Money Help Desk: Builder took £38K for my kitchen and then went bust

I THINK many people could benefit from reading your excellent article "Credit cards can save you from collapsing builders", November 9. I recently found myself in exactly the sort of position you discuss.

I paid 90% upfront of the cost of a new kitchen and alterations to a reputable company in June this year. I paid an initial £6,000 deposit by Clydesdale Bank Mastercard then £32,000 by cheques.

The company removed my old kitchen then declared it had gone bust and had ordered and purchased nil of my kitchen. The bank/Mastercard said as the total cost was more than £30,000 it was not covered but did agree to refund the £6,000 paid by card.

I also discussed the matter with Consumer Direct, who confirmed that transactions above £30,000 would not be covered by Section 75 of the Consumer Credit Act.

I gave up on the matter a while ago but saw your comment regarding "no limit" for Visa credit cards and wondered if there was any chance that "no limit" rules would apply to Mastercard transactions? I suspect the answer is "no" but thought you may be able to confirm.

As many consumers are unaware of the potential protection they can get by paying by credit card, your article is well timed.

AM, Edinburgh


Emma Parker, a consumer rights expert at the Financial Ombudsman Service, writes:

AS YOU say in your e-mail, Section 75 of the Consumer Credit Act 1974 provides protection to consumers who use particular types of credit to purchase goods or services.

Under Section 75, consumers may be able to claim their money back from the card issuer if there has been a breach of contract or misrepresentation by a supplier: for instance, if the goods or services were not provided or were substandard.

The majority of complaints the Financial Ombudsman Service sees in relation to Section 75 come from consumers who have paid for goods or services using a credit card. The complaint will often be that the goods or services were not supplied at all, normally where the supplier goes out of business – as happened in your case – after payment has been made but before providing the goods or services.

However, for Section 75 to apply certain conditions need to be met, including the condition that the total price must be more than £100 but not exceed £30,000.

Unfortunately, as the cost of the kitchen totalled more than £30,000, Section 75 did not apply in your case. In some circumstances, where a consumer has paid using a debit or credit card and Section 75 does not apply, the bank might try to reverse the transaction and "claw back" the money by attempting a "chargeback".

A bank usually attempts to charge back a transaction when a consumer says that they did not undertake or authorise it. In addition to this, Visa debit cards provide an additional chargeback right in the event that goods or services are not received.

It is important to remember that a chargeback right is not the same as a right arising under Section 75. While Section 75 gives a cardholder the right to bring a claim against a credit card provider for the whole transaction, even when only part of it was paid for with the credit card, a chargeback right is limited to the amount paid for by card.

Having looked at the circumstances you describe, it would appear that (although your card was not a Visa card) you have already been refunded the amount you paid by card, as if a chargeback attempt by the bank had been successful.

While I sympathise with your position, I think it is unlikely that the Ombudsman Service would require the bank to refund any more money in this situation.

However, if you wanted the Financial Ombudsman Service to consider the matter formally you can refer the complaint to us by contacting our consumer helpline on 0845 080 1800.