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Comments on use of charge-backs as a form of consumer protection

Consumer Measures Committee (CMC)
c/o Mr. Philip Halliday
Office of Consumer Affairs
Industry Canada
Room 962A, C.D. Howe Bldg.
235 Queen St.
Ottawa, ON K1A 0H5

BY FAX AND EMAIL

Dear Mr. Halliday:

Re: Use of Charge-backs as a form of consumer protection:

CMC Stakeholder consultation

The following are PIAC’s comments on the CMC Stakeholder Consultation Document “Use of Charge-backs as a form of consumer protection”.

The Public Interest Advocacy Centre is a national non-profit organization devoted to the representation of consumer interests in matters involving public utilities, essential services, and public interest issues of broad application to Canadians. Our focus is on the protection of lower income and vulnerable consumers, and on issues not already being addressed by other public advocacy groups. PIAC has developed a strong record of consumer advocacy since its inception in 1976, and is widely recognized as an important and influential voice for ordinary consumers in a variety of marketplace issues. PIAC is governed by a distinguished volunteer Board of Directors from across the country, and is supported by member groups and donors representing hundreds of thousands of Canadians.

1. Should the statutory charge-back remedy for contract cancellation rights be extended to apply to all sales channels in addition to Internet sales contracts (and distance sales, in the case of Quebec)?

Yes, it makes sense to provide a statutory charge-back remedy to consumers regardless of the medium through which they purchase (i.e., offline or online). From the consumer perspective, it would be difficult to understand why improper charges on their credit card may or may not be subject to this remedy, depending on whether the merchant in question was supplying goods offline or online.

Improper charges occur for a variety of reasons, not limited to the online context. Charge-back remedies should be available, under the same terms and conditions, wherever the payment mechanism used is susceptible to them.

2. Should the statutory charge-back remedy be extended to apply to situations of error correction?

Yes. Charge-backs should be available to consumers in all cases of improper billing due to a fault which is not their own.

Charge-backs should also be available in cases where the good or service ordered and paid for was delivered, but did not arrive in a reasonable time, did not arrive in good order, or was not as described, where the merchant refuses to refund upon return.

3. Should the statutory charge-back remedy be extended to apply to payment mechanisms in addition to credit cards? If yes, to which payment mechanisms?

Charge-backs only make sense where the payment system operator can “charge back” the merchant. If this is possible in other contexts such as debit cards, then there is no reason not to apply the same remedy in that context.

4. What sort of time limits should be included in a charge-back system?

The time limits that apply under the US Fair Credit Billing Act are reasonable and should be adopted here. (E.g., complaints to be lodged within 60 days, or at least 3 days before automatic payment will be made in order to stop payment; acknowledgement of receipt of consumer complaint to be made within 30 days; dispute to be resolved within 2 billing cycles or 90 days, whichever is less; cardholder to appeal resolution within 10 days)

5. Should there be a requirement for disclosure regarding charge-back rights?

Absolutely. Disclosure – and hence consumer awareness – is essential if the remedy is to be meaningful. Given that there is no incentive for credit card companies to make consumers aware of their chargeback rights (indeed, the incentive is to be mute about the possibility of charge-backs), statutory requirements for disclosure are required. In order to ensure that consumers are fully and properly informed, detailed rules are needed. The US Fair Credit Billing Act provides a good model for disclosure rules.

6. Should the obligations between credit card companies and merchants be addressed in the charge-back remedy?

No. The statutory remedy should address only what needs to be addressed in order to provide redress to the consumer. Credit card companies can and will draft their merchant agreements accordingly.

Yours truly,
original signed
Philippa Lawson
Counsel

 

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