CCMC sees little change in banks’ chargeback processes

The Code Compliance Monitoring Committee (CCMC) has released an update to its 2011 inquiry into practices within the banking sector to deal with chargebacks.

‘Chargeback’ is a term associated with a bank’s refunding of unauthorized or disputed credit card transactions at the request of a customer.

With the growing trend of Near Field Communication (NFC) payments using credit card touch and mobile phone payment applications, banks need to improve their customer service and customer protection. Improved services need to be focused on the chargebacks process since NFC payment methods are more prone to the practice of unauthorized transactions, thus increasing the possibility of fraud.

In 2011, the Code Compliance Monitoring Committee (CCMC) conducted a chargeback inquiry, investigating the compliance of banks to the sections of the Code of Banking Practice relating to disputed transactions. The inquiry involved a survey questionnaire sent out to each bank, as well as mystery shopper phone calls to the bank to request information on their chargeback process.

A customer can request a chargeback if a merchant has duplicated a transaction, when an unauthorized transaction has been processed in the absence of the cardholder, or when the cardholder does not receive goods purchased using the credit card.

The chargeback clause of the Code of Banking Practice implies that, in relation to the credit card transaction, the banks will:

  • claim a chargeback where it exists and where the customers have disputed the transaction with the bank within the required time frame;
  • claim the chargeback for the most appropriate reason;
  • not accept a refusal of a chargeback by a merchant’s financial institution unless it is consistent with the relevant card scheme rules; and
  • include general information about chargebacks with credit card statements at least once every 12 months.

The 2011 inquiry reported that the number of complaints on chargebacks was relatively small compared to the estimated 800 000 chargeback requests received by banks annually. The result of mystery shopping, however, indicated instances of inconsistency and inaccuracy of information being provided by bank staff when dealing with chargeback inquiries. Issues included referrals to dispute time limits, which were inconsistent with time limits specified in credit card terms and conditions.

As the result of this inquiry, the CCMC recommended that banks:

  • make consumers aware of the time limits for disputed transactions;
  • make the information on chargebacks dispute forms available on the bank’s websites including information on chargeback process, transaction, timeframes, refunds and complaints; and
  • augment online banking systems that enable customers to make online reports against unrecognized transaction and lodge a dispute.

This year the CCMC conducted a follow up exercise to review the implementation of the recommendations from the 2011 Chargeback Inquiry report. The CCMC indicated that little improvement had been made by the banks with regard to the provision of information on chargeback processes to customers. In most instances, banks that had implemented some of the initial recommendations, such as the use of prompt sheets by customer service representatives, saw improvement in their overall compliance rates.

The final report of the CCMC Chargeback Inquiry 2011 can be found here.

About the Code of Banking Practices

The Code of Banking Practices is a voluntary code of conduct which sets standards of good banking practice for the subscribing banks to follow when dealing with customers, whether individuals or small business operators. Subscribing banks have make a  commitment to improve the standards of practice and service in the banking industry, promote well-informed consumer decisions about their banking services, and act fairly and reasonably in delivering those services. For more information on the Code of Banking Practices visit the Australian Bankers’ Association.