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#2118802 - 02/17/17 08:59 PM Debit Card Dispute
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,474
Midwest
We had a debit card dispute where we gave the customer provisional credit. During our investigation we got information that the merchant did have authorization for the transaction so we determined there was no error and debited the provisional credit. After that, the customer decided to send the dispute to arbitration. Are we required to give provisional credit back to the customer?

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eBanking / Technology
#2118828 - 02/17/17 11:15 PM Re: Debit Card Dispute ahkcompliance
BrianC Online
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,673
Illinois
Once you deny the Reg E claim determining that no error occurred, your obligations under Reg E are done. However, if you elect to continue a claim deeper into the chargeback process because the cardholder has recovery rights under VISA/Mastercard rules, then you are obligated to follow their requirements.

Mastercard states in the rights and responsibilities section of the Chargeback Guide, "...when an issuer hasa billed a transaction to its cardholder's account for payment and then chooses to exercise a chargeback right, the issuer must credit the cardholder's account for the amount of the chargeback."

VISA has a similar rule for its chargeback process:

1.11.1.2 Attempt to Settle
Before initiating a Chargeback, the Issuer must attempt to honor the Transaction.
If the attempt fails and the Issuer has already billed the Transaction to the Cardholder, the Issuer must credit the Cardholder for the Chargeback amount.
An Issuer must credit its Cardholder's account for the amount in dispute, whether or not a Chargeback was initiated, if the dispute involves an Electronic Commerce Transaction that meets the conditions of any of the following Chargeback reason codes:
● 30 (Services not Provided or Merchandise Not Received)
● 41 (Cancelled Recurring Transaction)
● 53 (Not as Described)
● 83 (Fraud – Card-Absent Environment)
● 85 (Credit Not Processed)

In other words, VISA/Mastercard expect that you allow the customer to keep the money while you investigate, even if the investigation is not part of a Reg E investigation. I am curious about the statement, "The customer decided to send the dispute to arbitration." The bank is the gatekeeper to the chargeback and arbitration process. You get to decide whether the cardholder provides sufficient information to continue to arbitration. Considering the filing and decision fees are $150 and $250 respectively, (paid by the losing party) don't let you customer make expensive decisions for the bank unless you are sure you have a case you will win.
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#2119119 - 02/22/17 05:04 PM Re: Debit Card Dispute ahkcompliance
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,474
Midwest
Thanks Brian! As always, your thoughts are greatly appreciated!

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#2165547 - 02/22/18 11:09 PM Re: Debit Card Dispute ahkcompliance
Valley girl Offline
Gold Star
Joined: Aug 2014
Posts: 394
TX
Brian,

If I have a dispute that would apply to reason code 30, is there any time limit? The transaction took place 6 months ago. Is there a time limit for a dispute to be filed on "item not received" in VISA rules?

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#2165549 - 02/22/18 11:13 PM Re: Debit Card Dispute ahkcompliance
Valley girl Offline
Gold Star
Joined: Aug 2014
Posts: 394
TX
Never-mind Brian - as soon as I typed the question, I found the answer. 120 days.

Thank you!

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#2165554 - 02/23/18 12:00 AM Re: Debit Card Dispute ahkcompliance
BrianC Online
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,673
Illinois
Just note that the 120 day clock starts ticking the later of the transaction date or the promised delivery date which can be up to 540 days from the transaction date. This accommodates cardholders that preorder something far in advance and have to prepay. When I teach debit card disputes I use the example of a wedd my where the order for the dresses is placed a year before the wedding and a month before the business files bankruptcy and the dresses are not delivered.
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
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#2165645 - 02/23/18 05:02 PM Re: Debit Card Dispute BrianC
Valley girl Offline
Gold Star
Joined: Aug 2014
Posts: 394
TX
Thank you Brian. I will need to contact the member. It seems it was some kind of a "custom steel part" so there may have been a delivery agreement since fabrication was involved. It seems the vendor has packed up and moved on.

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#2291694 - 12/14/23 11:08 PM Re: Debit Card Dispute BrianC
MEB Offline
Member
Joined: Oct 2006
Posts: 51
Kentucky
Can you please point me to the current Visa rule that speaks to the 'Attempt to Settle' section referenced in Post #2118828 above? If I am understanding it correctly, we should be providing credit to the Cardholder while we are investigating a non-Reg E dispute if one of the listed Chargeback codes is used.
Last edited by MEB; 12/14/23 11:12 PM.
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#2291697 - 12/15/23 12:18 AM Re: Debit Card Dispute ahkcompliance
Valley girl Offline
Gold Star
Joined: Aug 2014
Posts: 394
TX
I found the section in the newest Visa rules, but I am not sure it refers to provisional credit anymore. The way I interpret it is that you have to attempt to honor the transaction, by contacting the merchant or going through the chargeback process, but if the attempt fails, you have to credit the member.

1.11.1 Disputes

1.11.1.1 Attempt to Settle

Before initiating a Dispute, the Issuer must attempt to honor the Transaction.
If the attempt fails and the Issuer has already billed the Transaction to the Cardholder, the Issuer must
credit the Cardholder for the disputed amount.

The Issuer must not be reimbursed twice for the same Transaction.

A Cardholder must not be credited twice as a result of both a Dispute and a Credit processed by a
Merchant.

An Issuer must not process a Dispute unless the Cardholder has suffered a financial loss (1)
(for example: the Cardholder did not receive merchandise or services, was charged incorrectly, or did not
authorize the Transaction).

1 This does not apply to Dispute category 11 (Authorization). For a Dispute category 11 (Authorization), the Issuer must
have suffered a financial loss.

ID# 0003287 Edition: Oct 2023 | Last Updated: Oct 2023

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