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When "Unauthorized" are Authorized -- What Then?
Answer by John Burnett, BOL Guru
Guru Bios
Question: Customer comes in to file three "unauthorized" transactions claims on his account where his debit card number was given out and the debit card is still in his possession. We required the customer to contact the vendor/merchant to see if they will issue a credit.
On transaction #1 customer states that he had been a member of the service offered since May 2004. Upon contacting the company they would not issue refund but cancelled all future service.
On transaction #2 Customer states that upon contacting company they stated that the customer initiated the contact and said that he had agreed to the terms and conditions. They refunded 75% of the last monthly charge and cancelled the service.
On transaction #3 he contacted the Company and they also said he had agreed to the terms and conditions. They refunded 75% of the last monthly charge and cancelled service.
Based on the above information are we liable under Reg. E or under VISA regulations to refund the balance of the 3 transactions?
Answer: The only question here is whether your customer in fact authorized any of these recurring charges. My gut tells me he did, and I can bet yours is doing the same. I think you have a strong argument that the customer authorized the transfers and you can deny the claims. Visa rules permit you to do the same.
On the chance that you decide that your customer didn't authorize the charges -- let's say your customer's got a teenager and the services are for things like music downloads and access to Web game sites -- you can apply the 60 day rule in §205.6 to go back and identify when the charges started and assign liability to the customer for charges posting after the end of the 60-day period. And I would not apply the Visa "zero liability" rule because the customer let the fraud go on unabated for too long.
First published on BankersOnline.com 1/16/06
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