warns about using credit cards with PayPal

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Personal finance guru Martin Lewis of has issued a warning to his millions of readers about potential problems when it comes to paying by Paypal using your credit card.

The headline reads: “Warning! Don’t use PayPal to pay on a credit card” and adds: “You’re losing valuable Section 75 rights.”

His concern centres around what are termed Section 75 rights. The article explores the problem in detail but here’s the short version: “Section 75 of the Consumer Credit Act 1974 says if you pay for something costing between £100 and £30,000, specifically on a credit card, the card company is jointly liable with the retailer.”

Section 75 is a valuable consumer protection mechanism that doesn’t protect you if you pay with PayPal.

You can read the whole article here.

Of course, to seasoned ecommerce SMEs, there’s nothing new here. We’ve known this for some time. But I wonder if it may have a detrimental impact on eBay traders if it does dent confidence in PayPal because such a venerable consumer champion has highlighted the issue.

4 Responses

  1. The best source document is the Financial Services Authority &
    Financial Ombudsman Service Consultation Paper 05/5 (CP05/4) which is online but I cannot include the URL for some reason [If you want it Dan, just let me know].

    Search for ‘PayPal’ and it will take you to a case study in Annex B of the document.

    Summary: Issuing credit cards is not an FSA regulated
    activity and the FOS concluded that section 75 did not apply in the circumstances of the cases that had been brought to it.

  2. The article by Martin Lewis might have several points of importance to the user of paypal, but we feel it should have also pointed out the refund and protection Policy of paypal and hence I find it slightly biased by scaring people into the believe that they are not protected at all.

    part copy of paypal terms:
    Buyer Protection

    If an eligible item that you’ve bought online doesn’t arrive, or doesn’t match the seller’s description, our Buyer Protection will reimburse you for the full amount of the item plus postage and packaging costs. Buyer Protection covers all your online purchases, on eBay or on any other website, when you use PayPal.

    For more information, see our User Agreement

    You bought a book but got a DVD, you bought a new item but got something that was used, you purchased 3 items but only got 2, the item was damaged in transit, the item is missing major parts (that the seller didn’t disclose), or you purchased an authentic brand but got a knock-off instead. Tell us.

    If the seller has accurately described an item, but you’re just not happy with it, if you fail to open a dispute within 180 days of purchase, or if your account is not in good standing, you are mostly likely not covered.
    Items Not Covered

    Items like real estate, motorised vehicles (of any kind), custom-made items, industrial machinery (for manufacturing), prepaid cards, or items that violate our policies or eBay’s policies, anything you buy in person, or money transfers to friends or family.
    Account Protection

    You’re not liable for unauthorised purchases made from your account.

    If an order doesn’t arrive or match the description, we’ll reimburse the full cost of eligible purchases and paid delivery costs.


  3. What is the situation if a smaller merchant uses PayPal as their credit card processing gateway?

    With the PayPal virtual terminal a customer paying over the phone or by post may not know that PayPal is being used.

  4. red top sensationalism
    every trader here knows that buyers just dont loose using paypal
    they often gain what they are not entitled to


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