A WARNING has been issued to shoppers over a quick payment option that can cost £1,000s.
Which? is urging caution over use of the “pay by bank” feature which lacks key consumer protection.
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The payment feature lets shoppers pay for products without the need to enter bank details or use a card.
It is used by popular online retailers such as WHSmith, Just Eat, Funky Pigeon and Ryanair.
You can also use it to settle credit card balances or pay bills.
However, Which? has raised concerns people may be unaware it can leave them unprotected if something goes wrong with a purchase.
The option lacks Section 75 and chargeback protections that shoppers get when paying through other methods.
Under Section 75 of the Consumer Credit Act, a credit card company can be held jointly liable for a purchase that turns out to be shoddy or does not materialise.
This means a shopper can potentially get a refund from the credit card company if they cannot recover their costs from a retailer.
Those using a debit card or credit card for purchases can also potentially get their money back via the chargeback scheme.
Which? said pay by bank is a “potential game changer” for businesses as they can sidestep card transaction fees and also benefit from receiving customer funds immediately.
There is also appeal for shoppers as refunds can be processed instantly.
While card details are not shared when making a transaction – eliminating the risk of them being stolen or compromised.
People do have general purchase rights under the Consumer Rights Act, meaning that goods must be fit for purpose, as described and of satisfactory quality.
But Which? said these protections are not always easy to enforce and in some cases may end up with people needing to go to a small claims court.
People may also face difficulties in the event of a business going bust.
This could particularly be the case if there is an issue with a future-dated purchase such as a flight, a festival, or a household big ticket purchase such as a kitchen or a sofa.
Jenny Ross, Which? money editor, said: “Innovations like pay by bank present opportunities for businesses and consumers alike, but they’re not without risk, particularly as they lack the rigorous purchase protections you get when paying by card.
“We’re calling on the regulator to act to ensure consumers can use pay by bank with confidence, but in the meantime, we’d urge consumers to think carefully before using it to book events or make substantial purchases – for now, your good old-fashioned credit or debit card may be the best option.”
A spokesperson for banking and finance industry body UK Finance said: “There are a range of options for making payments online which provides customers with choice as to how they wish to pay.
“Different payment methods do come with different levels of protection and it’s worth being aware of these when shopping online, particularly when making higher value purchases.”
What is Section 75 protection?
Section 75 protection offers you consumer protection on credit card purchases worth between £100 and £30,000.
It applies to any products or services you’ve bought that end up being faulty, broken, or were not delivered at all.
It also covers you in the case a retailer you’ve bought from goes bust.
Section 75 applies to goods bought online, over the phone or via mail order.
You aren’t covered by Section 75 if you bought anything with a debit card, but may be under chargeback.
To make a claim under Section 75, you need to contact your credit card provider.
It should then send you a claim form which you can fill in and your provider will use to process your application.
Your card firm might ask you to provide evidence such as a receipt or a report verifying that the item is faulty.
In the scenario where a retailer has not gone bust, you should complain to them first.
If you find that your card company has been unhelpful and refused your claim, you can take your case to the Financial Ombudsman Service (FOS).
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