Answer:
The customer may have a valid claim, but the bank does not have to accept liability as the merchant may have violated VISA/MasterCard operating rules in charging the customer's card. A rental car agency is permitted to authorize an estimated amount of the customer's cost for renting the vehicle. If the cardholder keeps the car longer than originally agreed, the agency can obtain additional authorizations.
However, VISA/MasterCard prohibit a merchant from charging a card to recover the costs of loss, theft, or damage unless the cardholder agreed to be billed on their card after being informed of the damage. The contract can assign liability to the cardholder, but it cannot force the cardholder to agree to be billed for damage prior to the damage occurring.
VISA rule 5.1.E.4 Car Rental Estimated Authorization Amount A Car Rental Company may estimate Transaction amounts for Authorization based on:
T&E Delayed or Amended Charges
VISA rule 5.2.M.4 Delayed or Amended Charges - Acceptable Charges
A delayed or amended charge may include room, food, or beverage charges, taxes, mileage charges, fuel, insurance, rental fees, and parking tickets and other traffic violations, and must not include charges for loss, theft, or damage.
MasterCard Rule 8.3.8 Charges for Loss, Theft or Damage
A Charge for loss, theft or damage must be processed as a separate Transaction from the underlying rental. The Cardholder must authorize the charge after being informed of the loss, theft, or damage.Although under Reg E, you cannot require that the cardholder go back to the merchant, in orer to successfully file a chargeback with VISA/MasterCard, ask them to do so. (It's a good idea to let them know that they can get their refund quicker by complying with your request.) If the agency refuses to cooperate, ask the cardholder to write a letter denying that they provided authorization to charge the card. Have them include their efforts to resolve the dispute with the merchant, and the merchant's response.
MasterCard issuers can file chargeback code 4859 RS7 (Addendum Dispute)
VISA does not have a specific code to address this situation so you can try chargeback code 85 Credit not Processed, or your processor may recommend filing a Compliance case against the merchant for violating the operating rules.
First published on BankersOnline.com 9/17/12
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