An Introduction to Debt Recovery – Part 3

This is the third in a series of articles written by Krystene Bousfield, Solicitor and Head of Debt Recovery at Travlaw LLP. During the coming months, Krystene will delve into the sometimes uncomfortable, but 100% necessary, world of debt recovery, providing tips, advice and helpful assistance to enable you and your business recover monies to which you are entitled – be that from suppliers or customers.

This series of articles is very much intended to be interactive, so please get in touch with any feedback or specific queries you may have.

Part 1 – ‘Keeping a Tidy House’                           Part 2 – ‘Know Your Debtor’

This Week – ‘There’s no such thing as a free holiday’ – Chargebacks and how to fight them

The benefits of using a credit card when booking a holiday are well publicised. Consumer forums and money advice experts are forever emphasising the fact that ‘should your holiday provider go bust, if you have booked via credit card – your monies will be fully protected’.

This is all well and good, but what about when those booking holidays with a credit card do so for a different reason? With the intention of applying for a ‘chargeback’ from the credit card provider, whether they have enjoyed the benefit of their holiday or not?

What is a chargeback?

A chargeback typically refers to the act of returning funds to a consumer. The process is initiated when a consumer raises a dispute with the bank of the card used to make the purchase and, if the dispute is approved by the bank, the money is taken back from the sales merchant and returned to the consumer.

The chargeback process was introduced primarily as a form of consumer protection however it is unfortunate that we are seeing more and more instances where consumers are abusing the process and using it in a fraudulent manner to literally ‘have their cake and eat it too’. (Perhaps ‘have their holiday and suntan too’ would be more appropriate for the purposes of this article!)

These individuals are booking holidays (flights, hotels, transfers, you name it), paying with a credit card, enjoying the benefit of the holiday and then claiming a full chargeback when they return. It is clear and unequivocal fraud.

What is the difference between a Section 75 and a Chargeback?

Section 75 of the Consumer Credit Act 1974 is a UK law, while a chargeback is simply a voluntary scheme. In addition, there is a limit on the amount of cover you can receive under Section 75 in that you can only make a claim on purchases between the value of £100 and £30,000. Under the chargeback scheme you can claim for any amount. 

Can a chargeback be disputed?

Yes, however the success rate of doing so is disappointingly low; approximately 21%. That being said, if you believe a chargeback has been raised fraudulently, you should do all you can to fight it, and we can help.

To ensure you have the best chance of success, evidence will be essential. Make sure you have a trail of your correspondence with the consumer during the entire booking period. This may include call recordings and email correspondence as well as both payment and contact information from the consumer themselves. It is likely that, if the consumer did travel, the airline will be able to provide confirmation of this, as will the hotel, theme park, and any other amenity that the consumer had booked in advance. All this information is vital in proving that the consumer who booked the holiday, did indeed enjoy the benefit of the same.

What if my dispute is unsuccessful?

If your dispute is unsuccessful, but you remain adamant that the chargeback was fraudulent, you can pursue the consumer via court proceedings. Due to the nature of the alleged fraudulent actions, criminal action could be an option however civil proceedings are likely to be faster, and if successful may entitle you to full repayment of the sums owing in addition to your legal costs. Again, this is a process with which we are able to assist.

It is a sad fact that chargebacks are becoming more common, but this is even more reason why the travel industry as a whole needs to stand up and dispute these head – on. Shockingly, where fraudulent chargebacks requests are not disputed, statistics show that half of these consumers will file another illegitimate chargeback within the next 90 days! It is therefore imperative that you take action!

If you believe that you have been the victim of a fraudulent chargeback request or would like to know more about the checks and balances that you can introduce within your business to prevent you from becoming such a victim, please get in touch to discuss how we can help.

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