and have asked for but do not receive a refund, you may have a chargeback claim or a claim under Section 75 as the travel provider will have failed to provide you with the services/accommodation you contracted and paid for.

However, if the cancellation arises because of a government imposed restriction on travel, then there may not be a breach of contract if the travel company has rights in its contract not to provide the services in those situations or to offer you alternative services instead. You may be entitled to raise a chargeback under the scheme rules in this case, but whether this will be honoured may depend upon the scheme rules for dealing with these types of disputed cases.

Do I have to accept a replacement service or voucher for cancelled flights or package holidays?

Typically, you are not obliged to accept this.

Are my rights affected if I accept an alternative booking or voucher for cancelled flights or package holidays?

It is likely that your claim against the travel provider would then be regarded as settled and so you could not change your mind later and make a chargeback or Section 75 claim.

However, in effect, the airline or package holiday provider has then agreed to provide you with a different right instead. If they fail to honour the alternative booking or you are unable to use the voucher when it is still in date, chargeback and Section 75 rights may then be available. However, just like your rights for the original trip, if the cancellation of the rebooked holiday arises because of a future government-imposed restriction then there may not be a breach of contract if the terms and conditions allow for cancellation in these cases. This might impact your ability to make a claim.

However, if you accept a voucher to use to book a future holiday (a bit like a gift voucher) and you are able to use this voucher to book a new trip with a new holiday contract, you will not have Section 75 or chargeback rights if something then goes wrong with that new trip if you didn't pay any of the price of the new trip on a card.

What if I have booked separate accommodation and paid for this on my card and my flight is cancelled?

You will generally be entitled to a full refund from your airline for the cancelled flight, but if you didn't book the flight on the card, then you would not be able to claim under Section 75 or chargeback for the amount of the flight.#

If the hotel is still open for business and it is the cancelled flight that has stopped you travelling, the hotel will not have broken their contract with you if they are still able to honour your original booking and so there is no Section 75 or chargeback claim for the accommodation costs. However, if the hotel's terms allowed you to cancel and get some of your money back, you might have a claim if they stopped you doing that and refused you a refund.

If you paid for the flight on your card and the flight is cancelled and you have the right to claim for breach of contract you may be able to claim hotel costs as consequential losses so long as these were reasonably anticipated losses you might suffer and recovery has not been excluded by the terms of any contract.

What if no-one cancels my holiday, but I just don't think it is sensible to travel or I am shielding, sick or live in an area with a local lockdown preventing me from travelling?

For Section 75 to apply, there must be a breach of contract or misrepresentation by the airline or tour operator. If there isn't then there is unlikely to be a Section 75 claim. A chargeback claim can
only be made where the travel company is the one who has failed to supply you with services (not where you choose not to want them anymore or are unable to travel).

You might, however, have a Section 75 or chargeback claim if you cancel your accommodation booking in line with the provider’s terms and conditions but do not receive a refund when you are entitled to something back.

What if the FCO has advised against travel to the area that I am travelling to?

If the airline or tour operator is still able to provide your flight or package holiday but you decide not to travel in these circumstances, you would not be automatically entitled to a refund from your flight operator or tour operator. You would therefore have no automatic right to make a chargeback or Section 75 claim. However, you should speak to the airline or tour operator to see if they can assist you further.

If the FCO advice is not to travel, you may have a chargeback or Section 75 claim if you cancel your booking in line with the provider’s terms and conditions but do not receive a refund when you are entitled to something back.

Does the name of the person who purchased the holiday (i.e. the cardholder) need to correspond to the person named in the holiday contract?

For a Section 75 claim to be valid, generally yes. But where the cardholder books the holiday for him/herself and his/her family then the cardholder will be able to claim under Section 75 in respect of a breach of contract or misrepresentation.

This can get more complicated where a number of independent individuals (e.g. friends or two couples) go on holiday. If there are two separate holiday contracts, the credit card holder who paid may not be able to claim losses from its credit card company for the friends. This may come down to the detail of the arrangement between the friends and the approach of your credit card company.

