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Customer Disputes Recurring Payment Months Later

Answered by: 
Brian Crow

Question: 
Assume a customer used their debit card to set up a recurring payment (for example) for a gym. They have okayed the payment for the last several months and now the customer says this is not correct. What steps do we need to take such as under Reg E? Can we return a POS for a Stop Payment?
Answer: 

There is no provision in VISA/MasterCard rules for returning an item as a stop payment. Future payments should be prevented by using MasterCard's Recurring Payment Cancellation Service, or VISA's Preauthorization Cancellation Service, or by cancelling the card. For previous payments, if the customer asserts that they have cancelled their membership you are required under Reg E to investigate. This investigation may include reviewing the terms and conditions of the cardholder's contract with the third party, and/or filing a chargeback based on the customer's claim (MasterCard code 4841 Cancelled recurring transaction or VISA code 41 Cancelled recurring.) The merchant then has 45 days to prove that the cardholder did not cancel, continued using services, etc.

First published on BankersOnline.com 8/13/12

First published on 08/13/2012

Filed under: 
Compliance
Filed under compliance as: 
Merchant

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