COVID-19 and chargebacks – what you should know before lodging a complaint
The COVID-19 pandemic has caused widespread cancellations of holidays and other events. Many Australians don’t know if they can get a refund for things they paid for but have not received, or how to go about it.
What is a chargeback?
If your plans were cancelled due to COVID-19 and you paid by credit card, you may be able to get a refund by asking your bank or credit union to raise a chargeback.
The basis for the chargeback request is that you paid for goods or services that you did not receive, such as a flight that was cancelled.
A successful chargeback involves your bank (or credit union) applying to your credit card scheme (e.g. Visa or Mastercard) to ask them to reverse a charge made on your credit card, however chargebacks are not always available.
This factsheet provides information about COVID-19 and chargebacks, including:
- What you should do before requesting a chargeback
- The role your bank or credit union plays in the chargeback process
- Whether your bank or credit union can raise a chargeback on your behalf; and
- How AFCA investigates chargeback complaints.
Try to resolve the issue with the merchant first
Your first step should be to contact the merchant who sold you the goods or services, such as your travel agent. Ask the merchant if they can give you a refund or offer you a reasonable alternative, such as a credit voucher or a rescheduled booking.
Working together with the merchant is often the quickest and easiest way to resolve the issue as the chargeback process can take quite a long time.
If you did not receive the goods or service, you may be able to request a chargeback. However, your bank (or credit union) may ask you to show how you tried to resolve the matter with the merchant first. If you do not contact the merchant first, this may impact your ability to request a chargeback.
If your travel plans were cancelled and you have travel insurance, you should also contact your insurer directly to see whether your policy provides cover for the amounts you have paid. If you are satisfied with the outcome provided by the merchant or your insurer, you will not need to request a chargeback.
How the chargeback process works
Credit cards are provided through banks and credit unions however, the card payment system is operated by a credit card scheme. The most common credit card schemes are Visa, Mastercard and American Express.
Each credit card scheme has detailed rules setting out when a customer can seek a refund through a chargeback. The rules of each credit card scheme are different. AFCA cannot review the rules adopted by the credit card schemes as they are not AFCA members.
When you tell your bank (or credit union) you would like help making a chargeback request, the bank or credit union starts by reviewing your claim to see if a valid chargeback right exists. A valid reason can include that goods or services were paid for but not provided, but this will depend on the circumstances.
If your bank (or credit union) decides there is a valid chargeback right, it notifies the merchant’s bank that you are seeking a chargeback and explains the reason why. If the card scheme rules don’t provide for a chargeback, the bank (or credit union) is not required to seek one.
When your bank (or credit union) makes a chargeback request, the merchant’s bank can choose to accept the chargeback and refund the money.
Alternatively, the merchant’s bank can attempt to reject the chargeback if it believes that the request is invalid. For example, the merchant’s bank may attempt to reject the chargeback if it believes that goods paid for were delivered. This means raising a chargeback does not automatically result in a refund.
If the two banks disagree about whether a chargeback refund should be provided, they may ask the credit card scheme to decide. The decision of the credit card scheme is final.
It is important for your bank to have all the details about your claim, including what you purchased, what attempts you made to contact the merchant, and any other details you can provide.
Due to the steps involved, it can take up to eight weeks after you raise a chargeback with your bank (or credit union) for a final decision to be made by the credit card scheme. It can take even longer at the moment because of the large number of COVID-19 related chargeback requests being processed.
What your bank or credit union is required to do
Your bank (or credit union) must claim a chargeback on your behalf if:
- A chargeback right exists under the card scheme rules; and
- You have established that you paid for goods or services you didn’t receive.
If your bank (or credit union) seeks a chargeback on your behalf, it must identify the appropriate reason for the chargeback (e.g. goods or services paid for but not received, credit not processed). Your bank or credit union must then take reasonable steps to pursue your claim.
Chargeback rights and government restrictions
Australian and overseas governments have imposed sweeping restrictions on travel and other activities due to the COVID-19 pandemic.
Each card scheme has different rules about whether you have a chargeback right in these circumstances. Your bank or credit union may be able to provide you with more information about this.
If the card scheme rules do not provide a chargeback right, you will need to explore other options to seek a refund. You can find out more information about your right to seek a refund from a merchant by contacting the Australian Competition and Consumer Commission (www.accc.gov.au) or the office of fair trading or consumer affairs in your state or territory.
Frequently asked questions about chargebacks and COVID-19
- The merchant made an offer I do not want to accept – can I raise a chargeback?
- The merchant will not offer a refund or alternative – can I raise a chargeback?
- I do not want to travel anymore - can I cancel my plans and raise a chargeback?
- My event was rescheduled, but I cannot attend – can I raise a chargeback?
- The merchant is now insolvent – can I still raise a chargeback?
- What are my financial firm's chargeback obligations?
- I’m unhappy with my bank’s response – can AFCA help me?
- I’m unhappy with how long it’s taking to receive a response – what can I do?
- How can I lodge a complaint with AFCA?
The merchant made an offer I do not want to accept – can I raise a chargeback?
You may be able to raise a chargeback if the merchant does not provide a refund but offers you an alternative you do not want to accept (such as a credit voucher or rescheduled booking). It will depend on:
- The terms and conditions of your original purchase;
- The rules of the credit card scheme which apply to your card; and
- Relevant government regulations.
