Photographers and other consumers run the risk of losing valuable consumer rights if they buy equipment using a credit card, and transfer the funds via PayPal.

Ian Douglas at Kynance Cove.webThe potential legal pitfall emerged during a dispute between a camera dealer and photo enthusiast Ian Douglas (pictured above) over a suspected faulty lens [© Charlotte Douglas]


PayPal, a popular system that allows consumers to transfer payments quickly online, has 179 million active customer accounts worldwide, including 20 million in the UK.

However, Ian Douglas, a keen photographer from Devon, said he learned a ‘valuable lesson’ after buying a lens and seeking redress when it ‘could not take a sharp picture’.

When Ian suspected a fault with the lens, he contacted the store where he had bought it online, but they only offered to repair the item, rather than replace it.

Unhappy with that option, he expected his credit card company to fully reimburse him.

However, Ian became aware of a potential legal drawback after realising he had bought the lens by transferring the funds via PayPal from the credit-card account.

He had decided to use the PayPal option, rather than paying direct from his credit-card account, because his credit card was in another room at home and he knew his PayPal password.

Loss of statutory rights

Ian feared he had lost his rights to protection under Section 75 of the Consumer Credit Act 1974 because the law doesn’t apply to purchases over £100 when the payment is made via PayPal from a credit-card account.

In contrast, if payment is made to the retailer directly using a credit card, then the law states that the creditor (the credit card company, in this case) is jointly liable with the supplier in any subsequent claim by the customer for ‘misrepresentation or breach of contract’.

But for Section 75 to come into play, there has to be a direct relationship between the buyer and seller of the product. PayPal, like other agencies, is classed as a third party.

A spokesman for the Financial Ombudsman explains further, telling Amateur Photographer (AP): ‘Section 75 of the Consumer Credit Act is a great piece of legislation that gives you lots of rights from your credit provider if goods or services you pay for don’t turn up or are broken/not as advertised. But, as with other types of consumer protection, it doesn’t cover you for every set of circumstances.

‘One of the rules that’s important in making a claim under Section 75 is that you need to have a direct relationship with the seller of the goods or services, and that you haven’t gone through a third party. This is known as the “Creditor-Debtor-Supplier” rule.

‘A good example of this is when you buy concert tickets. If you buy direct from the venue, then Section 75 might apply (if it’s over £100). If you buy through a ticket agency, then it won’t.

‘The same goes for PayPal. Because you are “paying” PayPal rather than the supplier, the link is broken and you can’t make a claim under Section 75.’


‘Buyer protection’

Although PayPal offers its own buyer protection scheme, this is considered inferior to Section 75.

For example, there is no time limit to make a claim under Section 75, but consumers must raise a dispute with the seller within 180 days of payment to qualify for PayPal buyer protection. PayPal also requires the buyer to raise a claim with PayPal within 20 days of this date.

The item must also be deemed as ‘significantly not as described’, as defined by PayPal. A product that fails to meet a customer’s ‘expectations’, but was ‘correctly described’ by the seller, would not fall under this definition. Items not covered include vehicles.

A PayPal spokesperson told AP that the buyer-protection service, which is free, would apply to purchases made using a credit card.

In 2014, PayPal extended its UK buyer-protection scheme to include digital goods, travel tickets and other intangible items. Previously, the cut-off time to raise a dispute with a seller was 45 days.

Ian, a retired software engineer, said the camera store eventually agreed to replace his lens.

  • Well, if you are such a good editor I invite you to edit my rant down to a “readable” size …

  • Chris Redman

    Um, can you run that past me again, or even better bullet point the diatribe?
    You’d never make a journalist, using 500 words when 100 will do.

  • And that’s not all …

    Notwithstanding the otherwise constant stream of disingenuous and delusional nonsense that flows from eBay/PayPal, the share price history of these two clunky operators demonstrates the reality:

    Aug 2007: (pre John Donahoe) EBAY ~$40; AMZN ~$40;
    Jul 2015 (pre eBay-PayPal split): EBAY ~$66; AMZN ~$480;
    Jul 2015 (post-split): EBAY ~$28; PYPL ~$37; AMZN ~$530;
    Currently: EBAY ~$23; PYPL ~$39; AMZN ~$700—LOL

    PayPal is standing still, and eBay has for years been effectively going backwards—at a steady rate of knots.

