Debit Card Disputes and How They Work

Everywhere I go on the blogsphere I seem to run into comments people have made about debit cards. “Debit cards don’t have the same protection as credit cards.” “Debit cards can lose you money.” And so on. The truth is, none of that is the case. Just as you can dispute a transaction on your credit card, you can also dispute a transaction on your debit card.

The first thing you have to know is the difference between a fraudulent transaction and a dispute. This determines the type of paperwork you need to fill out and what is required of you.

Fraudulent Transactions

A fraudulent transaction is any transaction that takes place on your account in which you did not authorize. This includes someone physically stealing your card and using it, as well as when the number itself has been compromised while the physical card is still in your possession.

When the card is physically stolen, the most common fraudulent transactions are going to be from gas stations and fast food restaurants. Most thieves are going to fill theirs and their buddies’ cars with gas on you – at least, that’s their thought process. They’re also going to go to lunch, somewhere quick and easy to get away just in case there’s any trouble.

When your card number has been compromised, the most common transactions are the online transactions. Your card number can be compromised in a number of ways. There have been cases where waiters at restaurants have been writing down the numbers when customers have used them to pay. There’s also the small scanners attached to ATMs and gas pumps that collect data and the thief can pick up at a later time. It is very important that you are alert and careful with who you hand your card to.

In the event you experience fraudulent activity on the account, there are a couple of things to do.

1.) Call your financial institution and cancel the card immediately.

In my experience, the only reason people haven’t done this is because they know who has stolen it and don’t want to get them in trouble, or they really did the transaction and are trying to pull one over on the bank. Otherwise, why would you want to leave that card open for use again? But, according to the agreement with Visa and MasterCard, when there is fraud on the account and the customer is disputing the transaction, the card must be closed or they will deny the claim.

2.) File a police report.

This may or may not be required by your financial institution. It isn’t usually required by Visa or MasterCard; however, it does put some responsibility for the claim on the customer. As I mentioned, there are plenty of people who claim that their family members steal their cards and they don’t want to press charges against them, etc. Well, that’s a domestic dispute and we’re not getting involved.

If your financial institution requires it, then you’ll need to do it in order to get your money back. In most cases it’s a simple matter of calling the police department to file the report. And really, if you’ve been stolen from, why wouldn’t you want to file the report? Every report filed gives the police more information on the person who’s committing the crime, so it’s to everyone’s benefit that people file reports in these cases.

3.) Fill out fraud dispute paperwork.

Each institution will have their own forms that they require you to fill out. You’ll need to go in and take care of that so they can properly identify you. If you have someone that you work with consistently, they may be comfortable just emailing you the paperwork; however, as a general rule, you’ll need to be in person to complete these forms.

Once you’ve completed those three steps, the forms are sent to the department that handles debit card disputes. Normally the process is that provisional credit is given within 72 hours and the investigation is launched. Technically, Visa and MasterCard have 60 days from the date of the claim to investigate. As a courtesy, your financial institution will credit your account the missing money and any fees incurred. But, during the course of the investigation, if Visa or MasterCard deny the claim for any reason, the provisional credit can be reversed.

Some reasons that Visa or MasterCard might deny the claim include:

- Timeliness

You have 60 days from the time it appears on your statement to dispute the charge. If it is past the 60 days, Visa and MasterCard are within their rights to refuse it.

- Lack of paperwork

If the claim is submitted and you do not provide the requested documentation, it could be rejected.

- Found to be a valid charge

We had a situation where several people were disputing a charge from a place with an uncommon name that was showing up as an out-of-state company. Since we had so many people disputing it, the credit union investigated what the company was and it turned out it was a new Dairy Queen location in an expanding area. The company name showing up was the franchise name – which was out-of-state – because they hadn’t changed the name with their merchant services carrier. Those claims were denied as being valid as everyone had frequented the new location.

