Refund of transaction
Mr G participated in the wine investment scheme which promised annual dividend of 15% paid on quarterly basis. For purpose of the investment, the Complainant purchased bottles of wine valued at RM15,000.00 from the merchant and payment was made through Bank A’s credit card on 26/03/2015.
Mr G was given the Certificate of Ownership of stock of wine and he executed an Understanding and Acknowledgement Agreement which provides inter alia, that the bottles of wine would be stored at a warehouse in Singapore for a period of 3 years. Mr G was made to understand that the bottles of wine be sold after 1 year with a projected capital return of 15%.
Mr G received the dividends for the first quarter in August 2015 but not for the subsequent quarters. He attempted to contact the merchant but was unsuccessful. On visit to the merchant’s premises in May 2016, Mr G discovered that the merchant had ceased operation. Mr G realised that he was scammed by the merchant. A police report was made and Mr G filed a dispute with Bank A seeking a chargeback on the transaction made at the merchant on the basis of non-delivery of goods. Mr G’s claim was rejected because the chargeback against the acquiring bank was unsuccessful.
Mr G avers that he is entitled for a refund of RM15,000.00 as the merchant failed to deliver the goods within a year of the transaction and that he had raised his dispute with Bank A within the chargeback timeframe of 540 days from the transaction date.
Investigation and Findings
Bank A received Mr G’s dispute on 25/05/2016. Upon receipt of the dispute, Bank A initiated a chargeback against the merchant’s bank (acquirer) to recover the transaction under reason code 30 of the Visa International Rules for “services not provided or merchandise not received”.
A chargeback is a process of debiting the merchant bank’s (acquirer’s) account by the issuing bank with the amount of a transaction which had previously been credited. This is done after the cardholder raise a dispute regarding a transaction. When a cardholder notifies his/her issuing bank of a dispute, the bank notifies the merchant’s bank (acquirer) of the reason for seeking the chargeback. The merchant’s bank can accept the chargeback or to refuse it. To refuse a chargeback, the merchant’s bank must show that the chargeback is not valid under the relevant credit card scheme rules.
The chargeback reason code 30 of the Visa International Rules for “services not provided or merchandise not received” is applied when the merchant was unable or unwilling to provide services or the cardholder or authorised person did not receive the ordered merchandise at the agreed upon location or by the agreed upon date. The chargeback time limit is calculated not later than either:
- 120 calendar days after the transaction processing date; or
- if the merchandise or services were to be provided after the transaction processing date, 120 calendar days from the last date that the cardholder is expected to receive the merchandise or services or the date that the cardholder was first made aware that the merchandise or services would not be provided, not to exceed 540 calendar days from the transaction processing date.
In the present case, the dispute filed by Mr G with Bank A on 25/05/2016 exceeded 120 days from the transaction processing date of 26/03/2015. Therefore, the acquirer has declined the chargeback.
For the second limb of chargeback reason code 30 to be applied, there must be a specific date when the goods are expected to be delivered by the merchant. As in a sale of merchandise, the date of delivery of goods is usually specified in an invoice or order form. If a merchant fails to deliver the goods by the date as specified in the invoice or order form, the chargeback timeframe will be 120 days from the last date the cardholder is expected to receive the goods or 120 days from the date the cardholder was first made aware that the merchandise or services would not be provided but not exceeding 540 days from the transaction date.
In the case of Mr G, there is no evidence of any invoice or document issued by the merchant stating that the wine would be delivered to him on a specified date. Hence, Mr G’s claim does not fall within the ambit of the second limb of chargeback reason code 30.
In view that the chargeback against the acquirer is unsuccessful, Bank A does not have direct recourse against the acquirer to recover the disputed transaction merchant as there is no contractual relationship between Bank A and the merchant’s bank/merchant. Bank A’s role as an issuing bank is to facilitate payment that was authorised by Mr G to the merchant. Furthermore, Bank A is not a party to the recruitment of the merchant.
The Ombudsman found that Bank A has made every effort to assist Mr G within the capacity of an issuing bank to recover the disputed transaction from the merchant’s bank through the chargeback process. It is unfortunate that the chargeback was successful.
The Ombudsman upheld Bank A’s decision.