How you are Protected When you Pay Online

When you’re paying for goods and services online, obviously you want to make sure that your money, bank details and personal information aren’t at any risk of being stolen and that your transaction is protected.

This guide will go through each common online payment method and discuss the pros and cons of each and how you are protected if things were to go wrong.

Credit Card

Using a credit card is a very good choice for shopping online as you have added legal protection if things go wrong. For purchases between £100 and £30,000 you will be protected under Section 75 of the Consumer Credit Act 1974. This means that your credit card company has equal responsibility with the seller and is legally obliged to help you to claim your money back if you have a problem with a product of service you purchased with it.

Will you get your money back when you pay a deposit by credit card?

If you’ve paid a deposit for a product or service via credit card, you are still protected under the Consumer Credit Act and you will be reimbursed for the full amount, not just the deposit amount.

For example, if you bought something which cost £250 and you paid £50 by credit card and the rest through other means, you would still be able to claim back the full £250 under the Act if you never received what you paid for.

Will you get your money back if you paid for a holiday by credit card?

If you paid, or partially paid, for a holiday which cost between £100 and £30,000, you may be able to claim your money back under the Consumer Credit Act if things go wrong.

If you booked a package holiday through a travel agent which is ATOL protected, you will be protected under this scheme instead, not the Consumer Credit Act. However, you will be protected by the Act if you booked your flights and accommodation separately, or if you booked a package holiday which is not ATOL protected.

You would be able to recover the cost of your flights if the airline went into administration before you flew, the cost of your holiday if the company you booked through went bust and they were not ATOL protected, and any additional costs you incurred trying to resolve the issue (for example, if you had to pay for more expensive flights to get home after your original flights were cancelled.)

Are you protected under the Consumer Credit Act for purchases above £30,000?

Changes were made to the Consumer Credit Act in 2010 and Section 75a was introduced which covers certain credit agreements and claims of up to £60,260.

This piece of legislation is a little more complex as it only covers purchases where the finance is directly linked to a specific item or product.

For example, if you purchase a car with a personal loan or a credit for £35,000, this will not be covered as you could have used the credit card or loan to buy anything. If you take out a loan specifically for the car, organised and arranged through the car dealership, this would be covered.

Another difference with Section 75a is that you can’t take your complaint to the credit provider as the first port of call. You need to go to the goods or service provider first, and then to credit provider only if your complaint was unsuccessful or the company has gone out of business and there’s no way to correspond with them.

How to claim your money back on a credit card

Contacting the retailer should be your first step, assuming the company hasn’t gone out of business. If you have no response, or they refuse to help, then contact your credit card provider. However, as both parties are considered as equally liable as eachother, you can go to the credit card provider first and they are legally obligated to help you.

• Write to your credit card provider stating what you bought, the retailer you bought it from and what the problem is. You should include any receipts or proof of purchase you have.
  
• Explain any correspondence you had with the retailer – or if you had none at all.
  
• Be sure to state that you would like to make a claim under Section 75 of the Consumer Credit Act and what you would like the company to do – which would usually be a refund.

If the credit card company refuses to help or you are unsatisfied with the outcome, then you can continue your complaint with the Financial Ombudsman Service who will deal with it from there.

Debit Card

If you pay for something using a debit card, you won’t be covered under Section 75 of the Consumer Credit Act, but you may be protected under the Chargeback Scheme. The difference is that this scheme is not a legal protection, it is an agreement which Mastercard, Visa, Maestro and American Express have signed up to and card companies will offer compensation at their own discretion.

This scheme will cover you for purchases of any value on a debit or credit card. This means that for credit card purchases under £100, you may be able to claim your money back under this scheme instead, but for purchases over £100 it is recommended that you claim under the Consumer Credit Act as there is greater legal protection.

How long do you have to make a claim under the Chargeback Scheme?

You usually only have 120 days from the date of transaction to get in your claim. Depending on the circumstances, some claims may be extended to 540 days.

What to do if your Chargeback claim is rejected

If you’re unhappy with the outcome of your claim, or the length of time your bank is taking to deal with it, you can raise a formal complaint with them. They then have eight weeks to deal with this.

If your claim is rejected altogether, you can then take it to the Financial Ombudsman.

PayPal

If you have a problem with an item you bought online using PayPal, you can report this on the PayPal website and you should be covered by PayPal’s Buyer Protection Scheme.

In order to make a claim, you’ll need to raise a dispute with the seller through PayPal’s Resolution Centre. You have 180 days from the date of purchase to do this, and your account must be in good standing.

If you and the seller do not reach a satisfactory resolution within 20 days of raising the dispute, you can then pass the matter on to PayPal themselves.

If your transaction qualifies under PayPal’s Buyer Protection, you will be covered for the full purchase price plus any delivery charges you paid.

Bank Transfer

If you pay for something online via a bank transfer, there is very limited protection if things go wrong.

You should treat bank transfer like paying with cash – if you know and trust the person you are sending money to, that’s fine, but be very careful if you don’t know the seller or you are purchasing something of a high value.

If money was taken from your account fraudulently, and you didn’t authorise the transaction, then you will be reimbursed by your bank – unless the bank can prove that you have acted negligently.

However, the problem comes when you authorised the transaction and purposefully sent money to this person. In this case, the fault doesn’t lie with the bank, so they are under no legal obligation to compensate you. It will be up to you to contact the seller and try to organise a refund.

So, in all cases where you are purchasing an item from someone you don’t know, stick to a debit or credit card payment as you will have much more protection if things go wrong.