If you were buying something, would you give cash to a company you’d never heard of without receiving the goods there and then? Probably not. But if you pay by bank transfer, you’re taking a risk if you don’t know the company because there’s no protection if things go wrong.
Q. What does paying by bank transfer involve?
A. Paying someone by bank transfer – usually online or by phone – means the money goes straight from your account to theirs. It’s not the same as paying over the phone by credit or debit card, or setting up a regular payment from your debit or credit card. It’s simply where you make a payment directly from your bank account to the person or company you’re buying something from.
Q. What kind of scams involve bank transfer?
A. Unfortunately, the answer is a huge range of scams. One that is becoming more common is where a fraudster hijacks a solicitor or company’s email and asks a house buyer or someone having work done to make the deposit payment to a ‘new’ account. Another scam is a ‘vishing’ scam where someone is told to transfer money to a so-called safe account which turns out to be anything but safe.
Q. Why can’t I get my money back if I pay by bank transfer and change my mind?
A. Paying online or over the phone where money is transferred directly from your account to the retailer/suppliers is similar to paying by cash in that there’s no consumer protection if things go wrong.
The UK Payments Council, which handles bank payments, has this advice: “We would like to warn people about making purchases online using internet or telephone transfers. Treat them like cash: if you know and trust the other party it’s fine, but be wary if you’re purchasing something of high value.” It has information on its consumer website about Comparing ways to pay, including what – if any – protection is available.
Since the beginning of the year, banks have transferred money between accounts in a matter of hours and — if you have second thoughts — you would probably only be able to get the transaction stopped if you contacted the bank immediately. Even then you may be too late.
Q. I thought I could get my money back if fraud was involved?
A. If money is taken from your bank account fraudulently, your bank must refund it unless it can show you have been grossly negligent. Unless it can show that the fraudulent transaction should be investigated further (to establish whether or not you were negligent) it must refund the money within days.
However, there’s no such obligation on the bank if you buy something from a person or company that turns out to be fraudulent.
Q. How should I pay if I’m buying something from a company I’ve not dealt with before?
A. Pay by credit card, if you can. If you pay by credit card and the item costs £100 or more (but less than £30,000), and it doesn’t arrive, isn’t as described or the company selling it goes bust, you should be able to make a claim against your credit card provider under Section 75 of the Consumer Credit Act. This Act makes the credit card company equally liable if the contract is broken.
There’s more detailed information about Section 75 in the article called Understanding your rights under Section 75 and in Paying by credit card — how you’re protected if you pay by card.
SAVVY TIP: If you buy something via Paypal you probably may not be covered under Section 75, although there’s some disagreement about this. The consumer group Which? believes you probably are covered if you buy from a business, but the Financial Ombudsman Service thinks you may not be covered — depending on the relationship between the seller and Paypal. However, Paypal does operate its own Buyer’s protection scheme, which is similar to chargeback (see below).
If you can’t make a claim under Section 75, because the items cost less than £100, or you paid by debit card, ask your credit or debit card company to make a ‘chargeback’. This essentially is a reversal of the transaction. There’s no lower limit as to how much the items must have cost, but there are time limits for making your claim (anything from 45 to 180 days from when you paid, depending on the brand of credit card).
SAVVY TIP: It’s not a legal requirement for credit or debit card companies to offer chargeback, but the card brands (such as Visa etc) have decided to do this. Debit card transactions are also covered by chargeback. The scheme rules vary slightly between Visa and Maestro.
Q. How do I know if a website I’m buying from is safe?
A. There’s no guarantee, but there are some steps you can take to check it out.
1. Don’t assume that a website address that ends in .co.uk is owned by a company based in the UK. Anyone (virtually) can buy a .co.uk web address. It doesn’t tell you anything about where the company is based.
2. Look for a physical address and contact number. If the goods don’t arrive, you’ll probably want to be able to speak to someone, rather than only be able to send an email to its customer service department.
3. Find out what customers are saying. Type the company’s name into a search engine, and check out review sites. Add the name ‘problem’ or ‘complaint’ to double check. It doesn’t mean that you shouldn’t buy from the site just because there have been complaints, but if there are a lot of unhappy customers or there’s a common thread between the complaints, it may be better to buy from someone else.
4. Make sure the site accepts secure payments. This is a tricky one because different websites use different security systems. You can look for a golden padlock sign, which will normally be in the browser bar. However, the padlock system may appear elsewhere or the website may use a different security system that doesn’t produce the padlock symbol.
SAVVY TIP: If you’re nervous about shopping online, you could take out a credit card that you only use for online purchases.
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