For a chargeback claim, if the travel company didn't supply the services, the cardholder is generally entitled to get a refund of the amount they paid on their card. So, if a cardholder paid £1000.00, the cardholder could raise a chargeback claim for the full £1000.00 to their issuing bank (assuming there are chargeback rights in the first place).

What if I booked through a travel agent?

If you booked through a travel agent your ability to claim under Section 75 depends on exactly who took your payment and what it was for. Section 75 usually only applies when the payment is made directly to the merchant who is actually providing you with services. However, the travel agent may have taken payment as agent for the supplier of the travel and you might therefore be covered.

Where a travel agent sells a holiday package that they have put together then Section 75 will apply as usually the travel agent is a party to the contract.

For chargeback rights, it does not matter if you book via a travel agent or directly with the service provider. If you fail to get what you paid for, it is likely you will be able to claim against the party who you paid, using chargeback.

I only paid for the deposit on credit card, can I still claim?

Yes. If Section 75 applies, it doesn't matter that the transaction was only partly financed by credit and recovery is not limited to the deposit.

Chargeback rights however only apply to the amount of the transaction made on the credit or debit card. This means you would only get your deposit back.

What if I have made a claim via my card provider, but I have not been reimbursed?

Credit and debit card providers are expected to handle Section 75 and chargeback claims in a reasonable timescale. If there is a delay in processing your claim, your card provider should clearly explain the reason for the delay.

Why has my claim been declined by my card provider?

Where your credit or debit card provider declines your Section 75 or chargeback claim, they should explain the reasons for this clearly and fairly and explain any further options that you might have, such as cover under a travel insurance policy or packaged bank account.

If you travel and then are forced into quarantine while abroad, what happens then?

In the first instance you should speak to your travel insurer.

Your airline or travel company may be able to assist you in changing your booking to a later date and provide advice on any relevant charges. You would need to talk to your airline or the travel company you booked with to understand what assistance they can provide.

However, it is unlikely you would have any sort of claim for this using a chargeback or Section 75 claim.

However, if your flights are cancelled or the airline refuses to fly you for a reason not set out in its contract with you, you should have a claim against the airline and if they do not meet the claim you may then have a right to claim under Section 75 or chargeback. If you suffer additional expenses as a result (because you have to pay for additional accommodation or living expenses), you may be able to claim these as consequential losses if they might have been reasonably anticipated under Section 75. But you would not have a claim for these using chargeback rights.

However, whether you have a claim will depend on whether it is classified as a breach of contract or misrepresentation for the airline not to fly you in the circumstances. There may be terms of the contract that prevent you from being able to fly in certain situations. If your airline is operating within the terms of its agreement with you, there will be no claim.

If you contract the coronavirus and incur extra medical expenses while you are abroad for treatment, can you reclaim them under Section 75?

In the first instance speak to your travel insurer.

You will only have a claim under Section 75 for these if these result from something your travel provider has done where they did not take reasonable care and skill. If they cannot be said to have caused your illness or exposed you to illness as a result of their failure, then you are unlikely to have a claim under Section 75.

Chargeback rights would not be relevant here, as they only apply to transaction costs paid on credit or debit cards.

Do I have to attempt to make a Section 75 or Chargeback claim before I can pursue a claim with my travel insurer?

In many cases you may be able to claim either under travel insurance or under a card right (chargeback or Section 75) or even both. Remember though you cannot claim the same loss twice. It is up to you to decide where to make your claim and travel insurers and card issuers must help you and not automatically refer you to someone else. Insurers and card providers should always give you reasons and act fairly.

Some insurers may require you to first seek refunds from other parties, such as a travel provider or from a card provider, before considering your claim. However, they must act reasonably and should not ask you to pursue a Section 75 claim if, for example, you are clearly not covered by Section 75.

If you are referred to your card provider, your insurer should take reasonable steps to help you understand why you are being referred. If your insurer does not do this, you should ask them to explain.

COVID-19

As the situation with Covid-19 in the UK evolves rapidly many consumers and businesses have questions about how the banking and finance industry will be able to support them to access the finances, support and guidance they need.

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