Debit card customers tied down by time limit on refunds

Customers who want a refund from their bank after paying for services on their debit card may run up against problems with time limits for their claim.

The issue has been highlighted by the collapse of the firm Go Ballooning this month.

Card scheme rules say claims must be submitted within 540 days of a transaction being made.

But some customers seeking refunds bought flight vouchers in 2007.

An estimated 14,000 customers are still waiting to see if they will get their money back after the collapse of Go Ballooning. The company has few assets to repay the estimated £2 million it owes, so the directors have recommended that customers apply for a refund through their bank if they have paid by debit or credit card.

Customers who paid on a credit card can claim their money back from the card company through provisions under Section 75 of the Consumer Credit Act.

In that case, their credit card company pays.

But the bank will probably first attempt something called chargeback, where under Visa and Mastercard rules they can try to get a refund from the bank of a business that has failed to supply goods or services.

Credit and debit card customers can also request their bank to do this but there are some time limits, a potential problem when some Go Ballooning customers bought their vouchers several years ago.

John, from Lancashire, made at least eight attempts to get on a Go Ballooning flight in the Lake District since buying his vouchers as a birthday present for his wife in 2009.

Each time the flights were cancelled because of the weather.

When John first phoned Yorkshire Bank to get a refund on his credit card, he was told he had missed the deadline: "She said unfortunately because you're over the 540 days, which is the period from when you actually purchased the vouchers, there was nothing Yorkshire Bank could do for me."

A chargeback claim must be made within 120 days of when the cardholder was made aware they would not receive the goods or service.

John had beaten that deadline, but card scheme rules also say a chargeback is also supposed to be claimed within 540 days of the transaction.

And as he had bought the tickets in 2009, Yorkshire Bank said in that initial call that he was outside that time limit.

But after John provided further details to the bank, and Money Box also made contact, this week he got his money back.

The bank had realised that even if he was too late for a chargeback, he would still be eligible for a refund under Section 75 of the Consumer Credit Act.

Yorkshire Bank said: "We have processed his claim, and the money is now back in his account. Initially we do this under the chargeback scheme in an attempt to recover the funds. If this is declined, we will use Section 75 and write off the amount."

But others who paid on their debit cards are still waiting.

Jason paid £105 on his Lloyds debit card for a flight for his mother-in-law in September 2011.

She tried to fly on six separate occasions, but, as in John's case, each flight was cancelled.

Because Jason did not use a credit card, so far Lloyds is sticking by the Visa chargeback rules. It said: "The customer's chargeback was rejected because the original transaction took place more than 540 days before he raised the dispute. Unfortunately, under the Visa chargeback rules, this means we have no chargeback rights and cannot get a refund for him."

Visa confirmed that claims going back more than 540 days would not be valid: "Chargeback is not a guarantee but, depending on the circumstance, it may be considered for cases involving goods not arriving, arriving damaged, arriving not as described, or where the merchant has ceased trading.

"Our rules are that the maximum timeframe for the completion of the dispute resolution process must be within 540 days from the date of the transaction."

Money Box is broadcast on Saturdays at 12:00 GMT on BBC Radio 4 and repeated on Sundays at 21:00 GMT.

You can listen again via the BBC iPlayer or by downloading Money Box podcast.