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DC Transaction Dispute w/ Proof of Authorization

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Question: 
Per Reg E (and even MasterCard policies), what should our process be for debit card transaction disputes where the customer claims the transaction was unauthorized but it gets charged back to us with proof (invoice, order, etc) of authorization? Am I allowed to charge it back to the member? Am I allowed to delay giving provisional credit for any amount of time? Can I (as the FI) call the merchant to verify shipment of goods, etc?
Answer: 

Reg E requires that you investigate your customer's claim and provide provisional credit if you have not completed your investigation within 10 business days from the date they notify you of the error. This can only be delayed if the cardholder fails to provide written confirmation of the error and your Reg E disclosure states that you require it.How you choose to conduct the investigation is up to you. You can utilize MasterCard's chargeback process, contact the merchant directly, or not investigate at all and credit the customer.

The next action depends on what your investigation uncovers. Questions to ask: Was merchandise shipped directly to your cardholder or to someone else? If the merchant supplies an IP address for an online transaction, does it match your customer's computer? Does the sales receipt signature match your customer's? Just because the merchant can represent a transaction does not mean that the cardholder automatically loses the claim. In some cases the bank loses, and in some cases the bank can request updated information from the cardholder and file an arbitration chargeback against the merchant to refute its initial response.

If it is determined that there was no error based on documentation obtained from the merchant, revoke the provisional credit. Reg E requires that you honor debits to the account for the amount of the revoked credit for 5 business day.

First published on BankersOnline.com 2/13/12

First published on 02/13/2012

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