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Banks will pay card refunds
MAYA FISHER-FRENCH – Jun 18 2008 08:52
Banks confirmed last week that they will refund customers who bought tickets for flights on Nationwide Airlines or concerts by singer Josh Groban using either a debit or credit card. This follows confusion two weeks ago over whether local payment rules protect customers from non-delivery of services by a company in liquidation.

Four weeks ago the Mail & Guardian said that MasterCard had confirmed that card users could apply for a “charge back” (refund) from their banks for their Nationwide and Josh Groban tickets, according to international card rules, which also apply to Visa. But the M&G received complaints from readers having problems with their local branches in this regard.

It turns out that there was confusion over whether the local payment rules, which are the responsibility of the Payments Association of South Africa (Pasa), provided for charge backs in the case of the liquidation of the merchant. This week MasterCard said that while it provides protection for customers, including charge backs for airlines that have gone out of business, “where local rules have been established by the Payment Association of South Africa, such rules may supersede MasterCard’s general rules”.

However, Walter Volker of Pasa confirmed that in the case of liquidation there are no separate local rules and that the MasterCard and Visa rules apply.

The problem is that when a merchant goes into liquidation there is no recourse for the bank to claim the money back from the merchant. In this case the liability lies with the “acquiring” bank — in other words the bank that provided the “card acquiring” services to Nationwide or Ticket Connection, which sold the Josh Groban tickets. If your bank is not also the acquiring bank, then it will request the acquiring bank to carry out the charge back.

In the case of Nationwide, if you bought your airline tickets directly, Standard Bank was the acquiring bank and will pay the refunds. Volker said one of the risks a bank takes in signing up a merchant is that the merchant could go bankrupt. He said all banks have to make provisions for such things and that the Nationwide loss was small compared with daily card transactions.

At the time of going to print Standard Bank had not issued a statement about the effect of the Nationwide charge backs on its business.

Source: Mail & Guardian Online
Web Address: http://www.mg.co.za/article/2008-06-18-banks-will-pay-card-refunds