How safe is PayPal?

Anyone who likes buying and selling online knows how quick and convenient PayPal makes paying. But how many of us know where we stand in terms of our rights on these payments?

In an age where we are told to be wary about online purchases and to avoid being scammed at all costs, it can be a nerve-wracking experience to input debit or credit card details into a website, so PayPal could be a possible option. Founded in 1998 – which is a seriously long time ago in the digital world – PayPal is an online payment system which enables you to spend and receive money all around the world.

It’s free to use and the concept is simple: PayPal stores your card details so that you are not directly sharing them with the online retailer. You can also send and receive money from friends, request money or make purchases with the app or a QR code, and it is used by millions of people across the globe. But like all payment methods, it is important to know whether PayPal is right for you – and what rights you have as a customer.

What are my rights when I use PayPal for online shopping?

Section 75 of the Consumer Rights Act protects you when you spend between £100 and £30,000 on a credit card and purchasing directly from a retailer. But this isn’t the case if you make the purchase through PayPal (or other third parties).

Essentially, your Section 75 rights become compromised because there is no longer a direct connection between you and the retailer; instead your relationship is with PayPal as the third party. With PayPal, you are paying them rather than the retailer and the company is then paying the retailer. So, where possible, it’s best to make payment for large purchases direct to the retailer, rather than via PayPal.

What is PayPal Buyer Protection?

PayPal offers its own buyer protection scheme called PayPal Buyer Protection. But this is not law and only protects from misdescriptions or items not turning up, rather than the sturdier rights given by Section 75. The reimbursement should include the full amount of the item, plus postage and packaging costs.

do you know your rights when using paypal for online shopping

You also are still entitled to your standard consumer rights from the retailer, just not Section 75. Many retailers have a ‘goodwill’ returns policy offering an exchange, refund or credit note for most returns. You have a statutory right to return something and get your money back if it’s faulty. If it’s not faulty, it will depend on whether the retailer has a returns policy. Some retailers won’t accept returns if the seal or original packaging is broken, and perishable items can’t be returned.

Kate Hobson, Consumer Expert at Citizens Advice, says: “If you haven’t got what you paid for then you are entitled to get your money back through a Section 75 claim only if the item cost £100 or more and was bought on a credit card. You won’t have this legal protection if you paid by debit card or used a money transfer service like PayPal.

“PayPal has its own compensation scheme which allows you to ask for your money back if an item doesn’t arrive or match the trader’s description. If you don’t succeed in getting your money back using this route, you could take your complaint to the Financial Ombudsman Service (FOS) if you think your case is covered by the scheme’s remit.”

This issue doesn’t just apply to PayPal but is the case with any third party payment. If you’re buying something with a credit card on Amazon and it’s sold through a third-party seller where Amazon is acting as an agency, you’ll encounter the same problems.

GH Tip: If you’re paying someone you don’t know (for example, if you’re buying a ticket to an event), never select ‘Sending to friends and family’. If the seller asks you to, they are likely scamming you as PayPal’s Buyer Protection does not cover funds that are transferred this way.