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Chargeback Rights for Internet Hotel Reservation

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Question: 
We had a customer book a two day hotel reservation through a popular hotel booking website with their VISA debit card. When the customer arrived at the hotel they were not satisfied and did not believe the hotel was as advertised on the website. The customer called the hotel booking website and they offered to refund her the money and find her another hotel. The customer said they would stay in the hotel for one night and accept the refund for the second night. The customer only stayed in the hotel for one night but was charged for the two nights. When she called the hotel booking website back they claimed that they had no record of the incident and would not refund the money. My question is do we have chargeback rights on this item or is there no error because the customer initially authorized that amount when they made the reservation?
Answer: 

There is a two pronged answer to this question. We must first address whether or not this situation is considered an error for the purposes of Reg E.

The error definition is located in Section 1005.11(a). The transaction does not meet definition of an unauthorized or incorrect funds transfer 1005.11(a)(i-ii). as the customer authorized the purchase and the correct amount was debited from the account. However the customer is claiming that the merchant promised a refund and failed to provide one. This does meet the definition of an "omission of an electronic funds transfer" 1005.11(a)(iii). Consequently the bank is obligated to investigate.

Based on the customer's claim, VISA/MasterCard will accept a chargeback on the basis of "Credit not Processed" MasterCard chargeback code 4860, VISA chargeback code 85. Note that VISA will not allow the chargeback right to be exercised until 15 days from the promised refund date. MasterCard sets this time frame at 30 days from the promised refund date.

The fact that the chargeback right is exercised does not guarantee that the cardholder will win the dispute, or that the bank must find in the cardholder's favor. The merchant may supply documentation to refute the cardholder's claim such as a "no refunds/exchanges" policy that the cardholder agreed to when making the initial reservation. The bank will have to decide to approve, deny or continue to pursue the merchant via the arbitration/arbitration chargeback process based on the documentation the merchant provides.

First published on BankersOnline.com 7/9/12.

First published on 07/09/2012

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