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consumer

Chargebacks: How to use your bank to get a refund

Key Takeaway

A chargeback is a process where a bank or card issuer reverses a payment transaction, returning funds to a cardholder. While not a direct legal right, the grounds for a chargeback often arise from breaches of consumer protections under the Consumer Guarantees Act 1993 (e.g., faulty goods) or the Fair Trading Act 1986 (e.g., misleading conduct).

Understanding Chargebacks and Consumer Rights in New Zealand

A chargeback is a process initiated by a bank or card issuer to reverse a payment transaction, returning funds to the cardholder's account. This mechanism is typically governed by the rules of credit and debit card networks (e.g., Visa, Mastercard) rather than directly by New Zealand statute. However, the eligibility for a chargeback often aligns with consumer protections provided by New Zealand's consumer laws, particularly the Consumer Guarantees Act 1993 and the Fair Trading Act 1986.

Grounds for a Chargeback and New Zealand Consumer Law

Many situations that may qualify for a chargeback are rooted in breaches of statutory consumer rights. Consumers, defined as persons acquiring goods or services for personal, domestic, or household use or consumption, are protected by specific legislation [Source: Consumer Guarantees Act 1993, s 2]. Suppliers, who are persons supplying goods or services in trade to a consumer, must adhere to these protections [Source: Consumer Guarantees Act 1993, s 2].

Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 (CGA) provides fundamental guarantees to consumers when they acquire goods or services from a supplier in trade [Source: Consumer Guarantees Act 1993, s 4]. A failure by a supplier to meet these guarantees can provide grounds for a chargeback.

Guarantees for Goods

When a consumer buys goods, the CGA provides guarantees that the goods will be:

  • Of acceptable quality: Goods must be fit for all purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6].
  • Fit for a particular purpose: If the consumer makes a particular purpose known to the supplier, the goods must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 7].
  • Match description: Goods must match any description given by the supplier [Source: Consumer Guarantees Act 1993, s 9].
  • Match sample or demonstration model: If goods are supplied by reference to a sample or demonstration model, they must correspond with that sample or model [Source: Consumer Guarantees Act 1993, s 10].

Remedies for Faulty Goods

If goods fail to meet a guarantee, a consumer has remedies depending on the nature of the failure:

  • Minor failure: If the failure can be remedied, the consumer can require the supplier to remedy the failure within a reasonable time. If the supplier fails to do so, the consumer may have the failure remedied elsewhere and recover costs from the supplier, or reject the goods [Source: Consumer Guarantees Act 1993, s 18, s 19].
  • Substantial failure: If the failure is of a substantial character (meaning the goods are not fit for purpose, depart significantly from description/sample, or are unsafe), the consumer may reject the goods or obtain compensation for any reduction in value [Source: Consumer Guarantees Act 1993, s 18, s 20, s 21]. Rejecting goods generally means returning them to the supplier and seeking a refund [Source: Consumer Guarantees Act 1993, s 22].

Guarantees for Services

When a consumer acquires services, the CGA provides guarantees that the services will be:

  • Carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Fit for any particular purpose: If the consumer makes a particular purpose known to the supplier, the services must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 29].
  • Completed within a reasonable time: If no time for completion is agreed, the services must be completed within a reasonable time [Source: Consumer Guarantees Act 1993, s 30].
  • At a reasonable price: If no price is agreed, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 31].

Remedies for Faulty Services

If services fail to meet a guarantee, a consumer has remedies depending on the nature of the failure:

  • Minor failure: If the failure can be remedied, the consumer can require the supplier to remedy the failure within a reasonable time. If the supplier fails to do so, the consumer may have the failure remedied elsewhere and recover costs from the supplier, or cancel the agreement for the supply of services [Source: Consumer Guarantees Act 1993, s 32].
  • Substantial failure: If the failure is of a substantial character, the consumer may cancel the agreement for the supply of services or obtain compensation for any reduction in value [Source: Consumer Guarantees Act 1993, s 32, s 34].

Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 (FTA) prohibits misleading and deceptive conduct by businesses and makes it illegal for businesses to make false or misleading claims about their goods or services [Source: Fair Trading Act 1986, s 1A]. Breaches of the FTA can also form the basis for a chargeback claim.

Key Prohibitions

  • Misleading and deceptive conduct: A person in trade must not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This includes advertisements, statements, or any actions that create a false impression.
  • False or misleading representations: Prohibits making false or misleading representations about the nature, characteristics, suitability, quantity, or quality of goods or services, including their price, origin, or endorsement [Source: Fair Trading Act 1986, s 13, s 14].
  • Unsubstantiated representations: A person in trade must not make an unsubstantiated representation. This means a representation made without reasonable grounds for believing it to be true [Source: Fair Trading Act 1986, s 12A].

Instances where a merchant fails to provide goods or services as advertised, or where what was received significantly differs from what was represented, may constitute a breach of the FTA. These breaches can then be used to support a request for a chargeback.

The Chargeback Process

While specific steps can vary slightly between banks and card issuers, the general process for initiating a chargeback involves several key stages:

  1. Attempt to Resolve with Merchant: Consumers are typically expected to first attempt to resolve the issue directly with the merchant or service provider. Many card scheme rules require this as a prerequisite for a chargeback [Source: Consumer Guarantees Act 1993, s 19, s 32].
  2. Contact Your Bank/Card Issuer: If direct resolution fails, the consumer can contact their bank or card issuer to report the dispute and initiate a chargeback request. This generally needs to be done within specific timeframes, which vary by card scheme and the reason for the dispute.
  3. Provide Evidence: The bank will typically require documentation to support the claim. This may include proof of purchase, details of the goods or services, communications with the merchant (emails, call logs), and evidence of the problem (e.g., photos of faulty goods, evidence of non-delivery).
  4. Bank Investigation: The bank investigates the claim, which may involve contacting the merchant's bank to present the dispute. The merchant then has an opportunity to respond with their own evidence.
  5. Outcome: Based on the evidence and card scheme rules, the bank determines whether to reverse the transaction. If successful, the funds are returned to the consumer's account. If unsuccessful, the bank will typically provide a reason.

It is important to remember that chargebacks are not guaranteed and are subject to the specific terms and conditions of the card issuer and card network rules.

When to Seek Independent Legal Advice

Individuals seeking to understand their specific rights regarding a chargeback, particularly when dealing with complex disputes or significant financial implications, should consider seeking independent legal advice. Information on legal processes and rights can also be obtained from Community Law Centres throughout New Zealand, which offer free legal assistance, or by contacting Consumer Protection.

Key Resources