Problem Set 15
15.1. Cliff Janeway comes to talk to you. It appears that he has taken to going to eBay to purchase rare books for his store. His problem relates to an auction he won yesterday for a rare and beautiful edition of Poe's The Raven. As he always does, Cliff paid for the purchase with his PayPal account. Unfortunately he confused the seller at the Raven auction with the seller at another auction on which Cliff had bid unsuccessfully earlier in the day. The result is that Cliff indavertently typed the wrong e-mail address in his payment request on PayPal and sent the money off to the wrong seller (someone from whom he previously had purchased a much less expensive book). When the seller of The Raven contacted Cliff several hours later seeking to arrange for payment of the $12,000 purchase price, Cliff tried unsuccessfully to cancel the payment. He then tried to contact the actual (but unintended) recipient by telephone, but was unable to find a working telephone number. Worried about his problem, Cliff wants your advice on what he can do. What do you say? EFTA §§205.2, 205.6, 205.11; Regulation Z, §226.13.
15.2. Cliff's next question for you arises from frustration. He buys many more things than he sells on eBay. And his common practice is to fund those purchases with transfers from his bank account. When he transfers funds from his bank account, however, the transfers do not show up in his PayPal account for several days (usually about four business days, as illustrated by the policy displayed on the PayPal website). Recalling earlier discussions with you about funds availability rules, he can't understand how their policy is lawful. "Isn't there some federal law that says they're obligated to give me the money quickly? I thought if it was a local transaction they had to make the money available to me in just a couple of days? How can they get away with this?" Regulation CC, §§229.2(a), 229.10(b).
15.3. The next morning you meet with Dorothea Brooke. She has started a small business buying up small, hand-made craft objects in nearby rural towns and reselling them on Internet sites. She thinks she would like to sign up with at least one prominent P2P provider. Her basic motivation is that she has been selling things only for money orders or personal checks, which means she doesn't get paid fora week or more after the conclusion of the auction. Not surprisingly, she is attracted to the idea of getting paid almost immediately. When she went in to set up the account, however, she noticed a lot of material on the Web site about her "payment preferences." She wants to know your views on whether she should enable her system to accept payments funded by credit cards or insist on the more cashlike forms of payment. What are the risks to her of accepting the credit-card payments? Is there any reason why she nevertheless might wish to accept the credit-card payments?
15.4. You have a meeting this afternoon with a new client, Hallie Kent, who operates a P2P service called WePayNow.com. She wants to talk to you about problems that she has been having with fraudulent transactions. The specific scheme that has been most common involves people who have stolen credit-card numbers. Each person opens two WePayNow accounts in different names. They then use the stolen credit-card number to make payments from one account to the other. They promptly withdraw the money and take no further action on the accounts when the card's limit has been reached. Then, at the end of the month when the bill reaches the actual cardholder, that cardholder normally declines to pay the charges. This week Hallie received a letter from her bank explaining that it was deducting $75,000 from her account for funds that it had forwarded to a large issuer for fraudulent transactions on that issuer's cards last month. Is Hallie obligated to make the payment?
15.5. Your first meeting this week is with a new client named Chris Nelson, who runs a startup software firm. Chris set up his firm to pay all of its bills through PaySure, an Internet bill-presentment service. After just one month, he has formed a very low opinion of PaySure's reliability, based on two separate incidents arising out of their service. In the first incident, he received an e-mail message from PaySure advising him that his electric bill needed to be paid. He clicked through on the link in the e-mail to a page that seemed to indicate his electrical usage for the month and asked him to authorize payment of the bill. Because the amount seemed about right, he paid the bill. Accordingly, he was shocked when he received another message the next day purporting to enclose his electric bill. When he called the electric company, it quickly became clear that the first bill was false ("spoofed" was the term the electric company representative used). Notwithstanding the genuine appearance of the page that Nelson viewed, it appears that the first payment was sent to a thief with no relation either to the electric company or to PaySure.
The second incident was discovered when Chris (perturbed by the electric company incident) went to his bank and looked at the bank's records of all of the charges on his account. He immediately noticed that the car payment he paid on PaySure the previous week appeared to have been sent twice.
Chris came to see you because his bank is unwilling to recredit Chris's account for either of the payments. What do you tell him? Is there anything that you would like to know? EFTA §§903, 908, 909; Regulation E §§205.2, 205.6, 205.11.
15.6. The next day, Chris Nelson comes back again, with more complaints about PaySure. It now appears that the principals of PaySure have used Chris's password information to abscond with all of the funds from his bank account. Does Chris have any remedy here? EFTA §909, Regulation E §205.6.
15.7. Your representative Pamela Herring is back with more questions. She has seen statistics indicating that 10 percent of P2P payments are made either to purchase pornographic content (which often is sold by organized crime enterprises) or pay for gambling. She also read press reports about how pressure by New York officials to prevent payments from being made to online gambling venues helped lower the rate of online gambling by New York residents. She wants to know if there is any good reason why Congress should not adopt a law that forbids P2P or EBPP providers from making payments to illegal enterprises. She proposes that the Department of Commerce would be responsible for maintaining a list of enterprises that it has determined to be operating illegal businesses (including e-mail addresses and bank account information for the enterprises in question). Providers who knowingly made payments to those enterprises would be subject to sanctions. What do you think about her proposal?
