With restrictions tied to the novel coronavirus pandemic likely to unravel all kinds of summer plans, consumers are scrambling to recoup money paid for cancelled flights, trips, weddings and children’s camps, to name a few.
Some are resorting to chargebacks, asking their credit card company to reverse payment for services merchants are no longer able to provide.
But how do chargebacks work and when are you actually entitled to demand your money back?
There are three main layers of laws and rules surrounding chargebacks, says Omar Ha-Redeye, executive director of the Durham Community Legal Clinic in Oshawa, Ont. The first is the contract between you and the merchant. The second is your credit card agreement. The third are statutes and regulations specific to certain industries as well as your province’s Frustrated Contract Act, which spells out what should happen when a contract becomes impossible to uphold due to circumstances outside the control of the parties to the agreement.
The first step is to take a look at what exactly you agreed to with your vendor, Ha-Redeye suggests.
The terms of service may contain a cancellation clause that sets out when and how you are entitled to your money back. Following the merchant’s refund policy “might be the quickest, cheapest way to get out of a financial commitment,” Ha-Redeye says.
If you didn’t sign a proper contract, it’s a good idea to have a written record of any promises the vendor may have made about returning your money. For example, if a business promises full refunds for cancelled reservations on its website — a practice that’s becoming increasingly common as companies try to entice consumers in a highly uncertain climate — “I would take a screenshot,” says Ha-Redeye.
Don’t be discouraged if you see a clause about “force majeure” or “act of God” that accounts for extraordinary events that may prevent a service provider from completing a contract.
It’s not clear yet how “force majeure” clauses will play out in the context of the COVID-19 pandemic, Ha-Redeye says. But the mere presence of such a provision in a contract doesn’t necessarily preclude the possibility of getting your money back, he adds.
This may be especially true if you’ve made your reservation before the restrictions linked to the health emergency went into effect, says Mikael Castaldo, credit cards manager at financial products comparisons site Ratehub.ca.
In general, if you and the merchant can’t agree on a refund, a credit card chargeback becomes an option, Ha-Redeye and Castaldo say. The idea is to challenge a charge for an item or service you did not actually receive.
You’ll need to provide the details of the dispute, including the date and amount of the transaction, as well as proof that you’ve already tried to resolve the issue directly with the vendor, Ha-Redeye says.
Your credit card company will often tell you exactly what kind of evidence it needs, Castaldo adds. This is likely to include any relevant email exchanges between you and the merchant or some kind of documentation of phone conversations.
That’s why Castaldo advises taking notes when you call a merchant to ask for a refund. Note the date and time of the call, who you spoke to and what was said, he says.
Don’t despair if you’re just left on hold and can’t get through to a human being, Ha-Redeye says. A cell phone record showing multiple calls to a vendor is also proof that you’ve made an honest effort to resolve the matter on your own, he adds.
Once you’ve submitted your evidence to your credit card provider, you can expect to hear back on your claim within 30 to 120 days, according to Castaldo.
For amounts under $100, your credit card company may decide to refund you quickly — usually within two to five business days — even if it hasn’t concluded its investigation with the vendor, he says. For larger amounts, however, expect the opposite.
In general, Castaldo adds, the larger the amount you’re disputing, the bigger burden of proof you’ll face to demonstrate that you are, in fact, entitled to a refund.
It doesn’t matter, however, whether you have already paid off the charge you’re disputing, Castaldo says. If you have and your credit card provider concludes your claim has merit, you’ll get the funds back. If you haven’t, your credit card company may freeze any interest accruing on that balance until it has completed its investigation, he adds. If the claim is approved, you won’t have to pay the charge.
If you used your credit card points to pay, you likely won’t get them back, Castaldo says. Instead, expect to get the funds back as an amount credited on your statement.
It’s important to act quickly once you’ve determined you can’t obtain a refund directly from the merchant, Castaldo adds.
“Try and apply within 30 days from the date of the charge,” he says.
However, if you’re claiming a refund for a product or service you have yet to receive, it’s acceptable to ask for a chargeback within 30 days of the original delivery date.
In other words, if you, say, booked a flight in October but weren’t supposed to fly until mid-May, you’re OK to ask for your money back within a month of your flight date, Castaldo explains.
Your credit card agreement may specify a time window for disputing a charge. But even if you miss it, keep in mind that credit card providers have “a vested interest in trying to find practical solutions and resolutions, especially in light of the pandemic,” Ha-Redeye says.
“Maybe they can reverse this particular charge, and then they’ll make money in years when you continue to use their service,” he notes.
Ha-Redeye also advises consumers to take a look at any relevant federal or provincial statutes and regulations when making their case to the credit card company.
When it comes to flights, air passenger rights advocate Gabor Lukacs says even Canadians with non-refundable flights are entitled to refunds if the airline cancelled their trip.
“There is a misconception about ‘non-refundable’ tickets,” Lukacs told Global News via email.
For consumers making their case to credit card companies, Lukacs recommends focusing on the concept of “services not received.” Consumers may also want to look at airlines’ tariffs for evidence of a contractual obligation to provide refunds.
Lukacs refutes the notion that travel credit or vouchers, instead of a refund, constitute adequate compensation for passengers.
“You paid for a ticket, not a gift card,” he says.
While there are no guarantees, it’s “very possible” that a small claims court would side with a consumer arguing they’re entitled to a refund for a flight cancelled due to COVID-19 with, Ha-Redeye says.
In general, consumers can also reference their province’s frustrated contracts, he adds.
“There are provisions in there that explicitly provide for a basis to get your money back,” Ha-Redeye says. “And I would encourage people to have a copy of that when they actually call their credit card company.”
While the statutes are slightly different from province to province, the concept is that if a contract was frustrated by events or circumstances entirely outside of the parties’ control, it should be reversed, Ha-Redeye says.
If you aren’t successful in obtaining a chargeback, the last resort would be to pursue a refund through small claims court, he adds.
But “companies, including the vendors as well as the credit card companies, don’t want a lot of litigation after the pandemic is over.” And that, Ha-Redeye believes, could ultimately play in consumers’ favour.
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