Question:-
I have a website where I sell goods online to customers. There is a company known as payflex that offers finance to online customers. They advertise on the my website. If the customer opts to use their finance option, payflex pays me out immediately. The customer then pays them in monthly installments which are interest free. However, they charge the website owner a commission in lieu of their services. Is this option permissible in Shariah?
Answer:-
Payflex is an innovative e-Commerce payment solution that can help online retailers make more sales. It enables consumers to break up the cost of their purchase into four payments. They receive their goods upfront, but they are able to pay for it in instalments every two weeks, at no additional cost to them. It’s a free spending plan.
Here’s how it works:
Let’s say a customer wants to buy an item costing R2000 from your online store. Instead of paying for the item in full, upfront, they have the choice of using Payflex when they check out.
Payflex allows them to split the cost of the purchase up into 4 equal, interest-and fee-free payments. When checking out, the customer completes a quick form and is instantly vetted. Upon approval, they then pay the first 25% of their purchase (R500) as a deposit, using their credit or debit card.
Payflex then collects the other 75% in three instalments of R500 each over the next six weeks.
But don’t worry – you’re not left waiting to be paid. Payflex will pay you for the sale upfront (less their commission). So even though your customers have a long time to for pay it in full, you will receive the money for the purchase up front.
Based on what has been mentioned above, we understand that the online store requests Payflex to offer their interest-free finance to customers who wish to utilize the easy-payment plan offered by Payflex. The interest-free finance offer would ultimately assist in generating more sales for the online store thereby attracting more clients, since clients have the option of paying on easy terms which is free of interest.
If this agreement/transaction is analysed, it results in what is known is Shari’ah as a transaction of Hawaalah. Hawaalah, in basic terms, is an agreement where a third party (in this case Payflex) takes sole responsibility to settle a debt owed by someone (in this case the purchase price owed to you by your online customer). The third party that takes this responsibility (Payflex) is known technically as the Muhtaal-Alaih.
You, as the retailer of the online store then, have no recourse of demanding payment from your online customer, as the debt has been transferred entirely by the customer to Payflex. This transaction is similar to another transaction known in Shari’ah as Kafaalah. The only difference between the two transactions is that in Hawaalah, the third party takes complete responsibility of the debt, and you as the retailer can no longer claim from your original debtor (the customer), whereas in Kafaalah you can claim from the third party, as well as from the original debtor (your customer). In both cases, the third party that takes responsibility of the debt is doing a favour and goodwill gesture by taking responsibility of the debt.
In terms of Shari’ah, the third party is not entitled to levy a fee (whether it is termed as a commission or whatever) for doing such a favour. Yet, in the enquired scenario, Payflex is charging a commission: in the example cited by you, the customer is owing you R500, yet Payflex pays you only R450, with R50 being their cut/commission. This will render the transaction impermissible. Hereunder is the text from the books of Fiqh that declares such an agreement as impermissible:-
و من المعروف في الفقه الاسلامي ان الكفالة عقد تبرع كالقرض فلا يجوز تقاضي الاجرة عليها (بحوث في قضايا فقهية معاصرة مكتبة دار العلوم كراتشي ج1 ص11)
Translation: “It is a well known fact in Islamic Fiqh that Kafaalah is a goodwill gesture (similar to giving a debt); hence it is not permissible to demand a fee for this gesture.”
ولو كفل بمال علي ان جعل الطالب له جعلا .……..ان كان مشروطا في الكفالة فالكفالة باطلة الي آخر (خلاصة الفتاوي المكتبة الرشيدية ج4 ص168)
Translation: “If a person stands guarantor for a debt with the condition that the initial creditor will give a payment to the guarantor, the transaction is invalid.”
Bear in mind that the Payflex website also mentions that, your online-customer will only be entitled to pay the purchase price interest-free if he pays within the stipulated four-month period. If he delays the payment, he is charged a default fee of R65 plus a further R65 for every week the installment is outstanding. This tantamounts to interest. By you handing your customer over to Payflex, you are subjecting him to interest, thereby indirectly condoning the interest factor.
Based on the above factors, it would not be permissible to use the Payflex facility.
ALLAH TA’ALA KNOWS BEST!
ANSWERED BY:
Mufti Mohammed Desai
Date: 27 Rabi-ul-Aakhir 1434 / 02 December 2012
