Should the credit card firm pay for your faulty goods?

We all know by now, thanks to Barclaycard's funny-man Rowan Atkinson, that credit card companies will refund your money if the Touareg carpet you bought with a card goes up in flames or the wedding present gets sat upon in church.

But the National Consumer Council, the official consumer watchdog, is not happy about the way credit card companies behave if the goods and services we routinely buy turn out to be defective, shoddy, unsuitable or simply do not arrive.

In its submission to the DTI, published this week, it claims that credit card companies routinely fob off claims for compensation for defective goods and services bought with cards, Customers are given the impression that their first recourse is against the supplier. Consumers who do not know their rights and do not have access to professional advice usually retire defeated.

At best they have to resort to a tortuous and sometimes expensive case against the supplier. At worst they give up and fail to get any redress at all.

The NCC says it has collected numerous examples, mainly from local trading standards officers and Citizens Advice Bureaux, of customers being told to seek redress from the supplier.

In fact Section 75 of the Consumer Credit Act of 1974 gives consumers equal recourse against the supplier and/or the credit card company, who are jointly and severally liable in law to provide compensation if goods and services costing over pounds 100 and bought with a card are faulty or fail to arrive.

When challenged, the Credit Cards Research Group, which represents leading Visa and Mastercard companies in the UK, says its members meet an average of over 20,000 claims a year and pay out over pounds 20m.

But it says the overwhelming majority of claims involve cases where goods and services have been paid for in advance and have not been supplied at all, usually because the supplier has gone bust.

This could include things like holidays, furniture, freezers, fridges, TV and video equipment, computers and big-ticket items bought from mail- order catalogues.

There is clearly a gap between the two sides on both fact and interpretation. Because there are no official statistics on the number of claims lodged each year there is no certain means of knowing whether enquiries which may be routinely turned away are therefore not recorded. But the two sides are clearly wide apart.

Credit card companies claim that faulty goods are properly treated under the Sale of Goods Act. Compensation and cover available to UK credit card companies are substantially better than in most countries. It is logical for customers to claim first on the actual suppliers rather than on the credit company, who cannot be expected to know the facts of the case.

They say the director-general of the Office of Fair Trading accepts the logic of this argument. They also claim that every monthly statement contains a telephone helpline for card users to call.

The NCC, meanwhile, argues that there is a strong case for extending Section 75 to allow claims against credit card companies for goods and services costing less than pounds 100. The aim would be to include items like kettles and kitchen equipment, which can go wrong either because of faults or misuse.

They would also like to see the law changed to apply cover to the total bill instead of individual items. For example many travel agents sell holidays and insurance as a package but card companies can treat them as separate items in the event of a claim. Likewise the motor trade routinely identifies parts and labour as separate items, which allows card companies to reject individual claims under the pounds 100 rule.

Finally, the NCC wants to see credit card companies admit liability to claims on goods and services worth pounds 100 or more which were bought abroad.

Card companies say they are not liable because they cannot be expected to take responsibility for suppliers they cannot possibly know. Consumers claim these are just the cases where they need protection because it is usually impossible to return the goods or complain in person to the supplier once they have returned to the UK. The companies are in practice accepting claims where the amounts are more than pounds 100, but only on the credit element, not the full price where that is different.

But this is part of a voluntary code of practice which expires at the end of the year. It had been assumed that the Government would have proposed new legislation by then. This is now thought to be unlikely, ensuring that the long-running spat between consumer groups and card companies is set to continue.