For customers, a chargeback is the main protection when paying by debit card, and an alternative to Section 75 on credit cards. The card issuer raises the dispute within the card scheme’s time limits, usually around 120 days, and the business’s acquirer takes the money back from the business. The business can defend the claim with evidence such as its booking conditions or proof of a refund.

Chargebacks and Section 75 compared

• A chargeback is a card scheme rule, not a legal right, and banks do not have to raise one. The Financial Ombudsman Service does generally expect them to where the scheme’s conditions are met and there is a reasonable chance of success.

• It works on debit and credit cards and has no minimum or maximum amount, but it only recovers what was paid on the card.

• Section 75 is a legal right for credit payments, can cover more than was paid on the card and has a much longer time limit.

Why it matters in travel

Customers often pay months before they travel, so the card industry is exposed if a travel business fails. The CAA has noted that, because of Section 75 and chargeback rules, acquirers sometimes ask ATOL holders for extra security or change their terms when they are worried about a business’s finances.

Example: a customer pays an agent £800 by debit card for a flight and hotel package, and the hotel supplier fails before departure. As organiser, the agent must offer a suitable alternative or a refund. If it does not, the customer’s bank can raise a chargeback for the part not provided, and the agent’s acquirer takes that money back from the agent.