Is it possible to chargeback a "legitimate" transaction which occurred due to a scam?

Question

A family member was recently duped into topping up a foreign pre-paid Visa card, and our domestic bank said they can't help due to them having verified the transaction with a One Time Password (OTP).

The story goes like this:

1. Family member received an email which appeared to be a company they work with, requesting a small sum for their service.
2. They went to pay the apparently small sum using their credit card
3. They received and entered the OTP the bank sent them
4. The credit card was debited x10 as much as what they initially thought they were going to pay.

The transaction seems to be a top-up to a prepaid Visa card company based in Spain - BITSA / PECUNPAY.

Our bank has said that the family member was in possession of both their card details and the SMS to authorize the transaction, they can't consider the transaction as fraudulent.

Is possible to issue a chargeback against the merchant in this case?

Answer 1

For your particular case, you probably have a valid chargeback claim.

Condition 12.5 Incorrect Amount can apply if:

• The transaction amount is incorrect.
• An addition or transposition error was made when calculating the transaction amount.
• You altered the transaction amount after the transaction was completed without the consent of the cardholder.

[This is written with merchants as the audience, so "you" refers to the merchant.]

Page 37 of Visa's Dispute Management Guidelines for Visa Merchants..

It would be rather silly if merchants could defeat a chargeback by simply noting that the transaction in general, but not the transaction amount specifically, was authorized. That would make all credit card transactions a "blank check" to the merchant.

Where it could get sticky is if the full price was disclosed, but in a discreet manner (e.g. in the fine print). If your authorization was made on the belief that the amount was lower, and that belief had a reasonable basis, I would expect the chargeback to be upheld, but it might be an uphill battle. It helps your claim if you can show that the merchant deliberately caused that false belief.

Addressing the general case of your question title, there are times when a chargeback of a transaction that is part of a scam is denied. For instance, if you use a credit card to buy pre-paid cards, and then let the scammers have access to the cards, the fraud is against the pre-paid card, not the credit card. If you try to charge back the credit card transaction, that will likely be denied, since you did in fact get what you were promised (you got pre-paid cards), and the merchant who sold you the cards was not a participant in the scam.