Most Canadian consumers are unaware of a key feature of electronic payments services they commonly use that can protect them from losing their money if they don’t get what they ordered, it’s not what they ordered, or what they ordered doesn’t work, Consumers Council of Canada research has determined.
The payments service feature referred to as a “chargeback” is examined in the Council’s latest research report Consumer Redress, Chargebacks and Merchant Responses in Distant Transactions.
“Just imagine if automakers installed seat belts but few knew they owned them or how to use them,” said Council President Don Mercer. “Chargebacks are a feature of payments services consumers need to learn more about. Used properly, chargebacks can protect consumers against the actions of unscrupulous or careless sellers.”
A survey of 2,000 Canadians conducted online in March 2017 by Environics Research for the Council found satisfaction with online transaction dispute resolution was highest for consumers who used PayPal, and PayPal customers were most likely to cite the payment intermediary as a source of assistance that led to satisfaction. A review of websites conducted as part of the research found newer entrants to the electronic payments business, such as PayPal and Amazon, provide more information about consumer protections and how disputes are resolved than do bank issuers of credit and debit cards.
Nearly half (45 percent) of consumers surveyed had experienced a dispute in a distant transaction in the past 24 months, the survey found. The majority of such disputes are resolved satisfactorily with the merchant alone, but 29 percent of consumers have sought a reimbursement from a payment intermediary in the past two years.
About 14 percent of consumers reported that a dispute they had thought to be resolved was not resolved because of subsequent action from the merchant or a third-party debt collection service.
“Consumers should not conclude that in all cases simply getting back their money through a ‘chargeback’ means the end of a dispute with a seller,” Mercer said. “A dissatisfied merchant may take the position a consumer still owes them money and try other ways to collect.”
The 168-page report examines in detail from a consumer perspective the system of chargebacks to obtain redress for consumers, considering also the perspectives of stakeholders to that system.
Consumers Council of Canada has received funding from Innovation, Science and Economic Development Canada’s Contributions Program for Non-profit Consumer and Voluntary Organizations. The views expressed in this report are not necessarily those of Innovation, Science and Economic Development Canada or the Government of Canada.