Consumers who buy faulty goods or services abroad will be entitled to a refund from their credit card company, after a landmark legal judgment yesterday.

The House of Lords confirmed that Section 75 of the Consumer Credit Act, which allows shoppers who use a credit card to pay for defective goods to claim redress from the card issuer, applies to overseas purchases as well as those made in Britain.

Consumers can make a claim from the supplier, their credit card company, or both, on overseas purchases worth between £100 and £30,000 if the supplier sells an item which is faulty or not delivered.

The ruling will come as a blow to banks and credit card companies who face rising bills as more shoppers buy goods from overseas on the internet.

The case was brought to the Lords by Lloyds TSB, Tesco Personal Finance and American Express, three leading credit card companies.

Hugh Evans, litigation partner at DLA Piper, a law firm, said: “The cost to credit card companies is likely to be rising. Consumer awareness of the rule is increasing, as is internet shopping and overseas travel.”

The legislation was drafted in 1974 when few people went abroad and there were few credit card available.

British consumers now hold nearly 70 million credit cards and they spent around £10 billion on goods and services from abroad last year.

Carl Belgrove, senior policy advocate at the National Consumer Council, said the judgment was “great news”. Martyn Hocking, of Which? the consumer group, said: “With most credit card companies, consumers already pay a charge each time they use a credit card abroad. The least they can expect is the same level of protection as they enjoy at home.”

A spokesman for Tesco Personal Finance said: “This has brought much-needed clarity to an issue that has been in doubt for many years. Since 1995 we have operated a voluntary policy of reviewing claims in relation to overseas transactions. We shall continue to operate this policy in light of the House of Lords’ judgment.”

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