Disputed Transactions

A disputed transaction is where you authorized the transaction, but the merchant pulled it out on the wrong date, charged too much, ran the item through multiple times, or something similar. You knowingly engaged in business with this company; however, they did not keep up their end of the agreement.

In the event of a dispute, you will need to do the following:

1.) Contact the merchant.

This should be your first step in this situation. Contact the merchant you made the arrangement with and see if they will reverse what they have done. Remind them of any arrangements you have made and speak to a supervisor if necessary. If this does not work, proceed to step two.

2.) Contact your financial institution.

You will likely need to come in person to fill out this paperwork unless you are dealing with someone who knows you. Along with this paperwork, your financial institution may require you to write a letter stating what steps you took in order to work it out with the merchant. Like the police report, this is putting some of the responsibility on the customers. With disputes, you GAVE account information to someone, therefore, you must be diligent in handling the situation. Not to be curt, but your financial institution isn’t your babysitter, you must take some responsibility in the process.

Once the paperwork is finished it is forwarded to the department that handles it and then filed with Visa and MasterCard. You usually receive credit within 72 hours and the investigation begins. That timeframe of 60 days from the date of the claim applies to disputes, as well. If the claim is denied, the provisional credit will be reversed.

Some reasons Visa or MasterCard may deny the claim include:

- A signed contract states the company charged the agreed amount

Visa and MasterCard do investigate your contract with the merchant. If you’re disputing it because you didn’t have the money that month and someone you spoke to said they wouldn’t charge you, but did, and the contract wasn’t amended, you’re out that money. Always keep your contracts updated!

- All sales final

If you purchased something that you later decided you didn’t want and tried to return it, but the merchant said no, Visa and MasterCard will check the receipt. If it says “All Sales Final,” they will deny the claim. Neither have the right to override the merchant in this case.

It’s important to understand that your financial institution really is the middle guy in the whole deal. Most of the time, they try to go out of their way to help their customers. I know that on several occasions we will take the loss to help a member out when Visa has denied the claim. So, if your claim is denied, you can always state your case to your financial institution and see what they say. But, in reality, if you’re disputing actual fraudulent transactions, or there was a legitimate dispute, then you shouldn’t be denied. If you’re trying to work the system, though, well that’s a different story.

So, what has been your experience with disputes? Has the process been similar to this or completely different? I’m always curious to read what other financial institutions do!

11 thoughts on “Debit Card Disputes and How They Work”

  1. Great post, Kristy. We have experience here….

    1. Debit disputes with BofA – These were quick, simple and painless. Not meant as an endorsement of BofA (we don’t bank there anymore), but these issues were typically handled over the phone in a matter of minutes. No paper work and the person on the phone certainly did not know us.

    2. Debit Fraud with BofA – same as above – quick resolution over the phone. Shipped out the new card overnight, and even sent it to a different branch as we were leaving for vacation the next day. We had other issues with BofA, but on these topics, they were stellar.

    3. Checking dispute with local bank – Not technically a debit issue, but debit pulls from checking. the bank cashed a check twice and didn’t bat an eye. Had to go down, fill out paperwork, and wait for them to sort it out – took a few days. Really, their lack of concern for their stupid mistake was a bigger issue than the paper work.

    4. Debit Fraud with local bank – This was awesome, mostly because they stopped it before it even happened. Their system caught the suspicious transaction before it hit the account and they called us about it. Then mailed out a new card.

  2. I think the main difference between debit and credit is that if your debit card is compromised, you don’t typically get that money back in your checking account until the bank sorts it out.

    On a credit card, they flag those charges and don’t hold them againist your balance until the investigation is final.

    This is just another good reason to have an emergency fund if you need cash on hand if your checking account was drained by debit fraud but you still have bills to pay.

    However, if some banks are now crediting back into your checking with just a phone call now, that is fantastic! :) Maybe I’m jaded by Wells Fargo!

