Paypal, Credit Card & Section 75 Protection

adh747

Hi All,

I purchased an item from an online retailer back in November last year. The product was not fit for purpose but the retailer refused to accept this. I had ordered the product from their website but had used the PayPal option instead of direct CC payment. However I completed the transaction through Paypal with my Barclaycard Mastercard. I decided to take my case to Barclaycard and claim against the retailer under Section 75 of the Consumer Credit Act. Barclaycard took over 4 weeks to assess my claim and then refused the claim on the grounds that Section 75 did not apply as there was a broken link in the Debtor-Creditor-Supplier relationship (DCS) as I had used Paypal. Unfortunately due to Barclaycards slow response I was outside PayPals 45 days limit for a claim. I should have claimed through PayPal at the same time as my Barclaycard claim but didn't - you live and learn .

I decided to take my complaint regarding Barclaycard to the Financial Ombudsman as reading up on Section 75 on this site suggests that this issue isn't cut and dry. Anyway the Ombudsman has come down on the side of Barclaycard again citing the broken link in the DCS relationship. I can obviously appeal against this decision and I also have the Small Claims Court option to use against the retailer. However I wanted opinions from others as to what further evidence I could bring to persuade the Ombudsman that Section 75 protection should apply in these cases. I see it as a technicality that Barclaycard have refused the claim as although PayPal processed the transaction, the goods were purchased directly from the retailer.

I also thought it worth raising this issue to warn others as many websites now offer PayPal, and other third party payment processing companies, as a payment option. It would appear that if you use one of these third party options and pay via CC, you will not be covered under Section 75 which is a huge disadvantage to using these services. Section 75 provides much more protection than PayPal and the time limits are much longer. A lesson for me is to never use PayPal if you can use your CC directly with the retailer.

I'd be interested in others opinions and experiences of this issue.

YorkshireBoy

You need to forget about section 75 and the FOS, as you/they can't change the Law. Speaking of which, have you actually read the Act?


Concentrate your efforts on the small claims process.

MPH80

adh747 wrote: »

I see it as a technicality that Barclaycard have refused the claim as although PayPal processed the transaction, the goods were purchased directly from the retailer.

It's really important to focus on this as it's not a technicality.

The use of paypal and a credit card both involve the use of a third party between the bank and the retailer - but the mechanism is very very different.

When you pay by credit card - the retailer will use a payment service provider (PSP) - that PSP acts as an intermediary between them, their bank and your bank. They provide all the connectivity required to allow them to process the payment.

When the retailer requests the funds - the fund move directly from your bank account to their bank account.

When you pay by paypal - paypal acts as the intermediary and, in turn, uses their own infrastructure to provide all that connectivity.

However, here's the difference, when you pay - the money moves from your bank account, into paypal's. Paypal then move the money on from their bank account (minus their fees) to the retailer (at a time of their or the retailer's choosing).

You don't pay the retailer - you pay paypal who pay the retailer on your behalf.

Really the key question you have to ask is 'did the retailer have any knowledge of the payment method I used?'

In the case of a credit card - absolutely - they'll know (even if they use a tokenisation service) that you used a mastercard/visa/amex.

With paypal - they just know you used paypal.

These differences are really important would apply to any kind of payment aggregation service - such as google wallet.

M.

tinkerbell28

100% that ^^^^ and as you've found the FOS will not help you. Your only comeback is a small claim against the retailer.

eskbanker

adh747 wrote: »

I'd be interested in others opinions and experiences of this issue.

See this recent thread which went the way of others on this subject, i.e. a miffed OP sounds off about how unfair it is but other posters patiently explain why Section 75 doesn't apply to these transactions....

grumbler

adh747 wrote: »

... I see it as a technicality that Barclaycard have refused the claim as although PayPal processed the transaction, the goods were purchased directly from the retailer.

The entire s75 protection for CC purchases is a technicality. It was written when CCs didn't exist for a credit given specially for buying some specific goods. Nowadays CC companies are victims of the reckless spreading of s75 to CC transactions that makes no sense to any reasonable person. I'd be surprised if CC companies didn't use any technicality to escape from their obligations under s75.

chattychappy

It is worth looking at what S75 says:

S75 Liability of creditor for breaches by supplier.

(1)If the debtor under a debtor-creditor-supplier agreement [...] has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor.

The conventional wisdom is that going through somebody like Paypal breaks the chain. Ie there isn't a single debtor-creditor-supplier agreement that covers your purchase. Instead you have two agreements, a debtor-creditor-supplier agreement where Paypal agrees to provide you with a service (money transmission) which is financed by the creditor (the CC) and a separate agreement with your retailer. Paypal haven't breached the contract or mispresented, so no CC liability.

Not surprisingly the CC's favour this interpretation and I think it is probably correct. The FOS interprets the law in the same way, but they don't make the law or set precedents. (Though they are usually consistant with themselves.)

The reason why some websites refer to uncertainty is that I don't think this issue has ever been ruled on by a higher court (ideally Court of Appeal or Supreme Court). Until it is, lawyers would regard the matter as unsettled. I'm not sure what argument somebody would run in a hope to challenge the conventional interpretation. Something to do with collateral contracts, or that really separating the two agreements is some kind of sham and that the law sees them as merged. Or perhaps that in a matter such as this Paypal is acting as some kind of agent of the CC. I feel the best chance is if the court decided to take a "purposive" approach to statutory interpretation, asking itself what parliament really wanted to achieve ("lenders should back you up when you buy stuff with their money") and should CCs escape liability because of Paypal type arrangements. But this is more an approach to resolving ambiguity in legislation rather than "creating" new law. Overall, I'm not convinced.

The FCA takes over regulation of CCs from April. They are keen to make a name for themselves and see "treating customers fairly" as a key principle. They might intervene in this area in the future.

You could have a go by making a Small Claim. Companies often make an offer to settle rather than have the hassle of dealing with litigation.

If "we" are right, then indeed it's true that CCs are escaping S75 on a technicality. S75 is littered with them. Eg you only need to put £1 onto a CC provided the item price is over £100 to engage S75. On the other hand, buy 4 chairs together at a price of £99 each and you're not covered (it is item price rather than transaction value that's important). If your additional cardholder makes a purchase then S75 is not engaged (though some would argue otherwise) because you have the agreement with the creditor (the CC) and the additional cardholder has the agreement with the supplier.

As grumbler says, S75 is from a bygone era. CCs might well argue that the whole thing is a technicality and ought to be repealed (or reformed).

adh747

Thanks for all the replies.

I'll go through the small claims court. Worth a try.

marksandygill

To be honest saying the Credit Card companies are using a technicality in a law is strange, if it was the other way around and customers were using a technicality (like say 'having to take a customers word for what was said to them') then strangely no-one complains?

bigadaj

marksandygill wrote: »

To be honest saying the Credit Card companies are using a technicality in a law is strange, if it was the other way around and customers were using a technicality (like say 'having to take a customers word for what was said to them') then strangely no-one complains?

Well the definition of a technicality is almost wholly dependent on which side of the argument you lie.

jonesMUFCforever

bigadaj wrote: »

Well the definition of a technicality is almost wholly dependent on which side of the argument you lie.

Well I know many people who have claimed PPI knowing full well it was not missold but the banks have paid them back!
It does work both ways.