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ombudsman news

issue 96

September / October 2011

complaints involving e-money

Electronic money services (also known as 'e-money') are commonly used by consumers when transferring money to pay for goods bought through websites such as eBay. Neither the buyer nor the seller is able to see the other party's bank account or card details, as these are kept hidden by the e-money business (or 'issuer') during the transaction.

The financial businesses that provide e-money do not have to be banks. They operate payment transfer systems by providing an account that the consumer can:

  • 'feed' from their bank or plastic card accounts if they are paying money; and
  • use to receive money paid to them by others, through the e-money system.

We can look at complaints about e-money issuers from sellers as well as buyers. This includes consumers and micro-enterprises (businesses with an annual turnover of under 2 million euros - approx. £1.7 million - and fewer than ten employees). As this selection of recent case studies illustrates, the complaints we see usually involve:

  • an e-money issuer 'reversing' a payment made to a consumer's e-money account;
  • the quality (or non-receipt) of goods that the consumer paid for through their account with the e-money issuer;
  • an e-money issuer restricting or closing the consumer's e-money account ; or
  • an e-money issuer failing to resolve a buyer/seller dispute to the consumer's satisfaction.

issue 96 index of case studies

  • 96/1 - e-money issuer refuses consumer's request for a refund
  • 96/2 - consumer complains that e-money issuer 'reversed' a payment made into his account
  • 96/3 - consumer complains that e-money issuer prevented him from getting access to his account
  • 96/4 - consumer seeks compensation for failure of a pre-paid e-money card he had planned to use while on holiday
  • 96/5 - e-money issuer refuses to refund consumer's account after consumer returned faulty goods
  • 96/6 - consumer complains that e-money issuer closed his account unfairly, because of his occupation
  • 96/7 - consumer says e-money issuer incorrectly charged a fee for handling a cross-border transaction
  • 96/8 -consumer says that e-money issuer should cover her losses after she was caught out by an online scam

96/1
e-money issuer refuses consumer's request for a refund

Miss G saw a well-known brand of smartphone listed on an online auction website and bought it for £50, using her e-money account.

When the phone was delivered, she found that it was a brand she had never heard of and that all the phone's functions were displayed in Chinese. She complained to the seller, who said she had no grounds for a refund as he had never suggested that the phone was made by the well-known brand.

Miss G then contacted her e-money issuer and asked for its help in getting her money back. It, too, told her there were no grounds on which she could claim a refund. It said the phone had not been described in a way that suggested it was made by the well-known brand.

It also said she should have realised, from the comparatively low price she paid, that the phone could not be a premium brand. Miss G then referred her complaint to us.

complaint upheld
Although we do not cover complaints about the sellers of goods - we do cover complaints about e-money issuers.

We looked at the terms and conditions of Miss G's e-money account. These said she was entitled to a refund from the e-money issuer in certain circumstances, including where goods had been paid for but never received, or where goods differed significantly from the seller's description of them.

We checked the description of the phone that had appeared on the auction website. We took the view that this was clearly intended to suggest the phone was made by the well-known brand. The brand was not only mentioned in the heading but was also referred to several times in the description of the phone.

We accepted that the asking price was unusually low - and might therefore have aroused some suspicion. However, we thought the description would have led any reasonable person to believe they were purchasing a phone that was genuinely made by the well-known brand.

We told the e-money issuer to refund the amount Miss G had paid for the phone and to reimburse her for all related postage costs, including the cost of returning the phone.

96/2
consumer complains that e-money issuer 'reversed' a payment made into his account

As a surprise gift for his wife, Mr K bought a pair of concert tickets costing £150 each. The concert, scheduled to take place the following year, was part of an international tour by a major American singer.

The ticket agency sent Mr K confirmation that he had booked and paid for the tickets - and told him it would post the tickets to him nearer the date of the concert.

Several months after paying for the tickets, Mr K realised that he would not be able to use them. He had forgotten that his wife's sister was getting married on the same day.

