FI Won't Give Cardholder Provisional Credit

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Question:

I process Visa and MasterCard chargebacks for several financial institutions and I am currently working on a case where the financial institution is not wanting to provide the cardholder provisional credit. The cardholder was making several auto fuel purchases in Florida and was called around the same time to verify transactions on her account. No one knows exactly what was said to verify the charges, but the cardholder agreed the gas charges were hers. Unknowingly to the cardholder there was actually counterfeit activity going on at gas stations in Massachusetts, so after her card was unblocked the fraud continued to happen. The financial institution has decided since the cardholder agreed that the original charges were valid and the card was unblocked for more counterfeit transactions to post, they will not be giving the cardholder credit because the fraud alert company tried to stop a further loss, but the cardholder insisted it wasn't fraud. Since I am the fraud processor, the cardholder keeps calling me because she wants this to be taken care of ASAP. She is out hundreds of dollars, but the financial institution is not budging on giving her credit because it's going to be a loss to them due to the card being counterfeit. Please give me some advice on this issue. I think people can make mistakes and I think when [Name of Fraud Protection Co Withheld] called to verify charges it was an oversight of the cardholder due to her making the same type purchases in her home town and we can not guarantee [Name of Fraud Protection Co Withheld] told her it was out of state charges. The financial institution knows there was counterfeiting going on that weekend because they had at least five accounts affected for the same merchants and state. Is the financial institution required to give the cardholder credit?

Answer:

First of all, the cardholder's relationship is with the financial institution and it's a cop-out for them to deflect their customer to you. It is the institution's responsibility to deal with these customers, not yours.

It is apparent that the customer was confused when contacted by the security company. Clearly, she can't be in both Florida and Massachusetts at the same time and she probably can document that she was in Florida. When the financial institution knows there is a counterfeiting scam affecting their cardbase, they are on notice that a customer's claim of fraud is perhaps more likely to be accurate. They certainly ought to take extra steps to ensure that allegedly fraudulent transactions were actually made by a depositor before dismissing a claim. Obviously, this institution has either not read or not understood regulatory guidance that has said the institution has the burden of demonstratng that a disputed transaction was authorized.

First published on BankersOnline.com 7/28/08