Why should PayPal not be covered by Section 75?

NFH

It has been widely reported in the past that Section 75 of the Consumer Credit Act 1974 does not apply to transactions where PayPal processes the transaction for the merchant.

I'm struggling to understand why this is. As long as PayPal completes the transaction with the cardholder and merchant simultaneously (as opposed to using an existing PayPal balance), PayPal is not an additional party in the transaction but acts only as an acquirer just like Streamline or Barclays ePDQ, neither of which fall outside the scope of Section 75. Is there any valid legal reason why PayPal transactions are considered outside the scope of Section 75, and if so, what is it?

dazza.mk

Because they aren't an acquirer, rather they are an intermediary between the merchant and an acquirer and therefore break the legal relationship that Section 75 is built upon (In the same way that additional cardholder's MAY not get SSection 75 protection as they are not party to the legal relationship).

All effectively holes in Section 75 as it is rather 'old' legislation.

The link below relates to Australia but tries to explain the difference.

http://www.paymentsgateway.com.au/what-you-need-to-know/payments-gateway-or-processor

NFH

dazza.mk wrote: »

Because they aren't an acquirer, rather they are an intermediary between the merchant and an acquirer and therefore break the legal relationship that Section 75 is built upon

Does PayPal really use another acquirer? I'd be surprised if it doesn't handle this function itself, given the size and nature of its business.

Why is it that the large acquirers like Streamline etc don't fall outside Section 75 then? There are an intermediary too.

dazza.mk

NFH wrote: »

Does PayPal really use another acquirer? I'd be surprised if it doesn't handle this function itself, given the size and nature of its business.

Why is it that the large acquirers like Streamline etc don't fall outside Section 75 then? There are an intermediary too.

Streamline aren't an intermediary:

"Streamline provides you with a complete payment card processing service. As the largest card payment acquiring business in Europe, we can accommodate and support the needs of all types and sizes of business - from small businesses to the largest international organisations."

You'll struggle to find Paypal using the exact terms 'Payment acquiring"

NFH

dazza.mk wrote: »

Streamline aren't an intermediary:

"Streamline provides you with a complete payment card processing service. As the largest card payment acquiring business in Europe, we can accommodate and support the needs of all types and sizes of business - from small businesses to the largest international organisations."

You'll struggle to find Paypal using the exact terms 'Payment acquiring"

PayPal processes card payments, just like Streamline does. From a Section 75 point of view, I still don't see that there's any difference between PayPal's role and Streamline's role.

dazza.mk

That's just it

Paypal are a 'payment processor'
Streamline are a 'merchant acquirer'

"Acquirers levy a merchant service charge (MSC) on card transactions that varies according to: the card scheme such as Visa, MasterCard and American Express; card type, for example debit, charge or credit; and transaction type, such as chip and PIN; as well as other factors"

With Paypal you just get a standard charge as they are the 'intermediary"

NFH

dazza.mk wrote: »

"Acquirers levy a merchant service charge (MSC) on card transactions that varies according to: the card scheme such as Visa, MasterCard and American Express; card type, for example debit, charge or credit; and transaction type, such as chip and PIN; as well as other factors"

With Paypal you just get a standard charge as they are the 'intermediary"

I still don't understand. Section 75 does not distinguish according to the fees charged to the merchant. I've seen nothing that suggests that PayPal and Streamline perform different roles with regard to Section 75, irrespective of the fees each organisation charges.

dazza.mk

Paypal:
"
With PayPal, you can get your money fast. When the order is complete, the money usually shows up in your PayPal account in a few minutes. Here's how to access it:
Transfer to your bank account

You can transfer money from your PayPal account to a bank account in 3-5 business days.
Spend it through PayPal

PayPal is accepted at thousands of websites and provides a fast, secure checkout."




Barclays ePDQ:


"Transaction details can be viewed in real time before payment is credited to your bank account. Or once it has been credited, you can access the transaction details online using our Store Administration Tool."




Why don't you think Paypal is an intermediary, when the result of the transaction with a Merchant acquirer is that you get cash in your account, whereas with Paypal you get Paypal funds in a Paypal account that you then have to transfer to a bank account?

dazza.mk

The legislation was written over 20 years before Paypal existed, so even though Paypal does the same job (in a slightly different way) it falls through the gaps, just in the same way an additional cardholder isn't necessarily covered as they don't form part of the legal relationship as they aren't a signatory to the credit agreement.

NFH

dazza.mk wrote: »

The legislation was written over 20 years before Paypal existed, so even though Paypal does the same job (in a slightly different way) it falls through the gaps

True, the legislation was not intended as a backup for failing merchants for credit card transactions, but more for hire purchase in the 1970s. Which gaps are you referring to though?

NFH

dazza.mk wrote: »

Why don't you think Paypal is an intermediary, when the result of the transaction with a Merchant acquirer is that you get cash in your account, whereas with Paypal you get Paypal funds in a Paypal account that you then have to transfer to a bank account?

They're both intermediaries of sorts. What relevance does your above distinction have upon Section 75?