He had still not been sent the tickets. However, he was aware that the concert had already sold-out, so he was sure he would get a good offer for the tickets on an online auction website.

As he had hoped, Mr K quickly succeeded in finding a buyer. Mrs C agreed to pay £500 for the pair of tickets. But not long after her payment had been credited to Mr K's e-money account - and while he was still waiting for the ticket agency to send him the tickets - the concert promoter announced that the singer's tour had been cancelled.

As soon as she heard about this, Mrs C asked Mr K to refund her £500. He told her he was not yet able to send her any money, as he was still waiting for the ticket agency to send him his own refund. However, he said that as soon as this arrived, he would pass the money on to her.

It was several months before Mr K got his refund. He then contacted Mrs C to tell her she would shortly be receiving a refund from him of £300. She thought at first that this must be an error and she reminded him that she had paid £500 for the tickets. However, Mr K said he could only afford to send her the amount he had himself paid for the tickets, which was their face value - £300.

Mrs C then contacted the e-money issuer. It told her it would put things right by 'reversing' the payment, which it did by taking £500 from Mr K's e-money account and paying it to her account.

When he found out what had happened, Mr K complained to the e-money issuer. He said it had 'no right to interfere'. He noted that the terms and conditions of the e-money account stated that buyers should 'raise any dispute within 45 days of sending a payment'.

As it was longer than this before Mrs C had contacted the e-money issuer, Mr K thought it was 'past the stage' where the e-money could take any money from his account.

The e-money issuer told Mr K that he had failed to act in accordance with its 'acceptable use' policy. It therefore considered that it had been 'fully entitled' to reverse the payment, even though it had done this some while after the original transaction. Mr K then referred his complaint to us.

complaint not upheld

We noted that the e-money issuer's terms and conditions allowed it to reverse payments, in certain situations.

Mr K did not dispute that he had received £500 from Mrs C for tickets he had never supplied. And he accepted that, because the concert had been cancelled, he would not now be in a position to supply them.

We said we thought it was fair and reasonable for the e-money issuer to remove the £500 from Mr K's account in order to refund the full amount Mrs C had paid. We did not uphold the complaint.

96/3
consumer complains that e-money issuer prevented him from getting access to his account

Within just a few days, Mr L sold a number of separate items on an online auction website. The payments were credited to his e-money account and he thought he would leave the money there for a while. A couple of weeks later, however, he decided instead to withdraw it.

He was then very surprised to find he could not get access to his account. The e-money issuer told him its automatic security system had flagged his account as 'potentially risky'. This was because he had only a limited account history and there had suddenly been a marked increase in the number of high-value transactions going through his account. The e-money issuer said that access to his account had therefore been restricted for up to 180 days, while security checks were carried out.

Mr L said he thought this 'totally unacceptable' and he wanted to withdraw his funds immediately. The e-money issuer told him the money could only be released if he:

  • answered some questions about the recent transactions; and
  • provided a copy of his driving licence or passport, as proof of his address and identity.

Mr L then referred his complaint to us, saying the e-money issuer had 'no right' to withhold his money and 'cross-examine' him in this way.

complaint not upheld
The e-money issuer sent us a copy of its terms and conditions for the e-money account. These were clearly set out and stated that the e-money issuer could restrict access to accounts, where it considered this appropriate, 'to help safeguard the interests of sellers'.

We noted that the e-money issuer had acted within these terms and conditions when restricting Mr L's access to his account.

In the circumstances of this case, we thought the e-money issuer had also acted reasonably in asking Mr L for details of the recent transactions and in requiring proof of his identity, so that it could validate the information registered on his account. We did not uphold the complaint.

96/4
consumer seeks compensation for failure of a pre-paid e-money card he had planned to use while on holiday

Mr B was very unhappy about the difficulties he had when trying to use a pre-paid e-money card while he was on holiday in Italy. He had used one of these cards on a previous holiday to the same small village - and had found it a convenient way of obtaining cash and paying for goods and services. On this occasion, however, things were different.

