“I’ll take a room. But, hold the exaggerations, please” How using PayPal can change your trip

Last weekend, Mrs. Consumer Courage and I went away to attend a family event.  As it happened, the only place where we could stay was a so-called Bed & Breakfast in the area.  The B & B that was in the brochure was Awesome.  Unfortunately, when we checked in, we realized that some of the language in the brochure no longer applied to the actual place where we were staying: 

  • Breakfast?…..who said you would get breakfast? Upon check-in, we were informed that there wasn’t really a breakfast. “Since the owner lives on the third floor where the kitchen is, we can’t serve breakfast.  But, there are muffins in the fridge – and here’s some peanut butter!”   
  • What’s so big about a view? Although the brochure and website boasted about the roof-top patio with ‘majestic views of the City,’ we were told “that’s only accessible from the third-floor unit.  You can’t go in there, because – you know – you’d have to bother the owner to get there.” 
  • You mean you didn’t walk here? The website had two things to say about parking. In one spot (Front page, set off in a box) it said ‘complimentary parking’ (whatever THAT means) and in another spot (teeny type at the bottom of said Front page) it said ‘Parking: on-street. Can be difficult.’  We learned that this meant that when midnight rolled around, there was ZERO parking, which forced you to drive around for an hour to wait for someone to leave
  • “Goooooood MORNING!”  We also learned that there was a construction project on the street – right outside the front door – where the Bed & (not exactly) Breakfast was located.  Now, I love summertime construction as much as the next guy. But, not when the crew starts working at 7:00 a.m.! 

All of these surprises combined with the fact that we weren’t warned about them at all, got me to wondering if I could leave the next morning, rather than face another surprise.  While I schemed about how to call my credit card company to have them place a hold on the charges in the morning, I was hit with a troubling thought – I used PayPal when I booked the reservation.  Meaning to say: The B & (almost) B had already received payment in full and the usual consumer protections that come with using a credit card might not be there for me. 
The Fair Credit Billing Act (FCBA) is the federal law that gives you the right to file a formal dispute with your credit card company.   It gives you 60 days from the time your bill arrives and requires the credit card company to handle your dispute properly and quickly.  The good thing is that you don’t have to pay that part of the bill that is disputed, until the investigation is over.  It is really helpful if you – don’t get what you ordered; get triple billed for something you did get; if charges appear out of nowhere, or something else happens to your credit card bill that makes you want to pull your hair out. But, how protected was I, having used PayPal?  It turns out…….not too much.

I agreed to this?

As a matter of fact, PayPal transactions are covered by the Paypal user agreement which I breezed by on my way to the ‘charge my credit card’ screen.  Here are some of the terms of the PayPal agreement that I said YES! to when I clicked ‘Accept the terms’:

  • Limited time in which to make a claim.  According to the PayPal User Agreement, you have to make them aware of your claim within 45 days.  I could mark on my calendar 45 days from the date I checked into the B & (almost) B. But, I would have missed the deadline.  According to PayPal, the 45 days starts to run, as of the time you make your payment.  That’s not such a big deal, if I’m buying a household item. But, if my dispute is over a B & (almost) B and I make my reservations a month before I stay there, I might not even have two weeks to make my claim;
  • PayPal decides whether you win.  That’s right, the company (PayPal) that gets a ton of repeat business from the seller that I’m angry at, is the one that decides who is gonna win.  Now, I’m not saying that PayPal is anything buy honest, when they decide claims. But, there is no denying the conflict of interest here. And, if you lose the claim, you can escalate the matter and expect that it will be decided in……
  • Mandatory Binding Arbitration (MBA).  There’s no way around this one.  It absolutely stinks.  MBA is a real scourge for consumers. (Consumer Courage has blogged about MBA agreements and how terrible they are for Consumers, complete with some references to various consumer groups that have issued reports about the negative effects of MBA)  Suppliers love MBA, because (unlike a traditional lawsuit) they can be sure that they are going to win nearly all of the disputes; they don’t have to hire lawyers to represent them and they are guaranteed that they don’t have to fork over very many of their own internal documents, while the dispute is being decided. (Click here for an interesting perspective on Mandatory Arbitrations by a retired Judge who was hired to be a hearing officer)
    • To be sure, you can decide NOT to be governed by (or ‘Opt out’ of) PayPal’s ‘Agreement to Arbitrate’ by just sending them a letter.  But, if you don’t take time to read the fine print when you sign up, you will miss the fact that you have to send them a letter within 30 days of using their service for the first time or your ability to ‘opt out’ disappears. (Click here to see the letter sent by Public Citizen urging Ebay to reverse itself and delete/or alter the identical provision in their agreements)
    • You can click here if you want to see how many other companies have ‘Agreements to Arbitrate’ in their standard User Agreement. 
  • No class actions.  One of the few arrows that consumers have in our collective quiver to fight corporate abuses is the threat of a class action (where hundreds, or thousands of consumers who have been wronged can appear in the same lawsuit to fight for their rights).  Sadly, class actions might as well be on the endangered species list, when it comes to consumer rights with respect to purchasing an every-day item.  That is because the ‘waiver of class actions’ clause is alive and well in nearly every consumer contract that you might ever sign. And, PayPal is no different.

