The story
Nathan had a personal credit card and merchant agreement for his business ‘Terrific Ties’ with Ready Money for over 40 years.
Nathan was planning a trip to Asia for dental treatment and travel.
Prohibited transaction
On 4 June Nathan used his personal credit card to make a purchase through his Terrific Ties merchant account. The transaction came to Ready Money’s attention through its regular risk assessment and fraud monitoring. Ready Money’s terms and conditions prohibit merchants accepting transactions from business owners. On 5 June Ready Money reversed Nathan’s transaction and suspended the merchant facility.
Second transaction rejected
Nathan was now overseas and did not know why the transaction had been reversed. On 12 June Nathan repeated the transaction. This time Ready Money processed the transaction as usual, but because the merchant facility had been suspended Ready Money could not pay the funds into the merchant facility account. Instead Ready Money paid the money into a bank account it held on file for Terrific Ties. Unfortunately Nathan had closed the bank account 10 years ago without telling Ready Money. The bank took three months to locate and return the money.
Accounts suspended without warning
Ready Money then suspended Nathan’s personal credit card account. Ready Money telephoned Nathan’s New Zealand telephone number and left messages. On 13 June Ready Money emailed Nathan asking him to call. Nathan replied saying he was out of the country and would be using his card. Nathan tried unsuccessfully to call the numbers provided by Ready Money.
When Nathan tried to pay for his dental treatment on 15 June his card was declined. Nathan made numerous attempts to contact Ready Money but it was not until 18 June that Ready Money explained it had suspended his account because it was concerned he had made a transaction prohibited by the terms and conditions. Nathan confirmed he had used his personal credit card to make a purchase through his merchant facility.
Account closed
On 25 June Ready Money told Nathan his credit card transaction was prohibited under the terms and conditions and it would close his account on 30 June. Nathan’s account was closed on 1 July, and Ready Money confirmed the closure in writing on 4 July.
Dispute
Nathan did not know the terms and conditions prohibited him using his personal credit card to make purchases on his merchant account. Nathan felt Ready Money had treated him badly, by:
- failing to tell him why the first transaction was rejected
- failing to tell him as soon as it suspended his accounts
- being difficult to contact from overseas
- paying the funds into a closed bank account
- failing to help him get the funds returned.
Ready Money referred to its terms and conditions, saying the transaction was prohibited and it was justified in suspending and then closing Nathan’s account. Ready Money also said it followed its usual procedure when paying the money into the account held on file and could not have known Nathan had closed the account.
Nathan replied that he had never accepted the terms and conditions. After 40 years Ready Money was unable to locate Nathan’s original application form, but said it had sent revised terms and conditions to Nathan. The terms and conditions stated that use of the card was deemed acceptance of the current terms and conditions.
FSCL’s review
We agreed Ready Money had acted in accordance with its terms and conditions. By using the card Nathan was deemed to have accepted those terms and conditions. Nathan’s transaction using his personal credit card on the merchant facility was a prohibited transaction. The terms and conditions also allowed Ready Money to suspend and then close Nathan’s account without warning.
We also agreed it was not unreasonable for Ready Money to pay the money intended for the suspended Terrific Ties account to the bank account held on record. Once the money was paid there would have been little Ready Money could do to reverse the transaction.
However Ready Money’s failure to communicate caused Nathan considerable inconvenience. If Ready Money had told Nathan it was concerned about his 4 June transaction, he would not have repeated it, nor tried to use his card overseas, and it is possible the complaint would have been avoided entirely.
Even if Ready Money could not reach Nathan by telephone we could not understand why it did not reply to his emails. Regardless of Ready Money’s concerns about Nathan’s transaction it had a customer overseas needing to use his credit card. We suggested Ready Money review its process of suspending accounts without notification.
Outcome
We recommended that Ready Money pay compensation of $300 to Nathan as a contribution towards the telephone calls and in recognition of the stress and inconvenience caused by Ready Money’s poor communication.
Ready Money and Nathan accepted our recommendation.