He used the card without difficulty on the first evening of his holiday, when he paid the bill in a local restaurant. However, the following morning he was unable to withdraw any money with it. There was only one cash machine within easy reach of where he was staying, so he was unable to try and get cash elsewhere.

In response to his phone call complaining that his card was faulty, the e-money issuer arranged to send him a replacement by courier, so that it reached him as quickly as possible.

As soon as this card arrived, Mr B went to the cash machine but he had no more success with this card than he had with the other one. He therefore got in touch with the e-money issuer again.

The e-money issuer said its system had not recorded any instances of his attempting to withdraw money with the replacement card. It therefore concluded that the fault must lie with the cash machine. It advised Mr B to 'leave it a while' until the machine was working properly and to then try again.

Four days later, Mr B had still not been able to withdraw any cash with the card, so he contacted the e-money issuer again. This time it arranged an electronic transfer of the total amount remaining on the card. Mr B was then able to collect the money in cash from the village post office.

Not long after the end of his holiday, Mr B wrote to the e-money issuer to complain. He said that because of the problems with the pre-paid card he had been obliged to use his credit card instead. He wanted the e-money issuer to refund the charges incurred on his credit card because of this. He also wanted the e-money issuer to compensate him for 'ruining' part of his holiday.

complaint not upheld

The pre-paid e-money card used by Mr B was one that is widely accepted by banks, including the one that operated the cash machine where he had tried to obtain cash. The e-money issuer had no record of any transactions on Mr B's card being declined, and there had been no problems reported by other users of this make of card.

We therefore thought the most likely explanation was that there was a mechanical fault with the cash machine Mr B had used. We told Mr B we did not think the e-money issuer could reasonably be held liable for this.

We pointed out that the e-money issuer had not been obliged to use a courier to get a new card to him. Nor had it been obliged to send him the balance electronically. However, it had gone to some trouble to try and minimise the inconvenience caused by the problems he had reported. We did not uphold the complaint.

96/5
e-money issuer refuses to refund consumer's account after consumer returned faulty goods

Mr J used his e-money account to buy a car stereo from an online auction site. It was evident as soon as the stereo arrived that it was faulty, so Mr J contacted the seller. The seller agreed to refund the £300 that he had paid for the stereo and gave him details of the address to which he should return it.

Mr J sent the stereo to this address, using registered post. Over a month later, however, he was still waiting to get a refund. After making several unsuccessful attempts to contact the seller about this, Mr J eventually asked the e-money issuer to refund his money.

The e-money issuer said it would look into the situation and get back to him.

A couple of weeks later it told Mr J that it was not prepared to arrange a refund. It said the seller had reported that Mr J had never returned the stereo. But it noted that, in any event, Mr J had 'failed to follow the correct procedure' for returning faulty goods.

The e-money issuer told him its terms and conditions stated that any faulty goods must be returned to the address registered on its system for the seller. However, it said it had no record of the the address Mr J claimed to have used when returning the stereo. Mr J then referred his complaint to us.

complaint upheld
Mr J provided copies of his email exchange with the seller. He also provided proof both that he had sent a package to the address the seller gave him - and that the package had been delivered there.

We looked at the terms and conditions of the e-money account. Contrary to what the e-money issuer had told Mr J, these did not say that items had to be returned to the address the e-money issuer held for the seller. They simply said that items had to be returned to the seller.

As Mr J was able to prove that he had followed the seller's instructions, we said the e-money issuer had unfairly turned down his request for a refund. We told the e-money issuer to refund the £300 Mr J had paid for the car stereo. We said it should also pay him £50 for the inconvenience it had caused him.

96/6
consumer complains that e-money issuer closed his account unfairly, because of his occupation

Mr D ran his own business working as a male stripper. Most of his bookings were for hen parties and the booking fees were credited to his e-money account.

He was very surprised when his e-money issuer contacted him to say it was closing down his account. It said it had been conducting 'a periodic review of clients' accounts'. As a result of this, it had found that he was not using his account in accordance with the terms and conditions.

