I am trying to determine the banks liability in the following situation:

A customer went to a club. He gave his card to a waitress for a $22 charge. When she came back, she advised that she had went ahead and charged him an additional $165 for an additional service. He told her he didn't want that; the Manager told him that he would not be charged. Since there was a valid pre-auth on the account, the customer called to find out when it would fall off but instead the charge completed. He initially disputed the item as fraud, but I was told by our processer since it was card present it would have to be pursued thru visa as non-fraud. So here are my questions -

1. Is the second charge unauthorized under Reg E since he gave the waitress the card or do only the VISA chargeback rules apply?
2. I spoke with the customer, and he said that he was willing to call the club so I could pursue a chargeback with Visa. This was over a week, and he has yet to contact me back.
3. How would others process a claim of this type?

Thanks for any assistance.

I don't know Visa rules like Brian Crow, but under Reg E it sounds as though he gave the waitress his card for a $22 charge and she made an unauthorized charge (could be defined as a theft in my book) and under Reg E he is due some funds. That means Visa could do no less, but could do more such as 5 day provisional credit.

This isn't as though the card was given for use and the person abused their authority, this person wasn't given the card "to use." The club should be jumping all over itself to return the funds charged without authorization.

Welcome to BankersOnline.

The customer is stating that the second charge is unauthorized. Providing a merchant a debit card does not give them carte blanche to charge whatever amount they want. Reg E requires that you conduct an investigation regardless of whether or not you have chargeback rights under VISA rules.

If the cardholder truly did not receive services for the $165, you can use chargeback right 30 "Services not rendered" provided that the cardholder attempts to resolve the claim with the merchant and puts this attempt in writing.

Your Reg E clock started ticking when the cardholder first notified you of an error. First, reach out to the cardholder to see if they are choosing to withdraw the claim and find out the results of the merchant contact. Second, since you cannot require merchant contact as a condition of investigating a Reg E claim, and there are no chargeback rights without, you may need to file a retrieval request with VISA to compel the merchant to provide a sales receipt for the $165. Since it is a card present transaction, VISA rules require that the merchant would have needed to obtain your cardholder's signature.

If the merchant produces a receipt that the cardholder signed, you'll have the evidence you need to deny the claim. If it is not the cardholder's signature, you owe the customer $165.

I issued provisional credit immediately as I knew it would take longer to do the investigation. I just wasn't sure how to continue to pursue with visa when the customer hasn't followed up or how to handle additional contact with the customer when I can't require anything under Reg E. Another employee at the bank wasn't sure it would even fall under Reg E and suggested that I try Banker's Threads for assistance. Your advice has been super helpful. Thanks.

Brian and BOL have you or will you conduct a seminar going into more details about MC/VISA liability and charge back rights of Banks. We've ordered both of your Reg E ones and they are great but would love one dedicated to more detail on MC rules.

Thanks for the lead-in P*Q. (Note P*Q was not compensated for the endorsement )

I will be presenting two webinars on MasterCard chargebacks in October. One will be a basic webinar comparing MasterCard to Reg E and providing details on the available chargeback types and MasterCard requirements. The second webinar will be for more advanced situations that require arbitration chargebacks and also focus on the Arbitration and Compliance process.

(There will be two sister webinars in October for VISA chargebacks.) One I get the info to BOL I will be sure to link this thread to the registration pages of BOL Learning Connect.

Excellent!!! Can't wait!