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Law Commission consultation on consumer prepayments on retailer insolvency

The Law Commission is consulting on the recourse that consumers have where they have prepaid for goods or services and the retailer has become insolvent before these are delivered. As part of this, the Commission has looked at the protection offered alongside card payments, and in the consultation asks whether chargeback provisions are sufficiently robust and transparent for customers to rely on.

  • UK Cards is committed to improving the transparency of card payment systems for consumers and retailers, to help encourage competition and better customer service.
  • Overall, UK Cards is in support of the proposals to make information on chargeback more accessible. To ensure consistency and accessibility, this information should be kept to high level principles. Evidence demonstrates that consumers do not find lengthy and detailed documents accessible.
  • UK Cards agrees with the Law Commission that chargeback should not become a legal requirement. There is already a well-used legal right under S75 of the Consumer Credit Act for credit card users, and there is evidence that the current voluntary system of chargeback works well for debit and credit card users. Consumer prepayments in the case of retailer insolvency form a subset of claims in one specific category of chargeback (non-receipt of prepaid goods and services) which equates to less than 5% of all chargeback claims.
  • The level of protection provided by card companies to consumers on their payments is the most comprehensive across all payment types. With the encouragement of alternative payment systems, policymakers should also be concerned with putting an obligation on providers of different payment types to make protection/ restitution cover known before the consumer makes a transaction through that route.
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