Disputed Credit Card Charges

OBSI’s approach to complaints about disputed credit card charges

Credit cards are a convenient and incredibly popular form of payment – according to Payments Canada, there were almost six billion credit card payments in Canada in 2018, totaling over $550 billion. These transactions usually go exactly as expected, but sometimes a consumer has reasons to dispute a transaction on their credit card statement. When this happens, the consumer usually wants a refund for the amount that was charged to their account.

Why do consumers dispute credit card charges?

When consumers request a reversal of a credit card charge, they often tell us:

1. they did not authorize the charge because:
   • their credit card was lost or stolen, or
   • they were a victim of fraud.
     
     
2. they did authorize the charge, but the charge should be reversed because:
   • the merchant charged more than the amount they authorized,
   • there was a billing error,
   • the merchant did not deliver the product or service,
   • the product or service received was not as described or what they expected, or
   • they were a victim of fraud by the merchant.

When consumers bring their complaints to OBSI, it is usually because their bank has refused to process a refund or chargeback the consumer believes they are entitled to, or because the consumer believes the bank has been unfair or made mistakes in how they handled the case.

OBSI will only review disputes between consumers and their bank – we do not investigate or resolve disputes between consumers and merchants.

What is the process for disputing a credit card charge?

In general, most cardholder agreements and legal rules require that consumers first approach the merchant who charged the card to resolve the problem. If that doesn’t work, consumers may request a refund or chargeback through their credit card issuer, which is often a bank.

The bank will investigate to determine if the consumer’s request is valid. Most credit card agreements require cardholders to cooperate with their bank’s investigation process. This means providing all relevant information within reasonable timelines and answering the bank’s questions truthfully.

While investigating the issue, the bank will usually refund the charge on the consumer’s card. However, if the consumer was not entitled to the refund, the bank will later reverse it.

Problems relating to fraud or stolen cards are usually resolved by refunds through the card network “zero liability” policies.

If the problem was with the merchant, the bank will submit a chargeback request through the credit card network – for example, VISA, Mastercard or American Express – and follow the credit card network's chargeback process. The credit card network will involve the merchant's bank in the process, and they will usually request information from the merchant.

Refund and chargeback processes require that consumers, banks and merchants follow strict procedures and timelines. Generally, consumers must dispute a charge within 30–45 days from the date of their statement. The bank and merchant involved also have set time limits to respond.

Consumer credit card protections

There are multiple protections in place for Canadian credit card users, including:

• Federal laws, such as the Bank Act and its regulations – These laws contain consumer protection provisions that apply to credit card customers of federally regulated banks. Most importantly, this includes limits on consumer liability when a card is lost or stolen.
• Provincial consumer protection laws – These laws give consumers the right to refunds from the suppliers or merchants they purchase goods and services from in certain circumstances and imposes some rules on credit card issuers to assist in this process. These laws also limit consumer liability when a card is lost or stolen.
• Cardholder agreements – These agreements describe the terms and conditions under which the financial institution lends money to the consumer through the credit card account, and usually include a description of the consumer’s protections and obligations.
• Card network rules – Financial institutions are required to follow these rules in order to process chargeback requests between cardholders and merchants. These rules are set by the credit card networks (e.g. Visa, Mastercard, American Express) and are international in scope.

We consider these rules, protections and obligations when we investigate and work to settle cases involving disputed credit card charges.

Our approach

Disputes relating to credit card charges are among the most common banking complaints consumers bring to OBSI. Usually, the consumer complains that the bank has declined to refund charges to their credit card, refused to follow through with a chargeback process against a merchant, or that the chargeback process has not concluded in their favour because the bank made errors in the way it processed the chargeback.

We can investigate a consumer’s complaint if their credit card issuer is a financial institution that offers our service. During an investigation for a disputed credit card charge, we focus on the obligations and actions of the consumer and the bank. We do not directly investigate or recommend compensation from the credit card network or merchant involved in the complaint, because they are not OBSI participating firms.

We will review what the bank did to determine if they:

• Complied with the applicable rules and regulations
• Followed their own policies and procedures
• Treated the consumer fairly and without bias
• Made reasonable decisions based on the available evidence

We will review what the consumer did to determine if they:

• Complied with the requirements of the applicable rules and regulations
• Complied with the requirements of their cardholder agreement, including protecting their card and their PIN
• Provided enough and/or valid reasons for their charge dispute
• Raised their concerns with the merchant and their bank within the required timelines

Complaints about credit card charges often involve disputes about whether the consumer authorized a purchase or whether they adequately protected their PIN. The outcome of these cases depends largely on the evidence in the case that each party can use to show what happened.

Our recommendations

Cases where we recommend compensation usually involve situations where the bank did not follow their own policies and procedures, the consumer was a victim of theft or fraud, or the bank made errors in its handling of the case.

Cases where we normally do not recommend compensation include situations where the consumer did not challenge the charges within a reasonable time, did not try to resolve the issue with the merchant first, did not protect their PIN, or did not cooperate appropriately with the bank’s investigation.

When we make a recommendation in disputed credit card charge cases, it is usually for the bank to compensate the consumer for the disputed charge plus interest. We may also recommend that the bank refund other fees or charges that have been incurred because of the disputed charge. In some cases, we may recommend non-financial settlements such as the correction of credit bureau records.

Consumer tips for challenging a credit card charge

The process of requesting a refund or chargeback can be frustrating, especially if you are not sure what to do. But there are important steps you can take to minimize difficulty in these situations and improve your chances of success:

Tip #1: Never share your card and your PIN.

This is a basic requirement in all cardholder agreements, but sometimes it can be harder than it sounds. Never give your card or PIN to another person, even if you trust them, and never ask another person for their card or PIN, even if your intentions are perfectly honest. Sharing of cards and PINs places the cardholder at risk if anything goes wrong later with a charge because they have breached their cardholder agreement. Consider using supplementary cards or using separate accounts for trusted helpers.

Tip #2: Review your credit card transactions regularly. If you see a problem, contact your bank immediately.

Review your credit card transactions carefully and regularly. If you use online or mobile banking, make a habit of checking the transactions on your card whenever you use the website or app. If you rely on statements, review them as soon as you receive them. If you see a charge you don’t recognize, don’t delay.

Fraudsters will try to make unauthorized credit card transactions without being detected, for example, by charging small amounts or using vendor names that might seem familiar. They will also often place charges for as long as they can. Contact your bank as soon as you become aware of any unauthorized activity on your account. All banks have time limits for reporting an unauthorized transaction.

Tip #3: If you authorized a transaction but there is a problem, work with the merchant to resolve it first.

If you have a problem with a credit card purchase, like faulty goods, or goods not delivered, there are laws, regulations and credit card network rules that can protect you. However, in order to benefit from these protections, you need to try to resolve the problem with the merchant first. Strict time limits apply, so don’t delay.

When reaching out to a merchant, explain the problem clearly and be specific about how you want them to resolve it. In some cases, the merchant may refund the charge, replace the goods, or offer another solution. If the merchant is unwilling to help, ask your bank for assistance.

Tip #4: Cooperate with your bank’s investigation.

When you dispute a credit card charge with your bank, they will investigate your request. Their investigation is most effective when you have provided complete information. Be sure to compile all the evidence that supports your reason for the chargeback, such as:

• the credit card statement showing the disputed charge,
• the original receipt, service contract, purchase order or invoice from the merchant,
• emails or other correspondence that shows you tried to fix the problem with the merchant,
• reasons to believe fraud happened.

If you are unsatisfied with your bank’s efforts to resolve your problem, contact us. We may be able to help.