CUSTOMER SERVICE? - PowerHouse Extended Warranty

Barclaycard will repay customers who used its card to pay for worthless extended warranty insurance bought via PowerHouse group. The capitulation is a victory for Money Mail which had applied intense pressure on Barclaycard, the last major credit company refusing to cough up. Customers were sold the insurance when buying PowerHouse products. But the insurance service company PowerPlan went into administration, leaving people out of pocket and without cover. Most credit card companies whose customers had used credit cards to pay for the insurance accepted they were liable pay up under Section 75 of the Consumer Credit Act, which makes the card company jointly liable if a service isn't delivered.

But Barclaycard said PowerHouse, to whom payments were made, had fulfilled its part of the contract by passing the money and customer's details over to PowerPlan. Once that had been done, what happened next was none of its concern. But the firm has now backed down. A Barclaycard spokesman said, "Barclaycard is pleased to honour these warranty claims to ensure our customers are not disadvantaged in any way." Section 75 kicks in when you buy an item costing more than £100 and less that £30,000 with a maximum £25,000 on credit. Only a minimal payment is needed on the credit card for the full purchase to be covered.

The Barclaycard interpretation of Section 75 has wide ramifications. Any agreement you enter into, which is not directly provided by the retailer, is not covered once the money has been passed to a third party. So if you book a holiday via a travel agent and the company providing the holiday goes bust, you cannot claim from the card firm. This is because the travel agent and, thus, the credit card company was obliged only to pass the money to the holiday provider. However, Barclaycard seems to be alone in this hard-line stance.

A Lloyds TSB spokesman said, "While the merchant is not actually the party responsible for the warranty cover, they did supply it to the customer. This is the case for the vast majority of transactions where the merchant is not the actual manufacturer/ service provider, but more often than not a retailer of third party goods/services." But Barclaycard argued, "Under the terms of the Act, because the extended warranty has been passed to a third party, Section 75 does not strictly apply. The Act requires a breach of contract between the cardholder and the retailer that accepted the card payment. We will continue to consider all future Section 75 claims on a case-by-case basis." (Source: Mail on Sunday)