Section 75 loophole, savy, or Plain Fraud

ArbitraryRandom

Okell said:

I think everybody is agreed that the OP's plan is morally wrong, unethical and dishonest (probably).  But that doesn't mean it's necessarily a criminal offence.

Rather than reopening the debate, I just want to highlight that fraud isn't only a criminal matter - https://www.ashfords.co.uk/insights/articles/guide-to-civil-fraud 

A loss sufficient support a claim would obviously then face the lower standard of proof, and I expect would still hinge on the reasonable person test for the two questions.  

Okell

That's a fair point*** - but I'm not sure it would be necessary for either the card provider or the trader to use this?

I know the OP talked about a s75 claim, but let's talk about chargeback first - not least because @born_again has already suggested it was more likely to be a chargeback than a successful s75 claim.

My understanding is that a chargeback takes the money out of the trader's bank account and refunds the consumer.  To me that means that that the trader has now had returned to him legal ownership of the goods which are the subject of the chargeback, and the consumer has no legal right to retain them.  The consumer then becomes a bailee of the goods and must keep them safe for up to 6 years in case the trader requires them to be returned.  The consumer has no right to retain the goods if the trader demands their return.  There hasn't necessarily been any fraud and the trader doesn't need to resort to a claim in civil fraud to get the goods back.

If it had been a s75 claim (and to be honest I'm surprised that the OP's original claim was successful if it truly was a s75 claim) then I don't think the card provider - if it wanted to do so - would need to bring a civil fraud claim in order to establish that legal ownership had transferred to them when they refunded the consumer.

My point is - and I'm aware I may not have explained this very well - is that there's no need to go down the civil fraud route from the point of view of either the trader or the card provider.  Once the consumer has received a refund they aren't entitled to keep (or sell for gain) the goods.  The goods are owned by either the card provider or the trader depending on who evetually coughed up for the refund.


***  In fact it's a very fair point and possibly highlights that much of this thread has been at cross-purposes.  When fraud is first mentioned people tend to think of a criminal offence rather than a civil one.  I'm not at all convinced there has been a criminal fraud here, but there might well be a civil problem.  But I think it just comes down to a question of who owns the goods once the consumer has been refunded

the_lunatic_is_in_my_head

Okell said:

 Once the consumer has received a refund they aren't entitled to keep (or sell for gain) the goods.  The goods are owned by either the card provider or the trader depending on who evetually coughed up for the refund.

Seems to be a whole can of worms, only going off the info posted by @born_again over the years so please correct anything if mistaken  

Funds for a chargeback comes from the retailer so it's clear the goods would belong to them. Typically a NAD chargeback requires the goods be returned (there's a thread on the eBay board, linking to a thread on the credit card board where someone lost their chargeback as they didn't return the goods). 

Not sure why OP would have gone through a chargeback and been able to keep the goods? Perhaps that's what happens when the retailer doesn't defend the chargeback? 

So you'd end up as an involuntary bailee, obligation being to let the owner know twice and then take care of the goods (or sell as required, etc, etc), so if you didn't let them know what's the punishment for not fulfilling that obligation? If they ended up taking you to small claims once the letter before actions appears you could make the goods available for collection and there's no longer a loss. 

S75 seems to come from the bank's funds but clearly the bank doesn't have the inclination to mess about with owning these goods, when you consider the consumer only has a duty to make them available for collection unless agreed otherwise a bank is unlikely to want staff booking couriers, handling goods and then trying to squeeze a few quid by selling them somewhere. Maybe there's a business idea there somewhere as a third party.

But the complication is if the bank reclaimed the money from the retailer, which I know they don't often do but you'd think for claims in the tens of thousands they would? then goods would again belong to the retailer right? How is the original customer supposed to know all this, really the bank should take the goods and then give them to the retailer if they force the retailer to cover the S75 value. 

When I ran my previous business and a customer claimed goods were NAD it was often cheaper to simply refund, or hope a part refund would satisfy, often the goods that come back were requested out of principle partly in the hope the customer was lying and wouldn't return and partly because if they were lying at least they wouldn't get free stuff, point being for companies doing serious volume messing about with pennies isn't worth it if the staff costs are going to be higher than what you'd get back, where as normal people like you and I are counting the pennies, whether in every day life or as running a small business, so our view is different. 

Born_again said S75 claims aren't that common, probably because the banks push a chargeback first, I'm sure if you preform a chargeback the bank asks if you've contacted the retailer so for a valid claim there shouldn't, in an ideal world, be any chargebacks as retailers should be sorting the issue out. 

If a retailer took a customer to court after the customer was refunded via a chargeback would they be awarded costs? After all they could have avoided the whole thing.

ArbitraryRandom

Okell said:

 ... I don't think the card provider - if it wanted to do so - would need to bring a civil fraud claim in order to establish that legal ownership had transferred to them when they refunded the consumer.

In a civil claim I don't think the question is generally ownership - in this case it would be for things like the cost of the chargeback/S75 process (as the claim would have been an abuse of the process). Plus potentially that the item now owned by the card provider was worth less (resale amount) than the value of the refund provided? i.e. a claim for losses directly attributable to the fraudulent activity. 

Remembering the question was if the behaviour would be classed fraudulent, not if any case would be likely to be forthcoming. 

the_lunatic_is_in_my_head

ArbitraryRandom said:

Okell said:

 ... I don't think the card provider - if it wanted to do so - would need to bring a civil fraud claim in order to establish that legal ownership had transferred to them when they refunded the consumer.

