Section 75, Square payment processor. - claim won

PM2019

Thank you. Obviously not cut and dried even though you paid by chip and pin on the retailers premises. My payments are made online via the phone which weakens my position further. Good luck.

Mc228

It really shouldn't matter either way.

Presuming you did actually pay the end supplier for the goods or services, the only function of square is to facilitate a payment from yourself via your credit agreement to the supplier. It has been found in court that a four or more party agreement does not interfere with the dcs link.

You have not loaded money on to square or funded an account with them. As far as you and I are concerned, there can be no other argument but that your credit agreement was used to fund the purchase from the supplier.

PM me what has happened to you please. I will update this thread with all the info once my case has been resolved.

PM2019

I am feeling more confident about things now, thanks for that, though it has been a disconcerting read through all the various googles around this subject. I will be dealing with them again re final payment soon and will let you know by pm what happens.

born_again

Best advise is to stop worrying and if there are any problems speak to your card provider. Not just front line, but the disputes team.

Mc228

So, here we are 1 year and 7 months later and I am happy to say that I have been victorious. The credit card company fought me every step of the way but have now offered me all the money for the car and the bmw investigation as full and final settlement. 
If anyone is interested in the timeline / arguments used to win then let me know.

northwalesd

Very tenacious, congratulations on your victory.

Sandtree

Mc228 said:

So, here we are 1 year and 7 months later and I am happy to say that I have been victorious. The credit card company fought me every step of the way but have now offered me all the money for the car and the bmw investigation as full and final settlement. 
If anyone is interested in the timeline / arguments used to win then let me know.

For those of us that skipped to the end... did this end up with the Ombudsman or Court or... ?

loveka

Hello. I'm so glad you won! I have a very similar situation ( although I used Stripe) with some added complications but I would be SO grateful if you could share how you did it!

I strongly suspect my Section 75 claim will be rejected on the grounds the guy I paid used Stripe as the processor.

Mc228

Hi,
I will post a timeline including the most important points. Ombudsman was used. I have changed names of parties.
6/6/2019: S75 claim raised with CC.
01/07/2019: CC reject claim citing a break in the DCS chain and that "Arguably, the transaction has been financed by Square, which means that your card was used to purchase the credit on a Square account, not the services".
09/07/2019: I reply with a letter citing a previous ombudsman decision (DRN0797157) that states that there is no evidence that "four or more" party agreements break the chain.
12/08/2019: Having not heard back from CC I raise a complaint with the Ombudsman as it has been over 8 weeks since the initial complaint. I state my case as follows:

My key points:
1. Section 75 applies here because the vehicle was absolutely unfit for purpose. It was not of satisfactory quality and I later found evidence of misrepresentation. There were issues that I have since found that were not mentioned in the advert or at time of purchase (leaking shock, leaking tyre, faulty battery).
2. My contract with DEALERSHIP for them to supply the third party warranty as an additional warranty was breached when they issued a chargeback on the premium.
3. I believe that CC company have presented an invalid argument to support their rejection of my claim. They appear to make the point that due to the purchase being processed through Square, the debtor-creditor-supplier chain has been broken. They further stated:
"Arguably the transaction has been financed by Square, which means that your card was used to purchase the credit on a Square account, not the services."
3a.  As I have detailed in Attachment 6, In a previous ombudsman decision a court case was referenced that supports the view that a four-or-more party agreement does not affect the debtor-creditor-supplier chain. This decision was in the favour of the consumer.
3b. As for their second argument, I have since found that this same argument was presented by a Mr Hapgood QC representing  several credit providers in the Supreme court. It was rejected by the judge and abandoned by the lawyer, as referenced in Paragraph 56 of the case summary referenced below.
Citation - Paragraph 56: Office of Fair Trading v Lloyds TSB Bank Plc & Ors [2006] EWCA Civ 268 (22 March 2006)
http://www.bailii.org/ew/cases/EWCA/Civ/2006/268.html  
   I fail to see how there can be any other argument but that my credit agreement with CC company was used to finance the purchase of the vehicle from DEALERSHIP.  No account was made by, or existed between myself and Square, they simply facilitated the transfer of funds from myself to DEALERSHIP via a Square terminal. It was the credit agreement between myself and CC company made at the time of purchase, on the premises of DEALERSHIP, that provided the financial basis for the purchase of the vehicle from DEALERSHIP.  Therefore, Section 75 applies.

