Bank should have acted on chargeback request

Wiremu transferred $150,000 to a binary options trading platform using his Visa and Mastercard credit cards in a number of transactions over several months. He saw inconsistencies in the platform’s ledger and came to believe it was a sham and his money had been stolen. He raised this with the trading platform, but it denied any wrongdoing. He asked his bank to chargeback the transactions on the basis the services were defective. The bank refused, saying it could seek a chargeback only if a merchant had breached the terms and conditions of a card – which had not happened in this case.
May 2020

Our investigation

After examining the credit card provider’s rules, we concluded that chargebacks were not limited in the way the bank claimed. We approached Visa and Mastercard and they both said a chargebacks was available in Wiremu’s situation. We concluded the bank acted wrongly by not initiating the chargeback request.

The probability of successfully recovering the transactions was low, but not non-existent. If the merchant had not responded to the chargeback, the funds would have been recovered. The merchant had responded promptly to Wiremu’s complaint so we thought it likely it would have resisted a chargeback. We also knew Mastercard and Visa would accept a copy of a trade ledger as proof that trading had taken place, and it wasn’t clear whether his evidence of defects was sufficient to challenge this. We recommended the bank pay him 25 per cent of the value of the transaction in recognition of the fact.


While Wiremu thought 50 per cent was fairer, we remained of the view that 25 per cent was appropriate given the low probability of successfully recovering the funds.

He accepted our final decision recommending 25 per cent reimbursement of the value of the transactions.

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