Not upheld: chargeback handling and Section 75 claim eligibility complaint against Lloyds Bank PLC

Decision detail

Summary

Mr R paid approximately £8,000 using his Lloyds credit card for a 28-day rehabilitation programme that ended after 8 days due to the client breaching the terms. Mr R sought a refund through both a chargeback and a Section 75 claim. Lloyds initially suggested a Section 75 claim could be considered but later declined it, stating Mr R was not the beneficiary of the services. The chargeback was also declined after the merchant provided a valid defence showing the contract allowed for termination and payment was non-refundable. The ombudsman found that Mr R was not a party to the contract with the provider (the contract was with his wife as 'the Funder' and the client), making him ineligible for a Section 75 claim. The ombudsman upheld Lloyds' decisions but acknowledged the bank provided conflicting information, for which it paid £250 in compensation.

The Ombudsman's reasoning

The ombudsman found that Mr R did not have a valid Section 75 claim because he was not a party to the contract with the rehabilitation provider. The contract was between the provider and either the client or Mr R's wife as 'the Funder', not Mr R himself. Although Mr R paid for part of the services, Section 75 requires the debtor to have a direct contractual relationship with the supplier to bring a claim. The chargeback was also reasonably declined by Lloyds because the merchant provided a valid defence showing the contract allowed for termination and payment was non-refundable. While Lloyds provided conflicting information about the Section 75 claim and chargeback requirements, the total compensation of £250 was considered fair for the distress and inconvenience caused.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website