Insights for consumers
Letting a merchant hold onto your card may be common practice at hospitality venues, and even required at some places, but it is likely a breach of your card provider’s terms and conditions. By handing your card over, you risk giving up some of the protections that your card provider can offer.
What happened?
Elijah* and Olivia* were on holiday in Miami with a few friends. They booked a table at a day club, which required them to spend a minimum of US$3,000. When they arrived at the day club, they gave their credit card to the day club staff. The staff held onto the card and charged it whenever Elijah and Olivia ordered food and drinks. Elijah and Olivia said they ordered a drinks package and some food for their guests, totalling around US$1,700.
Elijah and Olivia left the day club after a few hours, collecting their credit card on their way out. They did not receive a receipt from the day club, but they expected their final bill to have been US$3,000, as they knew this was the minimum amount they had to spend. However, when they got home and checked their credit card statement, they saw that they had been charged over US$7,500.
Elijah and Olivia requested a receipt from the day club, and planned to dispute the charge with them, but the day club did not respond. Elijah and Olivia then applied for a chargeback with their credit card provider.
The credit card provider initially issued the chargeback. However, they later reversed the chargeback after the day club provided their response and copies of several signed receipts. The card issuer said that these signed receipts, along with the fact that the charges were processed in person with the card present, supported the day club’s view that all the charges, totalling US$7,500 were ‘authorised’.
Elijah and Olivia did not agree, and complained to FSCL. They said the day club had charged them for items that they did not order, and that the signatures on the receipts were not theirs. Elijah and Olivia said they had been overcharged by over US$4,700.
What was FSCL’ view?
We reviewed the credit card provider’s terms and conditions, which said that a consumer would not be liable for unauthorised charges if they had complied with the card terms and conditions.
Some of the terms and conditions consumers had to comply with were to:
- Keep the card secure at all times
- Check that the card is in your possession
- Not let anyone else use the card
- Take your card back after making a charge.
Elijah and Olivia had given their credit card to the day club staff when they first arrived, and let staff keep hold of the card until they left the day club some hours later.
We acknowledged that it may be common practice for some venues, particularly hospitality venues, to ask to hold onto the consumers credit card, and that it may even be required at some venues. However, allowing anyone else to take possession of your credit card is a risk, and a risk that Elijah and Olivia willingly took. By allowing the day club to hold onto their card, Elijah and Olivia compromised the security of the card, and breached the card terms and conditions. This meant that Elijah and Olivia were liable for the charges even though they claimed they had not authorised them.
We found that the credit card provider had done what they could to help, by attempting to charge back the disputed charge. However, when the day club provided evidence to support the charge, the credit card provider was required to reverse the chargeback.
We acknowledged Elijah and Olivia’s comments about the validity of the receipts the day club submitted. However, it was not our role to investigate the day club’s actions and assess whether the receipts were valid. We explained that our role was to look at whether the credit card provider had to refund the unauthorised charges. Elijah and Olivia could continue to dispute the charges with the day club directly.
What was the outcome of FSCL’s investigation?
We suggested that Elijah and Olivia discontinue their complaint. They did not agree, so we issued a final decision, not upholding the complaint.
