Bank failed to explain card cancellation might not stop recurring payments

Categories:

Advice & information, Cards, Chargebacks,

Summary:

In December 2024, Janice used her credit card to buy goods from a merchant she found on social media. A month later, Janice contacted the bank and asked it to dispute the transaction because the goods were not as described. The bank sought a chargeback and advised Janice to cancel and replace her card. The chargeback was successful. However, a further transaction was processed by the merchant in March 2025. The bank sought another chargeback and cancelled the second card. This chargeback request was also successful.

Published:

September 2026

Janice complained that the bank had not protected her from the second transaction. She said cancelling her card should have prevented any future payments, and the second payment was unauthorised. She also complained the bank had given her incorrect information during the second chargeback process and had not treated her fairly.

Our investigation

The bank’s records showed Janice suffered no direct financial loss as a result of the two transactions. We found the bank followed the chargeback process appropriately and could not guarantee the outcome while the process was still under way. We found no evidence the bank misled Janice about the chargeback process or gave her incorrect information.

However, a recording of the January call when Janice first reported her concerns about the merchant showed Janice was initially reluctant to cancel her card. The bank said the merchant could be a scammer, and cancelling the card would stop any further payments. Janice then agreed to replace her card.

In examining how another transaction was processed after the card was cancelled, we found information showing Janice had unwittingly signed up to a subscription service when she made her December purchase. As a result, the merchant was able to process a further payment in March 2025. The evidence showed the merchant used an existing payment authority created during the December purchase, which had automatically transferred to the replacement card.

We found the bank did not adequately explain this possibility when it advised Janice to cancel her card. The bank should have warned Janice that replacing the card might not prevent the processing of recurring payments. In response, the bank offered Janice $500.