Laws on refunds

Just_Some_Boy

Hi everyone,

Is it a legal requirement that refunds for card payments are given in the way they were originally paid, using the original card that the payment was made on?  Or is this just typical practice?  I'm guessing it might be a legal requirement for money laundering purposes, but would like to check.

Without boring everyone with the detail, a service provider has told me that the only way they can refund me is by using the same card I paid for the service on, and by putting it into their terminal.  This is really difficult for me now as I no longer live within reasonable travelling distance, so I'm exploring whether there really is no other way they can refund me (they're claiming that it's a legal requirement for them to do it that way and no other).

Thanks in advance for any help and advice.

user1977

What sort of card? There shouldn't be a need for them to physically handle the card. If they say there's a "legal requirement", ask them what exactly that is. Should be good for a laugh.

elsien

I was refunded onto a different card over the phone a few weeks back, so my guess is they’re not being entirely accurate. 

p00hsticks

I'm not sure it's a legal requirement, but I think it probably is a condition of the retailer's agreement with their card processing company and/or Visa and Mastercard, not sure about others such as Amex etc

Bradden

I beleive it used to be due to the Consumer Credit Act .. before the days of debit cards. As the credit card company were technically the creditors the were due the refund not the customer. They shouldn't have to insiist on you coming in to branch. Presumable they have your cardnumber already and  just need the CVV code to authorise the refund. PDQ's are perfectly capable of cardholder not present transactions. If they say they do not have your card number then they have no way of knowing how you paid originally. 

Undervalued

Bradden said:

I beleive it used to be due to the Consumer Credit Act .. before the days of debit cards. As the credit card company were technically the creditors the were due the refund not the customer. They shouldn't have to insiist on you coming in to branch. Presumable they have your cardnumber already and  just need the CVV code to authorise the refund. PDQ's are perfectly capable of cardholder not present transactions. If they say they do not have your card number then they have no way of knowing how you paid originally. 

Not sure that follows.

Their systems may well record the method of payment used but without storing the full card number?

If the customer paid on a credit card but was later refunded in some other way they have still been advanced credit of that amount but now without the item it was for which would be wrong. With a debit card that is not an issue as in effect they have just paid in cash from one pocket and put the refund in another!

nyermen

There's probably more than one reason - AML springs to mind as one (you can't bring in cash and ask for refund to card, etc)

I don't think its a legal requirement, more of strong guidance.  Like many, I've had them alter this at times (apparently you can't refund to apple pay, or at least some stores say, so they just asked me for another...)

Penguin_

Undervalued said:

Bradden said:

I beleive it used to be due to the Consumer Credit Act .. before the days of debit cards. As the credit card company were technically the creditors the were due the refund not the customer. They shouldn't have to insiist on you coming in to branch. Presumable they have your cardnumber already and  just need the CVV code to authorise the refund. PDQ's are perfectly capable of cardholder not present transactions. If they say they do not have your card number then they have no way of knowing how you paid originally. 

Not sure that follows.

Their systems may well record the method of payment used but without storing the full card number?

If the customer paid on a credit card but was later refunded in some other way they have still been advanced credit of that amount but now without the item it was for which would be wrong. With a debit card that is not an issue as in effect they have just paid in cash from one pocket and put the refund in another!

Correct, their merchant copy will have the first 12 digits starred out & then show the last 4.

The OP should be able to give the details over the blower & the merchant type the details into the machine.

Sandtree

Just_Some_Boy said:

Hi everyone,

Is it a legal requirement that refunds for card payments are given in the way they were originally paid, using the original card that the payment was made on?  Or is this just typical practice?  I'm guessing it might be a legal requirement for money laundering purposes, but would like to check.

Without boring everyone with the detail, a service provider has told me that the only way they can refund me is by using the same card I paid for the service on, and by putting it into their terminal.  This is really difficult for me now as I no longer live within reasonable travelling distance, so I'm exploring whether there really is no other way they can refund me (they're claiming that it's a legal requirement for them to do it that way and no other).

Thanks in advance for any help and advice.

There is a legal requirement for the company to have appropriate anti-money laundering processes in place. What is "appropriate" isnt defined in law which helps as it means the application can keep pace with technology without a new act of parliament each time however does mean everything is left in a rather grey area. 

Refunding to source is widely accepted as appropriate AML practices and so whilst not directly legislated it is almost indirectly.

there is a secondary consideration, if they process it as a refund to source they get the merchant fees back whereas if they send money to a different account they are out of pocket for the merchant fees.

born_again

They should only refund to the card that payment was taken by.
But did you make the payment in person? If not then they should simply make a customer not present refund on their terminal. 

HeinzVarieties

Sandtree said:

Just_Some_Boy said:

Hi everyone,

Is it a legal requirement that refunds for card payments are given in the way they were originally paid, using the original card that the payment was made on?  Or is this just typical practice?  I'm guessing it might be a legal requirement for money laundering purposes, but would like to check.

Without boring everyone with the detail, a service provider has told me that the only way they can refund me is by using the same card I paid for the service on, and by putting it into their terminal.  This is really difficult for me now as I no longer live within reasonable travelling distance, so I'm exploring whether there really is no other way they can refund me (they're claiming that it's a legal requirement for them to do it that way and no other).

Thanks in advance for any help and advice.

There is a legal requirement for the company to have appropriate anti-money laundering processes in place. What is "appropriate" isnt defined in law which helps as it means the application can keep pace with technology without a new act of parliament each time however does mean everything is left in a rather grey area. 

Refunding to source is widely accepted as appropriate AML practices and so whilst not directly legislated it is almost indirectly.

there is a secondary consideration, if they process it as a refund to source they get the merchant fees back whereas if they send money to a different account they are out of pocket for the merchant fees.

This isn't true.  Only certain organisations are beholden to the Money Laundering Regulations.

8.—(1) Parts 1 to 6 and 8 to 11 apply to the persons (“relevant persons”) acting in the course of business carried on by them in the United Kingdom, who—

(a)are listed in paragraph (2); and

(b)do not come within the exclusions set out in regulation 15.

(2) The persons listed in this paragraph are—

(a)credit institutions;

(b)financial institutions;

(c)auditors, insolvency practitioners, external accountants and tax advisers;

(d)independent legal professionals;

(e)trust or company service providers;

(f)estate agents;

(g)high value dealers;

(h)casinos.

Note that general retailers are not included in that list.

The reason a retailer will insist on refunding to their original source of payment is their their card fees will be refunded and it completely protects them against any subsequent chargeback requests.  If they refund in cash a chancer could try their luck with a chargeback.

They tell their staff this guff because the staff are more likely to comply when "it's the law" and their customers are more likely to swallow it too.