Why customers abuse the cash on delivery service

From January 13th, 2018: separate fees for cash on delivery still permitted?

Are online retailers allowed to charge separate fees for cash on delivery from 01/13/2018? In the opinion of the IT law firm, there are good arguments in favor of the compatibility of cash on delivery with the new legal regulations.

I. What is meant by cash on delivery?

With the cash on delivery method of dispatch and payment, the recipient pays the amount owed for the ordered item, usually directly at the doorstep to the executing postal or logistics company. The postal or logistics company then transfers the amount it has usually collected in cash, less a certain flat-rate transfer fee, to the account specified by the retailer.

In fact, the postal or logistics company takes on the role of a bank: the recipient pays the amount owed to the retailer to the logistics company. This transfers the deposited amount to the dealer. In return, it receives a certain amount from the dealer for its service. The question now is whether the retailer can “pass on” this flat-rate service charge to the customer.

II. The Surcharging Prohibition

The "surcharging" ban is intended to prevent the payee from demanding payment from the payer for using a cashless means of payment to settle his debt to the payment service provider. Since the logistics company effectively assumes the position of a payment service provider with the cash on delivery service, the “surcharging” ban could basically also be transferred to the cash on delivery service based on its purpose.

With the cash on delivery service, however, the recipient usually pays at the doorstep in cash and not by cashless means of payment. However, the “surcharging” ban only applies to cashless payment methods.

This suggests that the “surcharging” ban does not cover surcharges for the use of the cash on delivery service and that the retailer can continue to collect these from his customers.

However, it may be problematic that the delivery company delivers the parcel to a parcel or post office if the courier does not meet the recipient. If the recipient then picks up the parcel at the branch, it is usually possible to pay the amount owed by EC card, at least for cash on delivery shipments with Deutsche Post / DHL. In these constellations, the recipient can settle his debt to the merchant using cashless means of payment. However, the prohibition of surcharging applies to these.

III. Good arguments for the compatibility of cash on delivery with the new legal regulations

Due to the unclear legal situation, one could therefore take the view, as a precaution, not to charge any surcharges to cover the costs even for the use of the cash on delivery service.

In the opinion of the IT law firm, however, the following arguments speak for the fact that cash on delivery can still be used as a permissible payment method from January 13, 2018 (provided that the costs incurred are clarified before the order is initiated):

1. Cash on delivery is a real payment method?

First of all, it is questionable whether cash on delivery (assuming the conditions offered by Deutsche Post / DHL) can even be qualified as a real payment method or payment service. This is not a pure payment method such as PayPal or prepayment. Rather, cash on delivery is a combination of a shipping service (e.g. parcel or letter mail) and a collection service (collection and forwarding of the cash on delivery amount by the carrier from the payer to the payee).

The amount of the "cash on delivery fee" is regulated by the BNetzA as a letter service.

Cash on delivery is simply not available as a "pure" payment service. They are only available in the "combined package" with one transport service.

2. Cash on delivery is not a cashless payment method as intended

The typical use case for cash on delivery is that the payer pays the deliverer in cash. As intended, it is not a cashless payment method (even if cashless payment is possible when you pick it up at the store). However, the new legal regulations as of January 13, 2018 only cover cashless payment methods

Although a cashless payment of the cash on delivery amount is conceivable when collecting from the store, in the opinion of the IT law firm, the additional costs of cash on delivery are not a payment method fee for a cashless payment method or a payment by credit card.

On the one hand, the payer is not at all obliged to pay using his credit card when collecting from the store. It is only an option, he can also pay in cash.

On the other hand, the causality of the use of the card for the incurrence of the fees is simply missing, because the use of the card does not result in (additional) fees.

In other words: the payer pays the same fees for cash on delivery, regardless of whether he pays the cash on delivery amount in cash or by card. The use of cards, i.e. cashless payment, does not result in any fees. The cash on delivery costs are rather due to the selection of the cash on delivery service, but not due to a cashless payment, because the customer pays for the carrier's collection service and not for the use of a cashless means of payment.

IV. Conclusion: The fate of cash on delivery in e-commerce is currently uncertain

Anyone who wants to continue to offer cash on delivery as a retailer must live with a certain risk of warning until the court clarifies the compatibility of cash on delivery with the new legal regulations to be observed from 13.01.2018, at least if the customer has the opportunity to pay the cash on delivery amount in a cashless manner.

The IT law firm considers this risk to be very manageable, however, as there are good arguments in favor of the compatibility of cash on delivery with the new legal regulations.

However, if you want to be on the safe side and want to avoid any warning risk, you have to delete cash on delivery from your offers.

A client thankfully let us know that for cash on delivery shipments with the freight carrier DPD, the cash on delivery amount can only be paid in cash (so the problem addressed here does not arise with cash on delivery via DPD).

tip: Do you have any questions about the contribution? Feel free to discuss this with us in the entrepreneurial group of the IT law firm on Facebook.

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