Refund for aborted holiday
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In August 2005, Mrs G booked a holiday to Bali in November 2005 through a travel agent. Using her credit card, Mrs G paid around $4,800 for air fares and accommodation for four persons.
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Soon after, Mr and Mrs G cancelled their holiday due to safety concerns associated with travel to Bali. Mrs G sought a refund from the travel agent but received only a partial refund of approximately $2,000 for the accommodation. Mrs G accepted that there was a non-refundable deposit of $250 per person but she claimed the remaining $1,800 that had not been refunded.
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Mrs G applied for a chargeback
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In February 2006, Mrs G wrote to her bank seeking a chargeback for $1,864.
The bank sought relevant documentation from Mrs G to proceed with the claim. Mrs G said that she sent the documentation by fax on more than one occasion but the bank said that it did not receive it until March 2006.
The bank said that in accordance with the rules of the relevant credit card scheme, a claim for a chargeback had to be made within 120 days of the transaction. As more than 120 days had elapsed since the transaction the bank proceeded to seek a ‘good faith’ chargeback from the merchant’s bank. The merchant’s bank rejected the request.
Mrs G complained to BFSO that delay on the part of the bank caused her application for a chargeback to be outside the time limit and therefore unsuccessful.
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BFSO’s investigation
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One of the questions raised by the case was whether the airline, which had not refunded the payment, or the travel agent, through whom Mrs G had booked her holiday, was the merchant for the purposes of the credit card transaction. The other question was whether the bank had delayed in processing the chargeback request and if so, was it liable for the portion of the payment that had not been refunded?
BFSO reviewed the terms and conditions of Mrs G’s credit card, which described the terms of the contract between Mrs G and her bank. The terms and conditions stated that a customer might be entitled to a chargeback of a transaction when there was a dispute with a merchant, noting ‘for example, you may be entitled to reverse a transaction where the merchant has not provided you with the goods or service you paid for…’
In this case, the merchant to whom Mrs G gave her credit card in payment for the holiday was the travel agent. BFSO considered that the relevant service that had been provided by the travel agent was the arrangement of flights and accommodation. The travel agent charged a fee for its services as well as passing on a proportion of the payment to the airline and hotels. In the view of BFSO, this meant that the service had been provided by the travel agent to Mrs G and there was no basis for a chargeback against the travel agent.
Further, BFSO considered that, as Mrs G did not use her credit card to enter into transactions directly with the airline or hotel there was no basis for a chargeback of any payment to those entities. Whether or not Mrs G was entitled to a refund depended on the refund policies of those entities. As such, BFSO concluded that even if the transaction had been processed in time, it would not have succeeded.
On the question of timing, BFSO found that, in accordance with the card scheme rules, the claim had to be lodged within 120 days of the initial transaction, which was made on 17 August 2005. As such, the claim was already out of time before Mrs G contacted the bank in February 2006.
BFSO found that, given the claim was out of time, the bank had acted appropriately in requesting a ‘good faith’ chargeback and that the bank was not liable to refund the balance of the transaction.
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