Mr D complained that this was unreasonable. He said that, to the best of his knowledge, he had done nothing wrong. In its response, the e-money issuer told him its terms and conditions stated that accounts could not be used for 'certain sexually-orientated materials or services'.

Mr D then referred his complaint to us. He said the e-money issuer was wrong to assume that he was offering 'sexually-orientated services'.

He said he was a professional entertainer, offering what was purely an entertainment service. He also noted that he had been using the account without any problems for nearly four years, so he did not see why the e-money issuer should 'suddenly have an issue' with his occupation.

complaint not upheld
We agreed with the e-money issuer that it was entitled to carry out periodic reviews, to check whether accounts were being used in accordance with its terms and conditions. Where appropriate, the e-money issuer could give reasonable notice to close an account.

The terms and conditions did not list every situation in which the e-money issuer might close an account. However, it did provide an email address for customers wanting to check their own situation before they opened an account.

We explained to Mr D that as long as the e-money issuer acted within the law, including equality legislation, it was a matter for its own commercial judgement to decide who it chose to do business with. Our involvement was limited to deciding whether the e-money issuer had acted fairly and in accordance with the contract terms.

Overall, we did not think it unreasonable of the e-money issuer to consider that Mr D's business fell into the category of 'sexually-orientated materials or services'. We also noted that it had given Mr D a reasonable amount of notice that it was closing the account. We did not uphold the complaint.

96/7
consumer says e-money issuer incorrectly charged a fee for handling a cross-border transaction

After she had sold a pair of designer shoes on an online auction website, Ms A's e-money account was credited with payment received from a buyer in southern Europe. The buyer was using a European e-money account provided by the same e-money issuer.

When she saw details of the transaction, Ms A noticed that the e-money issuer had deducted an additional fee, which she had not expected to have to pay. She raised this with the e-money issuer, who told her it had made the charge because the transaction involved currency conversion.

Ms A did not think this fair but the e-money issuer told her the terms and conditions of the account allowed it to apply the charge. Ms A then referred her complaint to us.

complaint not upheld
We looked at the e-money issuer's account terms and conditions. These clearly outlined the transaction fees payable, including those that applied to cross-border transactions where a currency conversion was required.

We concluded that the e-money issuer had acted within the terms and conditions when it deducted the fee from Ms A's account. We did not uphold the complaint.

96/8
consumer says that e-money issuer should cover her losses after she was caught out by an online scam

Miss M decided to try and sell a pair of designer sunglasses on an online auction website. She had never before used that website or had an e-money account.

The sunglasses sold for £1,500. Shortly after the auction ended, Miss M received an email. This informed her that the buyer's payment had been received, but the money would not be released to her until she had sent the sunglasses to the buyer.

Miss M then posted the sunglasses to an address in eastern Europe, as instructed in the email. In due course she logged into her e-money account to withdraw the payment.

She was unable to find the payment or any reference to it and when she contacted the e-money issuer, it said it had not handled any transactions on her account.

At first, Miss M was convinced that the e-money issuer must be mistaken. Eventually, however, she realised that the email she had been sent was part of a scam.

Miss M asked the e-money issuer to reimburse her for the £1,500 that she had never received. When it refused, she referred the complaint to us.

complaint not upheld
Miss M understood that the email telling her to despatch the sunglasses had not been sent by the e-money issuer. She said she now realised it had been part of a fraudulent scheme, designed to trick her into sending the sunglasses without being paid for them.

However, she was adamant that the e-money issuer 'must somehow be responsible' for making good her financial loss.

We accepted that she was an inexperienced user of the website involved and that she had never had an e-money account before. However, we noted that the website contained clear information for sellers, including details of its 'internet safety policy'.

We also noted that Miss M could have checked the authenticity of any emails relating to the transaction by viewing her e-money account online. This contained a copy of all messages sent to her by the e-money issuer.

We sympathised with Miss M's situation. However, we said the e-money issuer had not been involved in any aspect of the transaction and could not be held liable for her loss. We did not uphold the complaint.

image of ombudsman news

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.