Credit card billing for unknown hotel charges

A consumer received a credit card bill including unknown hotel charges and asked the credit card company to investigate the matter. She was not refunded before mediation. Details are shown below.

Details of the inquiry

My credit card statement included two-month old charges which I didn't recollect. I wanted to inquire of the travel company written on the statement, but I didn't know the contact details. So I called the credit card company instead. The credit card company said, "We will investigate the matter and reply to you in writing. The investigation will take one or two months. The charges will be withdrawn temporarily. If we have confirmed that your card has been misused, the payment will be refunded. There's no need to cancel your card. You can use it as it is." Then, I asked the company to investigate the matter.

One month later, the credit card company reported as follows in writing: "Someone booked a few overseas hotels and stayed there. The registrant's name is identical to your name. You need to contact the travel company by yourself to report the misuse of your card." My card was misused three times for overseas hotel services, totaling about 90,000 yen.

Then, I phoned the travel company and told what happened. The travel company said, "Your card may have been misused, but we can do nothing till we receive a request from the credit card company." I asked the credit card company to respond to the matter, but the company said, "Three months have passed since the unauthorized use, and unfortunately we can do nothing for you now. We should have cancelled your card immediately. Please accept our apologies for the poor handling of this matter."

I asked the credit card company for investigation soon after receiving the monthly statement. The credit card company told me that there was no need to cancel my card at that time. It's terrible that the company can do nothing for this. I want to get a refund.

(woman in her 30s, homemaker)

Summarized outcome

After receiving the inquiry, the National Consumer Affairs Center of Japan (hereinafter called "NCAC") mediated between the inquirer and the credit card company.

There are four people in the inquirer's family. The inquirer has never lost her credit card. When she inquired of the travel company, the company said, "When making a reservation through our website, a user need to enter a security code on the card. The card information could have leaked for some reason and could have been misused." NCAC asked the inquirer to send the investigation report written by the credit card company. The report stated that one person had stayed at three overseas hotels. Although the registrant's name was identical to the inquirer's name, neither the inquirer nor her family members left Japan on the accommodation dates (NCAC received and confirmed copies of their passports).

On the other hand, it was not clarified what the credit card company did exactly for the problem after receiving the request for investigation. Therefore, NCAC requested the credit card company to respond to the matter.

The credit card company said, "We already investigated the matter and can't do anything further. The settlement was made based on international settlement rules." NCAC strongly requested reinvestigation, and the credit card company agreed to reinvestigate the matter.

The credit card company reported results of the reinvestigation as follows: "One out of the three payments was cancelled through the travel company. After examining the remaining two payments, we've reached a conclusion that it is highly possible that the card was misused, and we've decided to initiate a chargeback process. However, we cannot disclose how and why we made the decision to refund." The credit card company didn't even tell how and why one of the payments had been cancelled through the travel company.

The inquirer accepted the above-mentioned response from the credit card company, so NCAC concluded the consultation.

Difficulties

How credit card companies respond to credit card misuse

When a credit card is associated with an international settlement brand¹ and credit card misuse is suspected in cross-border transactions, a credit card company may initiate a certain process (retrieval request or chargeback)² based on international settlement rules. (Some brands apply international settlement rules to domestic transactions as well.) If a deficit is covered by insurance or written off by a credit card company, consumers are redressed without incurring any financial burden. In general, however, credit card companies provide a disclaimer clause in their terms of service. Even if there's high possibility of credit card misuse, it's often the case that a cardholder shall not be released from payment obligation if the PIN number used in the transaction was identical to the actual number. Even if credit card misuse is highly possible, some credit card companies do not redress cardholders because cardholders are responsible for safeguarding their cards.

1. ¹ The phrase "international settlement brands" represents credit cards with a brand logo (e.g. Visa, Mastercard, JCB), the credit card settlement system and financial institutions for international settlements. (Source: "Introduction to cashless settlement Part 2" on NCAC's monthly online brochure "Kokumin Seikatsu" issued in September 2015)
2. ² "Retrieval request" means a process taken by an issuer to inquire of an acquirer for details of the transaction information when in doubt. "Chargeback" means a process taken by an issuer to claim a refund from an acquirer when the issuer considers the transaction is questionable. The time limit for chargebacks is roughly 90 days after submitting the transaction information, while it depends on reasons for chargebacks. (Source: "Introduction to cashless settlement Part 3" on NCAC's monthly online brochure "Kokumin Seikatsu" issued in October 2015)

Credit card company's response in the above case

The credit card company told that the deadline for resolution based on international settlement rules had passed, but it is construed that it was possible to handle the problem based on the rules when the consumer initially inquired. It's doubtful that the credit card company took two months for investigation and when the company completed the investigation the deadline for resolution passed. At the beginning, the company replied, "We can investigate without cancelling your card. The investigation will take one or two months, during which you can use your card." Later, however, the company said differently as follows: "We could have given you a refund if your card was cancelled soon after being billed." NCAC asked the credit card company if the initial respose was appropriate, but the company didn't answer the question.

Conclusion

There have been fraudsters who steal credit card data such as card number and the expiration date through the Internet and pretend to be cardholders. It is necessary for cardholders to take security measures, for example, keeping their cards and information thereof securely and confirming monthly statements.³

1. ³ Security measures which can be taken by users are described on NCAC's monthly online brochure "Kokumin Seikatsu" issued in June 2017 (article titled "Security measures for credit card transactions Part 1 - Credit card misuse and security measures[PDF]", written in Japanese)