  3. I guess I left that part out. Again, not wanting to pitch for BofA, but in either case – disputes or fraud – the onus was on the bank. Missing funds were credited to our account by the next day.

    I’ve since made it a priority to inquire about a bank’s fraud protection and account policies before opening an account. I know that some banks are still in the dark about all of these issues, but it certainly is not the case everywhere. Like I said above, even our local po-dunk bank has a pretty sweet fraud protection system.

  4. Maybe terms of service are changing for all cards, but I don’t recall seeing so many upset customers regarding disputes on Credit Cards as I see today with Debit cards. I work for a bank and I see a lot of declined disputes on Debit Cards as opposed to credit cards. With a credit card there is a receipt with a signature, with a debit card I see a lot of receipts presented with no signature and the disputes are declined by the bank. For example rental cars and hotel bills. Almost always see these disputes declined. Maybe Credit card carriers were more lenient in the past, but Credit Card holders always seemed to have more rights then debit cards I see today.

  5. I was wondering if someone here can help me out. I signed up to a service which has a $99 initial payment. So I did that. I overlooked the fact (in the Terms of Agreement, who reads this anyway :[ ) that it’s $99/month. It’s been charging my debit card $99 a month since June ’09. I recently checked my online bank account and found out that I’ve been paying all these months $99 to this company. I didn’t get any bill on the email or in the regular mail. Just charges on my bank account. I’d like to get back what was taken. My defense is I never received recurring bills from them at all (which is true). And their website do not show billing history of these monthly payments and no monthly notice of the charges. Do I have a chance of getting what I lost in those 9 months? I’m from California.

    Thanks
    Alvin

  6. Ok here is my experience, my visa debit card was stolen this past weekend, and the person who stole it somehow had my pin too, as soon as i noticed my card was missing i called the visa center to report it and block any access to my checking account, at that point everything was cool as my gf checked right away my account online and there was no unauthorized transactions, however surprisingly visa redirected me to my bank customer service and i was told that they only handle gift/prepaid cards and that i have to call back during business hours!!! i called visa again and they said they can’t block my card cuz my bank doesn’t give them access, and the only way to block it is to give them my card number! so honestly, how the hell am i supposed to give them my visa number if i m calling to report it as stolen? anyway visa filed a report (only when i asked to speak to a manager) and asked me to contact my bank on Monday to do the paperwork, so as a result of both visa and my bank incompetence and as of monday morning, i had $1900 of unauthorized transactions, now with -102 on my account that’s really a nice way to start the week :) thanks visa and westsuburban bank

  7. Alvin-
    Sorry, but it sounds like you signed up for it. It’s kinda like so many folks complaining about their credit card interest rate getting jacked from 3% to 30% for no reason. They can do that – it’s in those ‘Terms of Agreement’. Always understand what you are signing up for. As for your $99 over the past 9 months…. you’re really at their mercy here unless their sales process is at fault here, and you can say that this was not made clear to you.

    Simon-
    In your situation, it is not on Visa to solve this. It’s your bank. But, since you did get Visa to take your info – did they give it to your bank? Really, the laws should still protect you. In the first 60 days, it should be on the bank. If you haven’t solved this yet, then I’d be making daily phone calls to this bank until I got action.

  8. I was traveling in morocco.
    -I fell into this scam of carpet buying where people take you to the market and pitch you a story that how you can sell these carpets in 10 times what you pay here. I ended up agreeing to purchase a carpet with a debit card from citibank. Merchant took down my shipping information to ship the product. then in the midst of it i realized it is a scam and asked the merchant to cancel this transaction and i do not want the product. Merchant refused to cancel. I called the bank and informed them what happened. it is been a month I have not received the carpets. citibank is not giving me the credit and they are saying they are investigating. I provided everything they asked for, the receipt and some additional information and detail of what happened. I still have not received any product from the merchant.
    Please advise what i should do at this point. Citi debit is linked with MasterCard.

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