You should contact your bank (or credit union) to check whether a chargeback is available in your circumstances. You will need to provide details about the transaction you want to charge back and why you do not want to accept any alternative solution the merchant has proposed. This information will be shared with the merchant’s bank.
The merchant will not offer a refund or alternative – can I raise a chargeback?
If the merchant has not offered a refund (or acceptable alternative) and you cannot claim on insurance, you can ask your bank (or credit union) to request a chargeback on the basis you did not receive the goods or service.
You should provide your bank (or credit union) with:
- Details of any contract you have with the merchant, including tax invoices, terms and conditions and travel itineraries
- Copies of your correspondence with the merchant about the goods or service
- Full details of the transactions you want charged back and why you are seeking a chargeback.
Credit card scheme rules have time limits for raising a chargeback complaint. These time limits vary but usually start from:
- The date you expected to receive the goods or services i.e. the earliest date of your flight, accommodation or travel plans);
- The date you first became aware that you would not receive the goods or service; or
- The date you purchased the goods or service.
Do not wait too long to contact your bank (or credit union) or you could miss the deadline to raise a chargeback.
I do not want to travel anymore - can I cancel my plans and raise a chargeback?
There is no valid chargeback right under the credit card scheme rules where a customer changes their mind and decides not to use the goods or service.
If your holiday or event is still going ahead but you do not want to go because of COVID-19 (or some other reason), you should contact the merchant directly to discuss your options. The merchant’s cancellation policy will determine whether you can receive a refund or other alternative.
If the merchant is unable to provide the goods or service to you or has cancelled the service, then you may have the right to seek a chargeback.
If your reservation is refundable under the merchant’s policy and the merchant doesn’t process the refund, then you may be able to raise a chargeback. This is different to a chargeback for goods and services not provided.
My event was rescheduled, but I cannot attend – can I raise a chargeback?
This will depend on the credit card scheme rules that apply to your card. You should contact your bank (or credit union) to check whether you can raise a chargeback.
The merchant is now insolvent – can I still raise a chargeback?
You can contact your bank (or credit union) to request a chargeback if the merchant became insolvent after you purchased the goods or service and you have a valid chargeback right against the merchant. For example, they did not provide the goods or service you paid for.
When you make the chargeback request, you must identify which transactions you want to chargeback and why you believe you are entitled to a chargeback. You should also explain to your bank (or credit union) that the merchant is insolvent. Your bank (or credit union) will then make the chargeback request for you.
What are my financial firm's chargeback obligations?
Banks that are members of card schemes are legally obliged to pursue chargebacks under the law of contract.
Card schemes have specific rules about what basis chargebacks can be raised on and the timeframe in which they must be raised. Banks that subscribe to the Banking Code of Practice are obliged under the Code to pursue chargebacks for their customers where a chargeback right exists and when the customer has disputed the transaction with the bank within the timeframes prescribed under the relevant chargeback scheme rules.
The Code provisions are usually expressly set out in the terms and conditions of the account between the customer and the bank. If they are not set out, they are implied into those terms and conditions for any Code subscribers. The terms and conditions of the account form the contract between a bank and the customer, so are legally binding.
The Customer Owned Banking Association (COBA) Banking Code of Practice also has similar obligations to the Banking Code of Practice in relation to chargebacks which its subscribers are required to comply with.
I’m unhappy with my bank’s response – can AFCA help me?
The chargeback process does not guarantee your transaction will be refunded. You may not have a chargeback right under the scheme rules or the merchant’s bank may have a valid reason for rejecting the chargeback. The fact that you do not receive a refund does not mean your bank or credit union has made an error or breached its obligations.
If you lodge a complaint with AFCA, we will consider whether your bank (or credit union) made reasonable efforts to submit and follow up your chargeback request. We will assess whether your bank or credit union:
- Raised a chargeback for the most appropriate reason (where one exists); and
- Reviewed the merchant’s response to the chargeback to determine if it was adequate or if it should be challenged.
If your bank (or credit union) has not met its obligations, for example, where it did not pursue a chargeback on your behalf when it should have, we may require your bank to compensate you by paying you the amount of the refund you should have received (or another amount).
We will not require your bank (or credit union) to refund a transaction if it has complied with its chargeback obligations.
This means you may not be entitled to compensation if:
- There is no chargeback right for your transaction
- You disputed the transaction after the deadline under the relevant card scheme rules; or
- Your bank (or credit union) complied with its chargeback obligations, even if the chargeback was not successful.
If your bank or credit union challenges a chargeback that has been rejected by the merchant’s bank, the dispute will be referred for arbitration by the credit card scheme to make the final decision. AFCA cannot review the credit card scheme’s decision. We can only review whether your bank or credit union took appropriate steps to pursue your chargeback request.
I’m unhappy with how long it’s taking to receive a response – what can I do?
Given the large number of pandemic-related refund and chargeback requests, it may take longer than normal to receive a response from the merchant or your bank (or credit union).
Generally, AFCA expects a financial firm to respond to customer complaints within 45 days. This is what we refer to as the internal dispute resolution (IDR) period.
We understand it may take financial firms longer than 45 days to complete their chargeback investigation at the moment because of COVID-19. Therefore, we encourage customers to be patient and:
- Be prepared to consider the suitability of any alternatives offered by your merchant
- Wait for your bank (or credit union) to complete its chargeback investigation before you lodge a complaint with AFCA.
How can I lodge a complaint with AFCA?
If you are unhappy with your financial firm’s response and believe it has not met its chargeback obligations, you can lodge a complaint with us: