Disputed transactions

Typical complaints about cash machine transactions include:

• the customer says they didn’t make a cash machine withdrawal that has appeared on their account
• the customer's account has been debited with a cash machine withdrawal, but the customer says the full amount wasn’t dispensed

We ask for information from you and the customer to assess whether or not the customer made the transaction.

When the cash machine withdrawal is disputed, we usually ask the customer:

• where they were when the transaction took place
• the location of the cash machine used to make the withdrawal
• their previous use of the same cash machine

Examples of things we might ask you:

• how the card used to make the withdrawal was recognised by the cash machine, for example, by reading a microchip or magnetic stripe
• how the transaction was verified by the system, for example, by inputting a personal identification number
• if there’s more than one disputed transaction or a pattern of transactions at the same cashpoint
• the electronic audit trail for the withdrawal and any related transactions (for example, balance enquiries) that preceded or followed it

If we decide that the customer didn’t make the transaction, we’ll assess whether they have any liability for it – and, if so, how much. We take account of:

• the account terms and conditions
• the law, such as the Payment Services Regulations
• industry codes of practice
• sections 83 and 84 of the Customer Credit Act 1974, when the withdrawal was made using a credit facility

Where there’s a series of disputed transactions, we’ll assess whether and how that affects any liability the customer might have.

When a customer says they made a cash machine withdrawal, but didn’t receive the full amount of cash, we ask the customer:

• what they remember of the cash machine transaction, including any information or messages they remember seeing on the screen of the cash machine
• whether they have any interaction that they had with anyone at the time of the transaction, such as a conversation with someone else at the cash machine

We’ll ask you:

• for the cash machine records, to see when the cash machine was next balanced following the disputed transaction and whether there was surplus or missing cash
• whether the machine took back cash dispensed but not removed from the slot, and other transactions before and after the disputed transaction
• whether other complaints have been received about malfunctions at the same cash machine around the same time
• information about your cash machine procedures

Once we have the necessary information, we’ll consider whether or not the cash machine dispensed the correct cash for the disputed transaction. If we decide that it did, we’ll then consider other factors that might affect the customer's liability for the transaction.

Disputed transactions made with plastic cards happen in locations such as shops, bars and restaurants, and also with goods or services bought over the internet. Usually, the customer notices the transaction on their account and complains that they didn’t make or authorise it.

The transaction may have been made with a debit or credit card and by presenting the card in person or remotely. Remote transactions by phone or over the internet are also called ‘cardholder not present’ transactions.

To weigh up the facts and reach a fair decision, we’ll ask for information from you and the customer:

We may ask the customer for information such as:

• where they were at the time of the disputed transaction
• how the transaction was made, whether in person, by phone or over the internet
• the nature of the transaction, including when and where it was made, and what it was used to pay for
• the outlet where the transaction was made
• how the transaction was verified by the system, for example, by personal identification number (PIN) or password
• the electronic audit trail for the transaction
• their previous use of the plastic card

We may ask you for information about your plastic card or security procedures.

If we decide that the customer didn’t make or authorise the disputed transaction, we then assess if they have any liability for it – and, if so, how much.

In making that assessment, we take into account:

• the account terms and conditions
• the law, such as the Payment Services Regulations
• industry codes of practice
• sections 83 and 84 of the Customer Credit Act 1974 , when the withdrawal was made using a credit facility

Card details not used in the way the customer expected

Sometimes customers tell us that while they agree they provided their card details to a supplier of goods or services (usually by phone or online), the supplier has used those details to make a transaction they did not authorise.

An example might be a customer who used their debit card to pay for an item over the phone – but later found that the supplier had included extra amounts in the transaction, for charges that the customer wasn’t told about and hadn’t agreed to.

When we deal with complaints like this, we get as much information as we can about the circumstances in which the payment was made. We then weigh up all the facts and decide what the customer most likely agreed the supplier could take from their card account.

Complaints about the quality of goods or services

When the complaint is about the quality of goods or services paid for with a credit card, section 75 of the Customer Credit Act 1974 may apply . This is because, in certain circumstances, consumer protection laws make the provider of credit liable for some problems with goods or services. 

"Chargeback" is the name given to the process that enables consumers - in certain circumstances - to challenge and claw back payments made from their plastic card accounts.

That could be a transaction appearing on a credit card account, or it could be one that appears on a current account as a debit card payment. The cases we see usually concern disputes about VISA credit and debit card, and MasterCard credit card transactions.

The main parties to plastic card transactions are:

• the card holder - the consumer whose plastic card account has been debited;
• the card issuer - the financial business that operates the plastic card account for the consumer;
• the card scheme - the business that operates the payment network (for example, VISA and MasterCard are card schemes);
• the merchant acquirer - the financial business that provides the merchant with a facility to accept payments by plastic card (usually, their bank);
• the merchant - the business that the consumer pays using his plastic card. complaints about chargebacks

Typically consumers who complain to us about chargebacks have asked their card issuer to try to obtain a chargeback of a transaction because:

• they did not make or agree the plastic card transaction; or
• the transaction was carried out by the merchant for the wrong amount, or was duplicated; or
• the goods or services paid for were not provided.

We can normally consider complaints about chargebacks:

• • from card holders complaining about card issuers

These are usually complaints that a chargeback was not attempted - or was attempted but was not successful.

• • from merchants who are "micro-enterprises" complaining about merchant acquirers

These are usually complaints that the merchant acquirer accepted a chargeback request and debited the merchant's bank account with the amount of the chargeback.

Chargebacks are possible because of the contract between the card issuer (or merchant acquirer) and the card scheme. They are not a right or protection given directly to the card holder.

The exact grounds on which a chargeback may be attempted will vary, depending on the card scheme. Each card scheme operates its own rules for the plastic cards that fall within its scheme. While there are lots of similarities between these various sets of rules, there are also some important differences.

There is also normally a time limit for raising the chargeback request - usually 120 days from the transaction appearing on the account. But there are some variations between card schemes.

We consider that, as a matter of good practice, the card issuer should attempt a chargeback if the card holder has challenged a transaction and - taking account of the relevant card scheme rules - there appears on the face of it to be a chance that a chargeback request may succeed.

So we normally expect the card issuer to identify whether the potential exists for a chargeback request. And if so, to ensure that a request is processed in the right format and within any time limits that apply.

If it does not do that, we will decide whether in our opinion the chargeback would have succeeded, if it had been properly made.

Where a chargeback request is made but then refused, the card issuer can take the matter to the appeal process operated by the relevant card scheme. We cannot consider complaints about decisions made by card schemes about chargeback requests, because card schemes are not covered by the ombudsman service. But if the card issuer did not attempt an appeal, we will consider whether it should reasonably have tried and whether, in our opinion, it would likely have succeeded.

Complaints brought by merchants

Chargeback complaints brought by merchants against their merchant acquirers are usually about chargeback requests that were made and accepted. The merchant may complain:

• that the chargeback was made for unfair reasons
• that the merchant acquirer didn’t properly defend the request

The right of the merchant acquirer to debit the merchant’s account comes from the contract between them. Often referred to as the ‘merchant services agreement’, the agreement is made when the card-processing facilities are provided to the merchant by the merchant acquirer.

We’ll consider the terms of the merchant services agreement when we assess whether or not the merchant acquirer was allowed to debit the merchant’s account.

"Cardholder not present" transactions

Complaints from merchants often involve chargebacks made on card payments accepted over the phone or internet, also called ‘cardholder not present’ transactions. Merchant services agreements often have strict rules about when and how merchants may accept these transactions, and when they can be clawed back.

If the merchant acquirer has acted according to the terms of the merchant services agreement, we’re unlikely to uphold the complaint. This is even the case when the merchant has been the innocent victim of a fraudster who has obtained goods using a stolen card.

In some cases, the merchant says they were misled by the merchant acquirer about the risk of accepting a payment. Here, we consider the evidence and decide whether they were misled – and if so, whether that affects the merchant acquirer’s rights under the merchant services agreement.

Disputes based on card scheme rules

Complaints from merchants often involve chargebacks made on card payments accepted over the phone or internet, also called ‘cardholder not present’ transactions. Merchant services agreements often have strict rules about when and how merchants may accept these transactions, and when they can be clawed back.

If the merchant acquirer has acted according to the terms of the merchant services agreement, we’re unlikely to uphold the complaint. This is even the case when the merchant has been the innocent victim of a fraudster who has obtained goods using a stolen card.

In some cases, the merchant says they were misled by the merchant acquirer about the risk of accepting a payment. Here, we consider the evidence and decide whether they were misled – and if so, whether that affects the merchant acquirer’s rights under the merchant services agreement.

Some of the disputed transactions that customers complain about are made over the counter of their bank or building society.

The customer thinks that someone else must have impersonated them at the bank or building society branch and made the transaction (usually a cash withdrawal).

Sometimes the customer suspects that a member of staff from the bank or building society was dishonestly involved in the matter.

The type of information that we need to see in complaints like this includes:

• any paperwork relating to the disputed transaction, such as withdrawal slips
• any recollection the bank or building society has of the transaction, such as a statement from the counter clerk who dealt with the transaction
• information about any previous disputed transactions involving the branch or employee in question
• any CCTV coverage available for the time the disputed transaction took place (although even where CCTV is available it is rarely conclusive)
• information from the customer about where they were when the transaction was made
• information about the previous pattern of transactions on the account
• information about the consumer’s circumstances and whether anyone else could have had access to the consumer’s card and details

We use this information to decide whether or not the customer made the transaction, or has or authorised someone else to make it.

We see complaints about disputed deposits made through paying-in machines (including night safes). Customers complain that they made a deposit through the machine that has not appeared on their account, or that they’ve been credited with less than they paid in.

Sometimes the customer suspects that a member of staff from the bank or building society was dishonestly involved in the matter.

The type of information that we need to see includes:

• any paperwork relating to the disputed transaction, such as deposit slips
• the records for the paying-in machine for the period during which the customer says the deposit was made
• information about the bank or building society's procedure for processing payments from paying-in machines
• any CCTV coverage available for the time the disputed transaction took place (although in the complaints we see, this type of evidence – even where available – is rarely conclusive)
• information from the customer about exactly what was deposited and their recollections of making the transaction
• information about the previous pattern of transactions on the account
• information about the consumer’s circumstances and whether anyone else could have had access to the consumer’s card and details

If a member of staff is accused of dishonesty, we’ll need additional information from the bank or building society. This includes any previous similar disputed transactions involving the branch and employee in question.

We may need to keep some of this information confidential where it concerns third parties or the employment files of individual employees.

We’ll use this information to decide whether or not the customer made the deposit, and, if so, how much money was deposited.