So, be careful when you use a third-party service to make the payment when you book your next out-of-town jaunt (such as PayPal), or you might just be agreeing to give up your ability to fight. 

Posted by: Mark Wiseman (who is going to ask “Will there be anybody screaming outside my window at 7:00 a.m.?” if he ever plans to stay at a B&B again)

You agreed to this (whether you know it or not)….Mandatory Arbitration Agreements

In trying to find some empathy for some of my friends who are so shocked at the recent election results, I can still conjure up my shock when I first read the US Supreme Court decision in AT&T v. Concepcion  in April, 2011, which essentially wiped out our constitutional rights to have any legal dispute heard by a jury of our peers. (Editor’s Note: In the Concepcion case, the U.S. Supreme Court gave its blessing to any company that wants to hide language in any consumer contract that says “I, the consumer, agree that the only way to have my dispute with the company heard is by a private arbitration company and not in a Court of law”)

Sure, Concepcion was about stopping class actions filed by large groups of consumers who all have small monetary claims (the suit was about charging $30 for a free phone), but when the highest court in our nation upheld a forced mandatory arbitration clause in a cell phone contract it sent a message to every business in America that they too could easily eliminate the risk of being sued. A year later, the National Association of Consumer Advocates released a study  revealing that, no surprise, arbitration agreements are everywhere,  “from health club contracts to cable television services to nursing home contracts;” and they are, effectively, suppressing consumer claims and denying us our day in court. Let’s compare this study, with the recent news releases from stopfraud.gov‘ (which is a governmental task force made up of 20 federal agencies, 94 US Attorneys Offices and state and local partners to investigate and prosecute significant financial crimes).  StopFraud.gov issues weekly reports of fraudulent schemes that have affected millions, and lawsuits and settlements involving billions of dollars, covering criminals and big corporations alike.  One example is the lawsuit the DOJ just filed last month in NY against Bank of America seeking over a $1 billion for mortgage fraud.

In an age when half the country wants ‘less government’, one avenue to reduce government spending might be to look for ways to allow more (not fewer) private lawsuits to attack fraudulent practices against consumers. So what can we do? Since the chances of getting Congress to pass The Arbitration Fairness Act, S. 987 and H.R. 1873, is next to nil, all we can do is take the matter into our own hands, and do one of the following:

1) Refuse to do business with any company that forces you to waive your rights (next to impossible as nearly every nationwide company does this); 

2) Read the contract and physically cross out the mandatory arbitration provision before you sign (there may not be a quicker way to have the salesman say ‘I’m sorry, we can’t do business with you’);

3) Timely exercise your right to opt out of a mandatory arbitration program (easy!- if you read the fine print and act quickly!)

Option #3 seems to be the new trend now – offering consumers the right to decide (for a very limited time frame) that they don’t want to be forced into mandatory arbitration (this is called an ‘opt out’ clause).  By offering this ‘opt out’ clause, companies seem to be in a stronger position, when they need to prove in Court that their mandatory arbitration provision was not really ‘forced’ or ‘mandatory.’ The catch is the small window of time given to consumers to exercise that right. In the Time Warner contract,  for example, you must exercise your ‘opt out’ rights within 30 days of the FIRST time you become a Time Warner customer. The ‘opt out’ ship for Time Warner contracts sailed a long time ago for me, but it’s not too late to opt out of a mandatory arbitration program recently announced by PayPal. Nearly everybody uses paypal for online shopping, so anybody who has ever used it should jump on this chance to protect themselves. One of my favorite consumer blogs, Consumerist has made it super easy to ‘opt out’ of the PayPal mandatory arbitration agreement by giving us a downloadable form.  All you need to do is download it, sign it, and get it in the mail and postmarked no later than Dec. 1, to:

Litigation Dept.
2211 North First St.
San Jose, CA      95131

It’s always a good idea to keep a copy of any letter you send, and to be extra careful, you might want to send the letter by ‘certified mail return receipt requested’ – so you have proof that they received it. New customers will have 30 days from the date you first accept the user agreement to send the opt out letter, so if you start using it this holiday season, add it to your list of New Year’s resolutions to follow up with that opt-out letter . Ebay recently adopted a mandatory arbitration program and also gave customers a 30 day window to opt out, but that deadline passed earlier this week.  Don’t let this deadline pass, ACT NOW!!

Posted by: Nadine Ballard