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How would you like to pay?

When shopping online, customers are increasingly answering this question with payment service providers such as PayPal or Sofortüberweisung.

The advantage: Customers usually set up a user account only once, store their bank details and can pay the invoice amount with just a few clicks on all shopping trips online.

In the past, however, some online retailers paid extra for these benefits - much to the annoyance of many customers.

As soon as they resorted to the services of the external processors, sometimes hefty additional fees of several euros were due.

Is that permissible?

Yes, the judges of the Federal Court of Justice (BGH) decided (Az. I ZR 203/19).

Merchants are usually allowed to charge a fee if customers pay using PayPal or Sofortüberweisung.

The verdict could be expensive for consumers.

After all, extra fees for paying via the processor would now be legally covered by the supreme court.

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In the specific case, the competition headquarters sued the long-distance bus company Flixbus.

The consumer advocates wanted to clarify in principle whether the additional fees are permissible.

Flixbus is only one of several companies that has collected such fees, emphasized the competition headquarters.

EU guidelines cause disputes

In January 2018, the German government implemented an EU requirement that additional fees for common payment methods are prohibited.

In principle, Paragraph 270a of the German Civil Code prohibits payment if consumers pay by direct debit, credit card or bank transfer.

However, it was disputed whether this also included the use of services such as PayPal and Sofortüberweisung.

Most recently, Flixbus no longer charged any fees for such payments.

Source: WORLD infographic

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In the first instance, the Munich Regional Court prohibited the long-distance bus company from paying extra fees.

The judges argued that the use of the services always amounts to a direct debit or credit card charge.

After all, customers have to store their account or card data in the profiles of the payment service providers.

The Munich Higher Regional Court, however, dismissed the action again.

The lawmakers deliberately did not take into account the constellation between retailers, payment service providers and customers, argued the judges there.

BGH: Pay is for additional services

The BGH now followed this view.

The reason: When paying via the Sofortüberweisung service, the fee is ultimately "not required for using this transfer, but for the activation of the payment initiation service, which provides other services in addition to initiating the payment."

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For example, the processors checked the customer's creditworthiness so that retailers, for example, can send their goods before they have even received the payment.

In many cases, this also applies to the popular PayPal payment service, the judges made clear.

Here, too, customers would not have to pay the extra fees for the actual direct debit or credit card debit, but only for the involvement of the payment service provider who processed the purchase.

Are the costs passed on?

Those who book or order online now have numerous payment options at most retailers.

In addition to the purchase on account, credit card payment or direct debit, which are popular in Germany, these increasingly also include the offers from PayPal or Klarna, which includes the Sofortüberweisung service.

They enable consumers to pay for an online purchase with just a few clicks.

With PayPal, for example, the user usually stores their credit card or bank account details once, and the purchase price is then deducted from there when making a purchase.

In addition, the service providers offer their customers the option of settling invoices later or paying them in installments.

Consumer advocates see extra fees for end customers critically.

"We would consider it unfortunate if the costs for payment options were completely passed on to the customer," says David Riechmann from the consumer center in North Rhine-Westphalia.

After all, the merchants also benefit from the services of the payment service providers, for example through credit checks.

Nobody can yet foresee how the judgment will be implemented in practice.

The transaction fees may already be incorporated into the pricing models.

At the negotiation last December, Flixbus argued that it would be unfair if the costs were passed on to all customers in the product price.

And not just to those who would also use the payment service.

According to PayPal, surcharges are not allowed

"If the fees are charged again, this can lead to less use of these payment methods or to abandoned purchases, since the extra costs are no longer accepted by customers," predicts Riechmann.

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That should also be the major concern of the payment service providers.

For some years now, PayPal has forbidden merchants to charge customers - in its terms and conditions.

In the event of violations, the payment service provider threatens to terminate the business relationship.

"The ruling announced today by the Federal Court of Justice primarily creates legal clarity," said a PayPal spokeswoman.

In practice, however, nothing will change for customers.

“There will be no surcharges for payment with PayPal in the future,” promises the company.

Even with merchants whose legal relationship with PayPal is not regulated by the general terms and conditions, the payment service provider has so far achieved individually that they also do not charge any surcharges.

PayPal demands lush commissions

Many retailers and online payment services have always had a love-hate relationship.

If companies offer payment via popular service providers such as PayPal, they can use it to attract more customers.

However, merchants usually have to pay a commission to the payment provider for this.

At PayPal, the commission consists of a fixed amount of 35 cents per transaction and a variable component between 1.49 and 2.49 percent.

In addition, there is now the great market power of the liquidators.

In the past year, more than a fifth of online sales in this country were paid via PayPal.

For comparison: credit cards have a share of just one tenth.

The EU has already intervened in the fee practice of online retailers in the past.

As a rule, companies are no longer allowed to charge additional fees for common Sepa direct debits, Sepa transfers and card payments.

Sepa stands for “Single Euro Payments Area”, the uniform European payment area since 2014. The aim was to standardize payments within Europe.

This also included changing the account number to the much longer Iban.