Legal advice: credit firm pays after company goes bust

Judging by a number of the complaints to this site about scams perpetrated by ‘traders’ overseas I assume that the attraction of using PayPal for the payment process is that it gives access to sellers that are denied merchant facilities by the major credit card issuers and so possibly lower prices, but it comes without the consumer protections provided by the Consumer Credit Act 1974.

If a seller is not able to process a credit card payment, that should sound a warning bell in the buyer’s mind. Unfortunately there is often no way of knowing that a trade is taking place outside the scope of UK jurisdiction. This is not related to the case reported in the Intro to this Conversation where I assume that PayPal was merely being used by the customer as a channel, or platform, for processing a credit card payment, although it has not been explained why that route was chosen.

Do credit card companies [e.g. John Lewis Financial Services] have the right to decline payments via intermediaries? If not, they are at risk of having to meet s.75 claims without redress against the merchant in administration or liquidation. In the present case, can JLFS claim back against PayPal who ultimately admitted that they had “an agreement with the retailer”?

I have used PayPal for years to purchase inexpensive products from eBay sellers. eBay provides a convenient source of obsolete parts that have been discontinued by manufacturers and companies that specialise in spare parts. I presume that individuals and small companies buy up the remaining stocks and sell them on eBay.

I remain reluctant to give my credit card details to a small company that might not have adequate security measures in place or might not be honest. PayPal is often the only option for buying goods from businesses run by individuals. I usually have between £50 and £100 in my PayPal account and I have not had a single problem. I look for sellers based in the UK.

I see no problem with using PayPal in such circumstances, where the values are below the £100 s.75 threshold anyway. For larger amounts it is prudent to buy from a seller who will accept a credit card payment so that consumer protection is available.

Like NFH (below) I think the Financial Services Ombudsman was misguided in the case reported and that John Lewis Financial Services might have conceded for reputational reasons rather than strictly on the merits of the case.

Now that credit card surcharges are no longer permitted I do pay amounts over £100 by credit card. With companies failing as a result of coronavirus, this advice from Thomas is timely.