Paying for an online purchase through Paypal using a credit card removes the protection of the Consumer Credit Act entirely – so it's a case of caveat emptor
Can you please clarify if paying for goods through Paypal weakens a claim under the Consumer Credit Act 1974 if the trader goes bankrupt before the goods are received?
This was the case recently with an order I placed with an online retailer. Unfortunately I didn’t realise the company had gone into administration until after I was out of the Paypal dispute timeframe.
In this case, as the order was for less than £100, the Consumer Credit Act would not have applied but I am curious to know if my Visa payment is a contract with Paypal or the merchant providing the goods.
This is a good case to highlight the problems people face when they don’t pay the seller directly. Paying for goods through Paypal doesn’t weaken a claim under the Consumer Credit Act 1974 (CCA), it removes this protection entirely. It doesn’t matter if goods don’t arrive, are not as described or are inherently faulty, this law will not apply.
Section 75 of the CCA offers strong legal protection to the consumer. Under it the bank issuing the credit card is equally liable with the retailer for a breach of contract, such as non-delivery of goods or inherently faulty goods.
However, the CCA deals with contracts between only two parties: the buyer and the buyer’s card-issuing bank. The UK Payments Council, formerly APACS, explains that by using Paypal to make a credit-card payment, the buyer has introduced a third party into the contract. This releases the card-issuing bank from its obligations under the CCA.
Paypal does have increased buyer protection and has some bonuses. Unlike the CCA, it is not limited to purchases of £100.01 and above. But it does have its limitations as Mr Stubbs has found: the 45-day period in which to raise a dispute.
Because we hear about people who have lost out this way, we always advise readers who have paid by Paypal and are waiting on overdue deliveries to lodge a dispute before the 45-day cut-off date. If the goods arrive, then the buyer can always end the claim with no damage done to either side.
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