Consumer Advisory - Chargeback protects credit card users against dispute transactions

A review done by the Consumers Association of Singapore (CASE) on credit card industry practices found that chargeback protection is available for consumers’ prepayment for non-delivery of goods and services in the event of business insolvency. However, there seems to be a lack of clear and specific directions for consumers on how to file a chargeback application on card issuers’1 website. In view of this, CASE has compiled a basic chargeback guide for consumers based on the guidelines of major international credit card providers and local banks. The guide explains how consumers who pay by credit cards can ask for a chargeback within 120 days of the date of transaction for non-delivery of goods and services; delivery of unfit goods and services; transaction errors and/or unauthorised transactions.

Prepayment refers to money paid in advance to a business (either in the form of the purchase price or a deposit) before completion of the service or delivery of the goods. The collection of prepayment is popular in many industries, notably in the purchase of beauty or travel packages, fitness club memberships, home renovation services, as well as big-ticket items such as cars, furniture, electrical and electronic goods. However, in the case of business insolvency, consumers, as unsecured creditors, have little chance to recover their prepayment.

As Singapore continues to push for a Smart Nation and the adoption of cashless payment systems, we can expect credit cards to continue to be one of the preferred payment methods. As such, we would like to highlight the chargeback mechanism for credit cards - an existing form of consumer protection which allows consumers to dispute a charge and reverse the transaction should a purchase goes awry.

Upon submission of the chargeback claim, the card issuer will investigate to determine if the claim is valid. If the card issuer determines that the chargeback is valid, the card issuer will proceed to initiate a chargeback with the acquiring bank2. Consumers with disputes involving credit card transactions can visit their card issuer’s website or contact their card issuer directly for more information on the chargeback procedure.

While most consumers may recover their prepayments by requesting for a chargeback, this option may not be available for those who purchased goods or services with their credit cards under instalment payment plans (IPP). This is because the card issuer had already made full payment to the business on behalf of the consumer. Consumers are still liable to continue paying their instalments to the card issuer unless the business agrees to terminate the IPP and refund the bank.

Lastly, CASE would also like to strongly urge all card issuers to provide a step-by-step guide on how to lodge a chargeback claim prominently on their websites. This should include details of situations in which consumers may have the need to lodge a claim, such as loss of their prepayments in the event of business insolvency.

A copy of the chargeback guide for consumers can be downloaded here.

1The bank that issue credit cards to consumers.

2The bank that processes credit card payments on behalf of a business.  


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