| S: |
Carmen, I know that one of your duties at the HKMA is to enhance the protection of financial consumers. In relation to the recent closure of an outlet of a fitness centre, some news reports said that when some members of the fitness centre tried to cancel their credit card autopay arrangement for payment of membership fees, their requests were rejected by the banks concerned. The bank staff said that only the merchant could cancel the autopay arrangement. Why is the right to cancel such arrangement in the hands of the merchant? |
| C: |
I am aware of the news reports and very concerned about the situation. The credit card autopay service you mentioned involves a credit card direct debit authorisation agreement between the consumer and the merchant. Simply put, it is an arrangement under which the consumer authorises the merchant to deduct money from his or her credit card account directly, and therefore the merchant has the right to decide whether to cancel the autopay arrangement or not. |
| S: |
If a consumer wishes to terminate the autopay arrangement, what should he or she do? |
| C: |
The consumer can send a written instruction to the merchant to cancel the autopay authorisation. If the merchant ignores the consumer’s instruction and continues to charge to his or her credit card account, the consumer can provide a copy of the cancellation instruction to the card issuing bank and ask it to help contact the merchant to seek reimbursement of the disputed amount and cancellation of the autopay arrangement. However, the consumer should note that while the bank concerned will try its best to provide assistance, the outcome depends on whether the merchant is willing to cooperate. |
| S: |
What should the customer do if the autopay is not arranged through a credit card but a bank deposit account? |
| C: |
He or she can directly ask the bank concerned to cancel the autopay authorisation. |
| S: |
Both being autopay arrangements, why are the cancellation methods for autopay by credit card and by bank account different? |
| C: |
It should be noted that autopay arranged through credit card involves the consumer authorising the merchant concerned to charge to his or her credit card account, while autopay arranged through a bank account in general involves authorisation given by the consumer to the bank concerned to transfer money to a designated account. |
| S: |
I see. Precisely because the parties being authorised are different, the cancellation methods differ. |
| C: |
Right. I would also like to take this opportunity to remind consumers that provision of an “authorisation” is something that should be handled with care and prudence. Before signing any authorisation documents, consumers should first clarify who is/are being authorised, whether they are reliable and how to cancel the authorisation. It is worth noting that even if the consumer has cancelled the autopay authorisation to the merchant, this does not mean cancellation of the service contract or membership-related agreement that the consumer has entered into with the merchant. |
| S: |
Apart from autopay arrangement, many consumers opt for prepaying service fees by means of instalment payment plans using credit cards, for example, at fitness centres and beauty parlours. If the merchant goes out of business before the consumer can enjoy all the services he or she has prepaid for, does it mean that the consumer no longer needs to pay the remaining monthly instalments to the card issuing bank? |
| C: |
In general, under a credit card instalment payment plan, the bank concerned will pay the merchant in full for the prepaid amount and then charge the customer by instalments. In other words, the customer has obtained a loan from the bank. Therefore, even if the merchant concerned has closed down, the customer still has to make monthly loan repayments to the bank. In 2010, the consecutive closures of several yoga centres aroused concerns among consumers about instalment payment plans involving pre-payment for services. The HKMA issued a circular to banks in the same year to increase transparency of credit card instalment payment plans and enhance consumer protection. |
| S: |
I have heard that there is chargeback mechanism for credit cards. Can the customer apply for chargeback if the merchant concerned has closed down? |
| C: |
Sure. Generally speaking, customers using credit cards to make lump-sum payments upfront are eligible to apply for a refund of their payments, or a “chargeback”, in accordance with the credit card association’s rules, for services that they are not able to enjoy because the merchant has gone out of business. Details of the chargeback protection of credit cards can be obtained from the relevant card issuing banks. |
| S: |
How can we become a smart credit card user? |
| C: |
The key is to read the relevant terms carefully and understand your rights before using the credit card. Whenever you are unclear about the terms and conditions, you should first enquire the card issuing bank. I also suggest consumers to browse the HKMA webpage on Consumer Education Programme - Credit Cards, or download the Smart Tips for reference. |
