Threat to credit card protection overseas

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LONDON, Oct 2 (Reuters) British banks are trying to overturn protection for consumers shopping abroad on their credit cards.

Credit card providers are appearing in the House of Lords to appeal against a ruling that gives consumers using cards abroad the same protection they have in the UK.

It comes amid a consumer revolt on current account and credit card charges that is costing the industry billions.

The Office of Fair Trading (OFT) is currently investigating banks' pricing structures in a wide-reaching study that is due to be published by the end of the year.

It has already forced providers to cut credit card default charges to 12 pounds or less, and industry commentators have said a wider crackdown on charges could herald an end to ''free banking'' as companies try to recoup lost revenue.

Under section 75 of the Consumer Credit Act, card issuers are jointly liable with suppliers if there is a problem with goods or services, provided the price of the item is between 100 and 30,000 pounds and is paid for with the card.

The High Court ruled in November 2004 this only applied to domestic transactions, but the Court of Appeal confirmed the OFT's view and extended the protection to overseas transactions in March last year.

Consumers are, therefore, able to make a claim against credit card issuers as well as, or instead of, overseas suppliers.

But Lloyds TSB, Tesco Personal Finance, part of the Royal Bank of Scotland group, and American Express have challenged the decision.

A spokesman for Lloyds said the test case had been going on for more than three years and had ''absolutely nothing to do with the current environment or revenue''.

''It's a legal point that needs clarity for all parties,'' he told Reuters.

''Since this legislation was introduced back in the 70s, the world has changed dramatically. Our view is, very definitely, that what was intended in the original legislation is not the spirit now.'' He said the bank, which currently pays out on valid overseas claims, could be hit for ''astronomical costs'' not intended by the original legislation, such as Britons paying for cosmetic surgery overseas that goes wrong.

However, Martyn Saville, a senior researcher at consumer group Which?, said section 75 provided ''vital consumer protection'' and ensured ''ongoing confidence in the credit system''.

The Internet had opened up huge new markets to consumers, he said, and the level of cover received when paying by credit card should not be restricted geographically.

Saville added: ''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 credit card cover as they enjoy at home.'' British consumers spent 10 billion pounds on overseas credit card transactions in 2006, according to figures from UK payments association Apacs.

The hearing, which started on Tuesday, is expected to last until Thursday.

Reuters RS GC2057

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