Financial fitness
Know your rights when it comes to chargebacks
Global coronavirus-enforced lockdowns have resulted in a huge growth in the number of people using online buying platforms.
Online shopping means that consumers can get what they need without coming into close contact with people at stores. It is not without its challenges, however, and one the most concerning is the sharp rise in disputes reported to the Ombudsman for Banking Services (OBS) arising from cardnot-present transactions (card transactions that occur while the buyer and seller are not in the same place).
Ombudsman for Banking Services Reana Steyn says the increase in disputes is caused by consumers often not being aware of their rights related to these transactions, despite how frequently they are now being used.
“In the event of disputes with merchants regarding such transactions, most consumers are completely in the dark about their rights and obligations.”
One of those rights is getting what is called a chargeback. A chargeback is a reversal of a credit or debit card transaction that is initiated by the bank following a request by the cardholder.
Once a bank receives a chargeback request from the cardholder, it must investigate the matter.
“If it is established that the cardholder's request is valid, the funds of the transaction will be debited from the merchant's account and returned to the cardholder.”
A chargeback must be filed within 120 days from the transaction processing date, or the delivery date of the goods or services, Steyn says.
MasterCard and Visa's rules say that a cardholder must first lodge a dispute directly with the seller before approaching the bank for a chargeback. These rules, however, do not apply in cases of fraud.
Consumers may be expected to return the
goods to the seller before requesting a chargeback.
The Ombudsman advises that when requesting a chargeback, a written document must be provided to the cardholder's bank, describing the nature of the dispute and giving details of the disputed transaction .This information includes the date of the transaction, the amount involved and proof that notice of dispute was sent to the seller of the goods.
“It is vital that cardholders carefully read, and clearly understand, the terms and conditions of the purchase before completing the transaction. Do not click ‘accept' if you do not understand or agree with the policies.
“Before requesting a chargeback, it is important that cardholders double check what they originally agreed to, as they are bound by those terms – even if they did not read them,” says Steyn.
When can a chargeback be requested?
A consumer can request a chargeback when the product they have bought is damaged or defective, if it is counterfeit despite being described as the genuine article, or when the seller is not honest about the terms of the sale.
Tickets that arrive after an event has already occurred also entitle a buyer to a chargeback.
In addition, Steyn adds that one can claim a chargeback if the product is not as described
– it could be that the product is the wrong size, colour, quantity or the quality of workmanship is not what was promised.
If the seller is no longer able to provide the services that were paid for, a consumer is entitled to a chargeback.
“This is typically when the merchant has gone out of business or has voluntarily ceased operations – with no plan to compensate consumers, or if the cardholder was not notified that the date of service was unilaterally changed or postponed.
“It also applies when the goods do not arrive on schedule, or by the mutually agreed extended delivery date,” warns Steyn.
She cautions that this may even apply when goods do not arrive as promised as a result of travel delays or lockdown challenges.
When are chargebacks not allowed?
There are circumstances in which chargebacks will not be allowed. A chargeback can be declined when the product was sold voetstoots (sold as is, at buyer's risk).This rule also applies when the condition of the product is clearly pointed out during the sale.
In the current pandemic conditions, chargebacks may also not be claimed when a service is available but the buyer declines the use of a purchased service due to concerns related to the pandemic.
Chargebacks may also not be requested if a consumer is unable to use the paid-for services because of travel restrictions; has been charged a no-show penalty for failing to cancel a reservation; has missed a flight which led them to miss a subsequent, separate, non-refundable service; or when the buyer accepted a reasonable alternative compensation method from the seller.
To avoid the hassle of mistakenly applying for a chargeback, consumers are advised to first consult people with access to the card to see if they authorised a purchase without the cardholder's knowledge.
In the case of a transaction being fraudulent, Steyn advises consumers to immediately report the disputed transaction to the bank, without approaching the merchant.