Untangling credit and debit card transaction disputes

4 April 2016

Guide to help untangle credit and debit card transaction disputes

The Banking Ombudsman Scheme has published a Quick Guide about credit and debit card transaction disputes because of complaints each year from both credit card holders and merchants.

Banking Ombudsman Nicola Sladden said many of the complaints arose because of a lack of understanding about how card transactions worked.

“Few people realise you can’t cancel a credit card transaction, so when a transaction is disputed, someone must still pay – whether it’s the cardholder or the merchant.

“Who pays will be determined by the chargeback arrangements set out in the rules of the card company – the fifth party to every transaction. Cardholders also have only a limited time to dispute a transaction. If they don’t, they must pay,” Ms Sladden said

There is no automatic right to a chargeback, but it is industry practice to agree to one if there a valid reason, including when:

· an unauthorised transaction has taken place

· goods are paid for but not received

· the cardholder returns a defective or incorrectly described item

· the merchant charges the wrong amount, or duplicates a transaction

· a merchant continues to process a recurring payment that has been cancelled by a cardholder.

In looking at chargeback complaints, the scheme considered whether:

· the cardholder was told of the deadline for disputing a transaction

· the cardholder received appropriate, timely information to dispute a transaction

· the cardholder’s bank processed the chargeback request appropriately

· the cardholder’s bank assessed the merchant’s bank’s response to the request appropriately.

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