26/09/2019: I receive a final response from the CC stating that they will not uphold my complaint, stating "In this instance, the chain has been broken as the merchant used a third party payment processor, Square."
17/10/2019: I have not been assigned an investigator by the ombudsman but I update them with the current state of affairs as well as some further points:

My previous key points already explain why I believe the chain is intact, and the claim under Section 75 is valid, but I would like to add some further supporting evidence:

4. It is clear that the use of a third party payment processor does not automatically break the DCS chain, as CC Company continue to claim. I understand in cases such as Paypal and other "E-wallets", where money is loaded into your Paypal account before going to the supplier, that the chain would be broken; this is akin to withdrawing cash from your card and paying the supplier with the cash. Square have no other function but to act as an end-to-end payment processor and facilitate the transfer of funds from my credit card to the supplier, as explained before [Point 3a, DRN0797157], this "four-or-more" party arrangement does not break the DCS link, as proven in the prior mentioned court case and FOS decision. 

    4a. Square themselves describe their function as the following: "Square’s hardware and services create an end-to-end payment processing system: We capture your customers’ payment information at the point of sale (no manual reconciling), work directly with credit card payment gateways to securely route those payments to the right place, and deposit the funds into your bank account in one to two business days." - [https://squareup.com/gb/guides/payment-gateway]. There is no scope here for the D/C/S chain to be broken.

5. You have found in at least 2 previous ombudsman decisions (attached) that when not funding an (presumably PayPal - as referenced "P") "E-Wallet" account, the chain is unbroken. In this case, "P" takes on a similar function to Square as an end-to-end payment processor, in that it merely facilitates the transfer of funds made available from a credit agreement, to the supplier. 

    - "Like the investigator, I don’t agree that the fact that O used the services of a payment terminal, or payment gateway, provided by P interferes with or affects the d/c/s chain between Miss B/Amex/O. P simply provided the technology to facilitate the transfer of the money to O, without itself entering into possession of the money." -  DRN4631631

    - "Like the investigator, I don’t agree that the fact that P provided payment aggregation services to Amex is sufficient to break the d/c/s relationship between Mrs W/Amex/S. The relevant point is that Mrs W didn’t use her account with P to pay S for the goods – the transaction doesn’t appear on her the statement of her account with P. So I conclude that Amex is equally liable with S under section 75 for S’s breach of contract in supplying faulty goods. It’s therefore fair and reasonable that Amex should compensate   Mrs W by paying her £725, not £625 as the investigator suggested." - DRN5747043

    It is clear that the fact that DEALERSHIP used the services of Square as a payment processor does not affect the D/C/S link in this "four-or-more" party arrangement.

With these points considered, I see no reason for CC company to deny my claim, especially not for the reasons they have stated.  They have made no attempt to directly address the arguments I have made to them and I believe they are being unfair and unreasonable. 

10/01/2020: I am assigned an FOS investigator.
05/03/2020: The investigator sends their initial view. It agrees with me, upholding my complaint and also cites that.

Square is a payment processor, as they note in the legal terms on their website:
"Square is a payment processor that allows you to accept Cards from customers for the
payment for goods and services. We are not a bank and do not accept deposits as defined
by the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Your
Square Account is not a payment account and may not be used by you to instruct payment
transactions..." (https://squareup.com/gb/en/legal/general/payment)
As such, Square processes payment transactions for companies who then don't have to set
up relationships with individual card companies themselves. I would not consider it
necessary for there to be a contractual relationship between DEALERSHIP and CC COMPANY to satisfy the
DCS relationship.

