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#2227697 - 12/18/19 07:19 PM Stop Payments on Recurring Debit Card transactions
Snowgirl Offline
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New to this process - can someone tell me how a stop payment on a MasterCard recurring debit card transaction works? Obviously the stop payment on our core system kicks the item out, but then how is it handled for return? Our vendor is telling us they do not handle stop payments - only disputes?

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#2227730 - 12/18/19 09:29 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
BrianC Offline
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Mastercard will only accept a changeback for "cancelled recurring" if the merchant has been properly notified by the cardholder that they no longer authorize them to debit the account or if the Bank submitted a notice to the merchant using Mastercard's "Payment Cancellation Service."

If neither of these have occurred, then the Bank has no chargeback rights and is on the hook to the customer for failure to honor the stop payment request.
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#2227746 - 12/18/19 11:46 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
Snowgirl Offline
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Thank you Brian. So how does the bank submit a notice to the merchant using MasterCard's "payment cancellation service"?

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#2227767 - 12/19/19 03:19 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
BrianC Offline
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That is a question for your debit card processor or Matercard representative, first to see if you are enrolled in the service and second what the process is through their systems.
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#2227769 - 12/19/19 03:27 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
burkemi Offline
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Originally Posted by Snowgirl
New to this process - can someone tell me how a stop payment on a MasterCard recurring debit card transaction works? Obviously the stop payment on our core system kicks the item out, but then how is it handled for return? Our vendor is telling us they do not handle stop payments - only disputes?


The easiest and best stop payment avenue is to cancel this card and reissue.
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#2227817 - 12/19/19 09:07 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
BrianC Offline
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Illinois
Quote
The easiest and best stop payment avenue is to cancel this card and reissue.


That doesn't work as well as it used to since banks are required to participate in the Mastercard Recurring Billing Updater. The bank would have to make sure that they code the new card number to not be shared with the merchants or the merchant will just start charging the new card number.
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#2227847 - 12/20/19 02:09 PM Re: Stop Payments on Recurring Debit Card transactions BrianC
burkemi Offline
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Wow - I wasn't aware of that. Since we're on the subject, does Visa do this as well? (we are Visa branded here).
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#2227849 - 12/20/19 02:23 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
Valley girl Offline
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We are a VISA issuer, and yes, we have to take additional steps to opt cards out or VISA Account Updater will update recurring transactions. Not all merchants are signed up, but there isn't a list or anything to refer to see what merchants are part of the program. Since there is a cost for the program, I doubt that every subscription merchant is signed up, but we opt the cards out anyway. We also opt out cards that have reported fraud if the fraud occurred with an on-line merchant.

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#2227866 - 12/20/19 05:18 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
Valley girl Offline
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I received a dispute from a member on Apple iTunes charges going back to September 6, 2019. Member states he cancelled the recurring transfers with iTunes in September (he can't remember the date or how he cancelled). He noticed that iTunes kept charging him, but he didn't have time to contact us until now. Can I deny the dispute because he did not cancel with us? 1005.10 (c) (1):

(c) Consumer's right to stop payment. (1) Notice. A consumer may stop payment of a preauthorized electronic fund transfer from the consumer's account by notifying the financial institution orally or in writing at least three business days before the scheduled date of the transfer.

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#2227868 - 12/20/19 06:41 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
BrianC Offline
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Illinois
Quote
Member states he cancelled the recurring transfers with iTunes in September


The Member is not stating that you failed to honor a stop payment. He is claiming that the transactions after September are unauthorized because the authorization was revoked. Since the assertion is that transactions are unauthorized and there is no statute of limitations for reimbursing customers according to 1005.6 for unauthorized transactions, we will have to investigate to determine if the charges are truly unauthorized. Customer liability is determined by 1005.6 depending on when the first charge occurred after the alleged cancellation and when we transmitted the statement on which that charge appeared.
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#2227897 - 12/20/19 10:15 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
Valley girl Offline
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I am questioning it because the definition of unauthorized states that term does not include a person who was furnished the access device by the consumer and unless the consumer notifies the institution that the transfers are no longer authorized by that person. He revoked his authorization with iTunes, but he didn't notify us. The definition of "person" in Reg E covers organizations, so I think we are within the regulation to deny the dispute since they were set up as recurring transactions. I would not apply this same logic to a one-time payment at Walmart or any merchant other than those that are recurring transactions.

This would be a totally different situation if he said he had never authorized any transactions with them. I apologize if I seem to be beating this death - I am just trying to understand.

(m) “Unauthorized electronic fund transfer” means an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. The term does not include an electronic fund transfer initiated:

(1) By a person who was furnished the access device to the consumer's account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized;

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#2227900 - 12/20/19 10:47 PM Re: Stop Payments on Recurring Debit Card transactions Snowgirl
Adam Witmer Offline
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Well, the commentary to the term "unauthorized EFT" explains that a person who was furnished the access device would be someone like a family member or coworker and would have been granted authority to make transfers to a person.

"2. Authority. If a consumer furnishes an access device and grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized."

To me, this is talking about someone you give your card to so they can make purchases. You grant them authority to make transfers to another person. When you give your number to a merchant, you are not granting them authority to make transfers to another person - you are the one authorizing the transaction and the merchant is not making a transfer on your behalf (because you are doing that). When you stop that authorization, future transactions then become unauthorized because they are not authorized by you (and the merchant was never authorized to make transfers on your behalf).

I understand that this isn't as clear as it could be, but Reg E disputes are one of the hottest topics with examiners right now (just look at the USAA consent order or the FDIC Consumer Compliance Supervisory Highlights June 2019) and it is best to error on the side of the consumer.

How much are these recurring itunes purchases for? $15? I would just refund them and limit your risk.
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