In this article, independent flooring consultant Richard Renouf explains how a customer’s rights and obligations change depending on the method of payment. So far in this series of articles we’ve looked at the things we need to consider when we sell to customers in a shop, and I’ve promised to look at online and off-premises sales in a future article. Before I do this, however, there’s an important matter we must consider. How did the customer pay? Credit card and store card payments and finance agreements (including interest-free credit) give the customer the right to claim against the finance provider instead of, or in addition to, the retailer; and other card or bank transactions may also give the customer the ability to ask for help from their bank. The Consumer Credit Act 1974 (CCA) was introduced to clarify the legal responsibilities of the parties involved in a credit sale. Usually there is the customer, the retailer and the finance provider and the transaction is actually circular: The consumer offers to buy the goods and enters an agreement to pay the finance provider, the retailer supplies the goods to the consumer but obtains payment from the finance provider (usually with the provider taking a commission or percentage), the finance provider pays the retailer and then recoups the purchase price and any agreed interest from the consumer. The advantage to the consumer is that they can spread the cost and have the goods immediately. The advantage to the retailer is that they get prompt payment from the finance provider, and, of course, the finance provider also makes a profit from the sale. The CCA makes clear that even though the consumer is actually purchasing from the finance provider, both the retailer and the finance provider have legal obligations under the contract even though the provider may never actually see the consumer or the goods. These obligations continue even if one of them goes out of business. If the consumer has a valid complaint, the CCA allows the consumer to claim against the finance provider as long as the purchase was more than £100 and less than £30,000, and it allows the consumer to claim the whole cost of the sale even if they only paid a small part of this on their credit card. The legal requirements are set out in Section 75 of the CCA and so a claim made under this legislation is often referred to as a ‘Section 75 Claim’. Before such a claim could be made in court the consumer must have contacted the finance provider to give them an opportunity to resolve the complaint, and the finance provider will have a procedure to investigate the complaint by contacting the retailer for information and possibly by asking the consumer to get an independent expert’s report where there is disagreement. If this does not get the complaint resolved, the consumer can raise a Section 75 Claim in the county court against the finance provider, or both the finance provider and the retailer. A chargeback may be part of the Section 75 process, but it can also by done by any bank or finance provider if their customer raises a query about a payment they have made. The bank can withhold payment to the retailer – or even take it back from their account – until the matter is investigated and the finance provider is satisfied that it should be repaid to one of the parties. The terms of the Mastercard, Visa, Amex and merchant processors allow for this to be done without asking the retailer first. Usually the retailer is told when it has been done and is then given a limited time to explain their side of things, and if this is not done on time or to the finance provider’s satisfaction the money will be returned to the consumer. Prompt attention to any chargeback can be successful when the complaint is not valid, but a poor response or failure to respond on time would make it very difficult to challenge and reverse the chargeback through the finance provider. Chargebacks can be made even when a customer has not made a complaint to the retailer, and so the retailer is unaware of any issues. I have never known a retailer succeed in suing a finance company over a chargeback they did not agree with, but, I have known cases where finance providers have rejected consumer complaints and the consumer has then proceeded to make a successful Section 75 Claim though the County Court which then, of course, results in a chargeback to the retailer. An unhappy consumer could also make a complaint to the Financial Ombudsman and as this is costly for the finance company this is something they try to avoid and may result in them doing a chargeback because it is the cheapest option. Citizen’s Advice (citizensadvice.org.uk) and Money Saving Expert (moneysavingexpert.com) have excellent guidance on their websites. www.richard-renouf.com