Mark Pestronk
Q: I am fed up with getting debit memos for allegedly unauthorized credit card charges. In every case that our agency knows of, the client really did authorize the charge but decided to dispute it because the client did not want to pay for unused, nonrefundable tickets. In a few cases, the client even took the trip but still claimed that the charge was not authorized. We have tried to contest the debit memos by showing, through a series of emails, that the client authorized the charge, but the carriers refuse to budge. It is extremely unfair of the carriers to make us pay. Can anything be done to stop this abuse?
A: Airline debit memos for allegedly unauthorized charges remain one of the biggest headaches that travel agencies face. Despite decades of effort by all parties involved in the process, there have never been any meaningful solutions when a sale is by phone or email.
For nonrefundable fares, it is very easy for the cardholder to initiate a chargeback. All that the cardholder has to do is to check a box stating that the service was not provided, or that the charge was not authorized.
Every credit card merchant agreement that I have seen allows the card issuer to charge back whenever the merchant does not obtain an imprint, swipe, signature and several other things. In other words, the card issuers shift all risk onto the merchant.
For airline tickets, the card issuers send a chargeback notice to the airline, which then sends you a debit memo, apparently regardless of the reason for the chargeback. Most debit memos come through ARC’s Memo Manager, which is used by 150 carriers.
For agencies, the inherent flaw in the system is that they cannot deal directly with the credit card companies to persuade them to reverse the chargeback. Since only the airlines themselves are the merchants of record, the card companies will listen only to them, with few exceptions.
Having the carrier in the middle between the card company and the agency is what distinguishes the debit memo system from what merchants in other industries face. In most cases, it does no good to prove to the airline that the charge was authorized, if, as often happens, the airline will not relay that information to the card company.
According to ARC, the only sure way to successfully dispute a debit memo is to provide a signed and imprinted charge form within five days after you receive the debit memo. ARC acknowledges that this step is impossible or extremely impractical for non-in-person sales, but this is what the credit card issuers require.
Therefore, you need to concentrate on preventing chargebacks in the first place. ARC has five useful pages of fraud prevention tips for both in-person and non-in-person sales that you can find here.
In addition, for non-in-person sales, you can develop a form that looks like an ARC Universal Credit Card Charge Form for clients to sign and fax or scan and email back to you. The benefit of such a form is not that it will successfully dispute debit memos, but rather that, having signed an official-looking paper, the cardholder is less likely to initiate a chargeback.