Could consumers see the rights they get with credit cards extended to debit cards?

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by: Sarah Maple
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Date: Thu, 1 Apr 2010 Time: 6:34 AM
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Consumers who buy goods with a debit card could enjoy the same protection as those who use a credit card, if new plans to shake up the industry get the go-ahead.

In the current uncertain climate, many consumers are finding themselves out of pocket each year because of the rise in the number of companies going bust - or because they have been ripped off by rogue internet retailers or bad service, such as non-delivery.

However, the government is currently conducting a review of the credit card industry, and has hinted that it might tighten the rules to give greater protection to those who pay by debit card. (See: How the government credit and store card proposals affect you.)
Credit card protection

At present, one of the best ways to protect yourself when making payments is by using a credit card as under Section 75 of the Consumer Credit Act, your card provider is "jointly and severally liable" with the retailer, which means you have the right to claim from your issuer if the retailer refuses to pay, or has gone out of business.

The rules enable you to reclaim money on purchases worth between £100 and £30,000 that you don't receive or are faulty.
What protection is offered by a debit card?

While shoppers can avoid losing out by paying with a credit card, many people are reluctant to buy goods and services on credit - and particularly when making purchases online.

But if you pay by debit card, you generally aren't covered if goods are faulty, fail to arrive, or if a company stops trading; this is because debt cards are not, strictly speaking, credit agreements.

That said, some Visa debit-card providers will make good the loss through a voluntary scheme known as Visa Chargeback which gives similar protection to that granted for credit card purchases.
Credit card crackdown

The government is in the middle of a crackdown on credit card lending, and the UK Cards Association - which represents the credit card industry - has just submitted its package of changes in response to proposals put out to consultation by the Department for Business, Innovation and Skills (BIS) last October.

The BIS is now reviewing the "landscape" on pre-payments with a view to reporting back to ministers in the next few weeks - but has acknowledged that consumers have concerns about their rights when using different types of credit cards.

The government will then publish its response, and this could include new legislation.
Could this be a consumer victory?

With the banks arguing that it would be very expensive to offer the same rights on debit cards, any changes to the existing rules would be a major victory for consumers.

But campaigners have certainly put forward a persuasive case for bringing the debit card rights in line with credit card rights, and point to findings showing that one in 10 consumers are not receiving goods or services they pay for in advance - with less than half getting their money back, and an average loss of £242 for those losing money. (*)

In the words of Steve Brooker, of Consumer Focus: "Consumers are losing out in the fight to reclaim money from bankrupt businesses. Better protection of pre-payments is in everyone's interest."

(*) Consumer Focus

About the Author

For more information about the rights of credit cards and debit cards, check out http://www.confused.com/credit-cards