Debit Card Pre-Authorization

mcf1989

Hi,

New to this and, not sure if there is potentially a thread regarding this.

Basically, can a company pre-authorise a card for an amount without notice?

In this instance, I have started the upgrade process of a mobile phone, entered card details, however states no payment will be taken untill the order prcoess is complete - which it was not.

On the previous page where the card details are input it doesn't state anywhere that pre-authorization / ring fencing of funds will take place.

Are they able to do that? I don't think so, and can't appear to find any law regarding this.

I know that the funds essentially become available again, but messed me about. It's a similar principle of adding clothes to a basket, inputting card and delivery details but not actially completing an order in my eyes, you wouldn't expect the company to pre-authorize funds in case you do actually place an order.

Any help, or righs I may have in my complaint would be greatly appreciated.

Thanks.

mt99

Yes there are some threads about this - I remember one about Morrisons doing it. Anyway, they usually do 'ring fence' ie pre-authorise money. This will reduce the 'available balance' at your bank account. Then if the order is cancelled the ring fenced money is released but this take a few days so as you say you don't have access to your money until that occurs.

mcf1989

Yes, I'm aware of the process and as to why they do it BUT are they allowed to do it without informing you that it will happen or notice?

mt99

Not only are they allowed to do it - that's the way the system works. Which is why some recommend you use a credit card rather than a debit card as it doesn't affect your bank account, it only affects the amount of credit you have left. Found this example:
When a shop (for example) processes a card payment, they get a initial auth, which is their guarantee (more or less) that they will be paid. As part of that auth the shop gets a six digit auth code. In order to complete the payment process and actually receive the funds into their account, the shop has to then put the transaction through for settlement. The six digit auth code will be included in the settlement message, so your bank will be able to match up the transaction to the auth on your account. This releases the funds previously ring-fenced, thus ensuring there is enough money available in you account for it to be debited successfully.

agrinnall

I'd be inclined to agree with you that no ring fencing should take place until you have authorised payment. About the only pre-auth that I'm aware of is at petrol stations, to ensure that the card has funds available, but that is generally only for £1 rather than the full amount of the proposed transaction (which obviously is not known in in advance with most fuel purchases). In mt99's example, because the transaction has not been completed then the hold should be released as the auth code is no longer valid.

It would be worth saying which retailer this is if you can in case anyone else has experienced the same thing.

mcf1989

Thanks for the response.

It is O2.

mt99, I am aware they are allowed to do it, but are they allowed to do it without giving you notice?

I understand that payment won't clear until authorization occurs, but are they able to pre-authroize payment without ay authorization or notice that they are going to do so?

I appreciate that if cancelled the available funds will essentially be returned.

Anthorn

In my own personal experience ASDA did it and then debited my account again. That took the money out of my account and in addition held the same amount of money in reserve. They don't appear to do that any more though.

A related action is where you sign up for an account and enter your debit card details as requested. For example mobilephonesdirect said they would not debit my card because the phone is free and it's used for ID but they did authorise £2.50 which I expect will be held in reserve and returned to my balance in due course. In addition NowTV and Netflix did the same and authorised £1 each before the accounts were approved.