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Credit card cancelled – unauthorised transactions charged to closed account – delay in notifying bank of dispute
When Ms B toured Australia in rental cars during 2003, she says that she used her cancelled Visa card for identification purposes while paying for each car hire in cash.
Unknown to her, charges were also made against her Visa card. It was a shock to find out on return to New Zealand that she owed more than $5,000 for car hires that she said had nothing to do with her.
Ms B approached her bank for help and in the time available it was able to charge back to the firms concerned some $1,500 of the most recent charges. The remainder was said to be Ms B’s responsibility, because under the standard Visa Conditions of Use, a card holder wishing to dispute a transaction:
Ms B thought that having cancelled her Visa card, the bank should not have reactivated her account to accept the charges wrongly made to it. She therefore believed the bank to be liable for the full amount of disputed charges.
This line of argument was not entirely persuasive because Ms B had herself used her cancelled Visa card for emergency purchases during her sojourn in Australia. More to the point, however, account closure does not protect against the ongoing use of card details. The cardholder is still liable for all charges debited to their account after closure, aside from charges that a bank succeeds in reversing.
I concluded that liability had to be determined on the basis of the contract. The terms and conditions of the Visa card clearly state that if a cardholder does not tell the bank about disputed transactions within 60 days of the closing date of the relevant account statement, the cardholder will have to pay for those transactions.
While it may not have been Ms B’s fault that unauthorised charges were debited to her account, it was not the bank’s fault either. Because the 60 day rule was not met, she would have to repay the credit card debt.