Caught out by debit card refund time limit


Debit card

Customers trying to get a refund on goods bought with a debit card - using chargeback - could be in for a nasty surprise. The chargeback scheme is a little-known loophole, that means that if you paid for something by debit card and you didn't get what you paid for, you can apply to the bank to have the transaction reversed. It gives debit card-holders somewhere else to turn if the company in question refuses a refund or goes out of business.

However, customers are discovering it is nowhere near as flexible as the rules protecting credit card users.


The BBC Moneybox programme said the problem was highlighted by customers of Go Ballooning - a hot-air-ballooning company that went out of business earlier this month. A number of customers had bought flight vouchers years earlier, but when applying for a refund under the chargeback scheme, they were told that they had exceeded a time limit for a chargeback - of 540 days from when the transaction was made.

There is also another limit - that the chargeback must be requested within 120 days of learning that the services or goods will not be delivered - and you have to be within both limits.

The problem with ballooning vouchers is that trips rely so heavily on the weather, so it's perfectly possible to book a trip and have it cancelled - and it only takes for this to happen a handful of times before you suddenly discover the best part of two years has elapsed.

Those who paid for the voucher with a credit card are still covered by Section 75 of the Consumer Credit Act, which means that the credit card company will still refund the cost of the voucher. But those who paid with debit card more than 540 days ago are out of luck.

There's no come-back either, because while they can appeal to the Ombudsman, the fact that the deadline has passed means the Ombudsman will reject your claim too. You can't take the company to court either, because chargeback is not a legal right, but it is voluntarily included in the rules of most debit cards.

What it means for you

This may seem like an unusual set of conditions, but it's far more commonplace than you might imagine. It applies to any service where you pay for something in advance by loading a balance into an account. The transaction is when you pre-load the money onto the account. If the business goes bust a couple of years down the line (before you have spent all the money you have on account), the initial card transaction will not be protected.

It's also worth understanding that if you use a debit card to load money into Paypal and use that to make a purchase, it's highly unlikely that you will be able to use chargeback if there is a problem with anything you buy - because your initial payment is considered to be with Paypal rather than the business you are buying from.