In a civil claim I don't think the question is generally ownership - in this case it would be for things like the cost of the chargeback/S75 process (as the claim would have been an abuse of the process). Plus potentially that the item now owned by the card provider was worth less (resale amount) than the value of the refund provided? i.e. a claim for losses directly attributable to the fraudulent activity. 

Remembering the question was if the behaviour would be classed fraudulent, not if any case would be likely to be forthcoming. 

There's still one aspect missing here and that is generally speaking this is only possible because the retailer has breached the implied terms of the contract*

Even if the customer's actions was classed as fraud at a civil level where does the retailer's inability to provide goods conforming the contract come in to play? Would that affect the outcome, the awarding of costs, something else?

My point here is what OP is suggesting shouldn't be possible at all unless there is fault on the retailer's part also. 

*Yes you could outright lie (which would obviously be fraud) and the OP's issue with the Lego is very subjective making it opinion so I guess the court would have decide whether or not the goods conformed.

ArbitraryRandom

I think your last point addresses your question for me - where is the line between 'puffery' and false advertising? 

But generally speaking the card issuer (who would be the one bearing the cost of the s75 claim) has done nothing wrong, so the retailer being at fault doesn't excuse the OP's abuse of the system and the card issuer's subsequent losses... 

Grumpy_chap

the_lunatic_is_in_my_head said:

There's still one aspect missing here and that is generally speaking this is only possible because the retailer has breached the implied terms of the contract*

Is that always the case?
What evidence does the CC require in chargeback cases?
How does the detail of the chargeback process work?

It is my understanding that in chargeback cases, the CC essentially takes the individual's word and recovers the funds from the supplier. 
The supplier then has to decide whether to challenge, or seek recovery of funds via alternative routes. 
For low value issues (including £140 Lego sets), the retailer probably just shrugs and determines it is not worth the time to pursue the funds or the return of the product.  It is probably just written down the same as any other stock discrepancy.
If a retailer spotted a pattern of specific individuals making repeated chargeback claims, you can expect a different approach.

Where a claim is processed as S75 (not chargeback), the CC is directly liable and may not be able to recover the funds from the retailer.  In these cases, I understand the CC are far more diligent as to establishing liability and the process is rather slow compared to chargeback refunds.

There does seem to be a lot of cases that add confusion if the individual believes a refund was S75 where the indications are that the refund was actually chargeback.

born_again

Grumpy_chap said:

the_lunatic_is_in_my_head said:

There's still one aspect missing here and that is generally speaking this is only possible because the retailer has breached the implied terms of the contract*

Is that always the case?
What evidence does the CC require in chargeback cases?
How does the detail of the chargeback process work?

It is my understanding that in chargeback cases, the CC essentially takes the individual's word and recovers the funds from the supplier. 
The supplier then has to decide whether to challenge, or seek recovery of funds via alternative routes. 
For low value issues (including £140 Lego sets), the retailer probably just shrugs and determines it is not worth the time to pursue the funds or the return of the product.  It is probably just written down the same as any other stock discrepancy.
If a retailer spotted a pattern of specific individuals making repeated chargeback claims, you can expect a different approach.

Where a claim is processed as S75 (not chargeback), the CC is directly liable and may not be able to recover the funds from the retailer.  In these cases, I understand the CC are far more diligent as to establishing liability and the process is rather slow compared to chargeback refunds.

There does seem to be a lot of cases that add confusion if the individual believes a refund was S75 where the indications are that the refund was actually chargeback.

In this case as goods not as described.
OP would have to prove what was ordered & what was received.

So screen shot or copy of order showing what it was.
Then it would normally be a picture of what was received.
Its Visa/Mastercard that require this.

So not sure how Op did this. All I can think to bank simply decided on "Go Away Money" as the idea that a Lego set is going to mirror a F1 car in 100% details is just a joke. 

the_lunatic_is_in_my_head

born_again said:the idea that a Lego set is going to mirror a F1 car in 100% details is just a joke. 

The issue is that the set is described as:

Build a detailed LEGO Technic model replica of McLaren’s 2022 F1 car

yet OP says:

It is actually a mash up of the 2021 and 2022 car.

I like Lego but have zero interest in F1 so can't comment if whether what the OP says is valid but based on those two statements alone I can see some ambiguity as to whether the set is as described. 

There's also a review on the Lego website that says

I was a bit skeptical (sic) of this set at first. I am a huge F1 fan and I was looking for some accuracy in a large model F1 car. The price is great for what you get. My problem with the car is that it's not a 2022 car but it's also not a 2021 car. It's a morph of 2 cars. 

Is that the OP or someone else with a similar opinion? 

the_lunatic_is_in_my_head

ArbitraryRandom said:

where is the line between 'puffery' and false advertising? 

Well yes indeed.

ArbitraryRandom said:

But generally speaking the card issuer (who would be the one bearing the cost of the s75 claim) has done nothing wrong,  so the retailer being at fault doesn't excuse the OP's abuse of the system and the card issuer's subsequent losses... 

Yes and no, they haven't by their actions but the legislation holds them liable to same resect as if they had so the credit provider are liable for the actions of the retailer.

I don't think we can do much more than speculate at this point but it was interesting to learn that state of mind can be false