22/06/2020: After waiting ages for a reply from the CC company they finally got back after delaying several times due to Covid. They came back rejecting the initial view from the investigator. Their argument contains a lot of irrelevant information but it seems to basically be arguing that they believe Square converts the money into "electronic money". Here is what I replied to the ombudsman with, my arguments in bold:

Taking into account what CC Company have said, I feel like they are making spurious arguments without any evidence. 
I myself created an account with Square for my business and accepted a payment through it. The only time I could see a reference to the money I have received in my Square account was as an "Upcoming Transfer" before being deposited into my business bank account. I could not interact with this value in any way.
CC Company have said that "we are not aware of any agreement between Square and the supplier that the funds will be transferred directly to the supplier..."
-When registering for your Square account, you agree to the payment terms in section 9 which state: "We will settle proceeds to your verified bank account..." in fact they state on their FAQs: "Please note that your Square account will not be activated to accept payments until you have linked your bank account to Square, and the bank account has been verified." 
[ https://squareup.com/gb/en/legal/general/payment - Section 9 ]
 
CC Company have said that "we are not aware of any agreement between Square and the supplier that the supplier will honour our card..."
-When registering with Square you agree to the Legal Terms that detail in Section 23: "You will honour all valid and current cards without discrimination when properly presented by a customer for payment".
[https://squareup.com/gb/en/legal/general/payment - Section 23]
 
CC Company have said that "Customers seem to know that they are paying through Squareup". 
-This is irrelevant and unfounded but to me it just seems like any other credit card transaction when you are presented with a card reader.
 
CC Company have said that "We maintain our position that Squareup converts the funds provided by us into electronic money to finance the separate transaction with the supplier."
-This seems to be the crux of the issue. As you have noted in your view, a Square account is not a payment account. Further to that, at no time do the funds fit the FCA description of electronic money. The FCA state that it is NOT considered electronic money where:
 
"(c) monetary value stored on specific payment instruments that can only be used in a limited way and meet one of the following conditions:
(i) allow the holder to acquire goods or services only in the issuer’s premises;
(ii) are issued by a professional issuer and allow the holder to acquire goods or services only within a limited network of service providers which have a direct commercial agreement with the issuer;
(iii) may be used only to acquire a very limited range of goods or services; or
(iv) are valid only in a single EEA State, are provided at the request of an undertaking or a public sector entity, and are regulated by a national or regional public authority for specific social or tax purposes to acquire specific goods or services from suppliers which have a commercial agreement with the issuer."
[https://www.handbook.fca.org.uk/handbook/glossary/G346.html]
 
The only reference to money in a suppliers' Square account is before it is transferred to the business bank account of the supplier, where it shows as an "Upcoming Transfer". 
Given that the usage of your Square account is extremely limited because one cannot do or acquire anything with the figure shown; points ii and iii confirm that it cannot be considered as electronic money. The funds made available by the credit agreement at the time of purchase clearly financed the transaction for the purchase of the vehicle from the supplier

27/07/2020: The ombudsman lets me know that they have received information directly from Square about their role in the transaction and terms and conditions. They also agree that electronic money has not been purchased and that the credit agreement has financed the transaction between myself and the dealership.

17/08/2020: The ombudsman lets me know that the CC company have now at last agreed to consider the complaint under Section 75.

10/12/2020: After back and forth with the CC company gathering more data regarding my claim to ensure that the rest of S75 applies, they send me a letter with a full and final settlement offer of the cost of the vehicle + the BMW inspection.

Now it is crucial to note here: The CC Company never accepted that Square did not break the DCS chain.  They instead stated that they were looking into my claim under Section 75 "Regardless of whether or not the DCS chain was broken". This is an important distinction as I guess they wanted to avoid making a precedent of this. However should you find yourself in a situation like I have I hope that my experience, research and arguments can help you.

I am glad the Ombudsman was there to stop them ignoring me.

jet01

Very disreputable behaviour by the CC company. After all the above I still don’t understand for the life of me how they can possibly believe that Square should be treated differently to any other merchant acquirer which is surely what they are at the end of the day. With the exception of Amex then surely a third party processor must always be involved in a CC transaction? Just because Square are a new market entrant rather than a traditional operator don’t see how that changes their role in the transaction or how anyone can conceivably argue that it should. Big Cc company using spurious legal argument to try and avoid paying up and surely they should have realised it was inevitable the ombudsman would have to rule in the OP favour.