    And, notwithstanding the “spin-off” of PayPal from eBay, eBay and “PreyPal” remain effectively joined at the hip—for at least the next five years—and anyone that thinks otherwise is simply uninformed; and, thanks to a continuation of most of the destructive policies introduced over the eight year reign (2007–2015) of the “Pain from Bain”, John Joseph Donahoe II, the eBay marketplace is continuing on its slow journey down the toilet; nevertheless, during Johnny Ho’s occupation of the eBay corner office, this cretin and his gang of hand-picked Keystone Kops still managed to obtain for themselves massive, unearned, “performance” bonuses—while the company’s “long” shareholders received not one penny.

    PayPal is a clunky, non-bank-licensed, non-deposit-insured, virtually non-regulated, “pretend” bank; a higher fee-charging payments intermediary that, in the main, rides on the back of the world’s banks’ existing payments systems, with no formal agreement with those banks other than PayPal’s operating of a credit card merchant account facility with, and the making of direct debits/credits on some users’ bank accounts via, one of those real banks.

    PayPal is, in its own words, “a merchant of sorts”; it is not a licensed “bank”; virtually everything that “PreyPal” does is done via “marketing” arrangements with licensed financial institutions—for example, look for the identity of the actual credit provider (in the micro print) on their credit providing instruments.

    Funds received via “PreyPal” are at risk of being subjected to lengthy arbitrary holds; funds left “on deposit” with PayPal are not FDIC deposit-insured. Even more perilous (for PayPal’s shareholders), the great majority of PayPal’s business originates from its (still) effectively mandated place on the eBay marketplace, so it logically follows that—with the destructive Johnny Ho-Ho-Ho now sitting at the head of the PayPal boardroom table—”PreyPal” will undoubtedly be accompanying eBay on its journey to the sewage farm.

    The reality is, PayPal’s parasitic, higher fee-charging payments operation has little long-term future—outside of its mandated place on the atrophying eBay marketplace—now that professional online/mobile payments offerings from MasterCard (“MasterPass”) and Visa (“Visa Checkout”) are available to any online merchant that has (or can obtain) a credit card merchant account with a real bank.

    And, with respect particularly to “mobile” payments, notwithstanding Apple Pay’s disappointing initial showing, methinks Apple Pay, Samsung Pay, Android Pay, “MasterPass”, and “Visa Checkout”, that is, those operations that have formal relationships with the world’s retail banks and MasterCard/Visa, will soon enough throttle the flow of oxygen to a great deal of the clunky PayPal’s parasitic operations.

    PayPal users should never give PayPal an authority to direct debit their bank accounts; PayPal should only ever be given access to funds via a real-bank credit card account; that way your credit card-issuing bank will be the final arbiter of any transaction dispute; similarly, sellers should never accept payment via PayPal for goods that are going to be picked up by the buyer; PayPal offers sellers zero protection from scammers in such circumstances.

    In May 2015, PayPal was fined $10 million over its “Bill Me Later” service, in part for unfairly charging some customers deferred-interest fees. The company was also required to return $15 million to consumers who used the service, which is now called PayPal Credit.

    PayPal’s one-time adoptive parent, eBay, is likely the most unscrupulous commercial entity operating on this planet; but, have no fear, eBay is an equal-opportunity fraudster; demonstrably, they will knowingly aid and abet the defrauding of buyers by unscrupulous eBay merchants who bid on their own auctions, and, conversely, of honest sellers by unscrupulous buyers—as long as there is a financial benefit in such fraud for eBay. And if anyone thinks that the clunky “PreyPal” is any more scrupulous—given their equally poor customer service and lack of any mediation of transaction disputes by human beings, which effectively results in a hard-wired bias towards buyers/payers that they now necessarily have to pander to—good luck to all you small online merchants who may get burned in the process.

    For a detailed analysis of the ugly reality of eBay’s demonstrable, calculated, facilitation of endemic shill bidding fraud on consumers on its auctions marketplace—Google “Shill Bidding on eBay: Case Study #5”

    Goodbye clunky PayPal—it’s not been nice knowing you—Google “Retail Payments: The Reality”