FTC Wants Quicker Credit Card Refunds

The Federal Trade Commission has issued a proposal that consumers who purchase goods and services via the internet receive timelier refunds.

"It makes sure that they're going to get prompt service -- as prompt as the technology allows today," said FTC spokesman Frank Dorman.

The proposed regulations would modernize and update rules that have been in place since 1975 which were put into place to help ensure that consumers promptly received the merchandise they ordered or were refunded their money.

Prior to the new FTC proposal, retailers were obliged to refund money onto a customer’s credit card within one billing cycle or, roughly, one month. The new regulations would mandate that retailers issue refunds within seven days. The FTC went on to clarify the regulations by expressly making them pertain to purchases made over the Internet as well, and extend protection to customers paying by means of gift cards or debit cards which was previously absent.

The new refund rule would apply to situations wherein the customer requests a refund before the merchandise has been shipped out as well as to shipments that have been delayed.

Associations that act on the behalf of retailers are supportive, in large part, of the proposed changes. The National Retail Federation and the Direct Marketing Association stated, in comments submitted to the FTC, that their members already make an effort to issue refunds in a prompt manner and that everyone stands to benefit – retailers and consumers alike – by the standardization of rules applied to orders made through the mail, over the phone or online via the Internet.

“These rules make good business sense and are well-integrated into the business practices of our members," read the comments made by the Direct Marketing Association to the FTC.

The precise amendments contained within the FTC proposal are as follows, according to their website ftc.gov:

• Clarify that the Rule covers all orders placed over the Internet;
• Revise the Rule to allow sellers to provide refunds and refund notices to buyers by any means at least as fast and reliable as first-class mail;
• Clarify sellers’ obligations when buyers use payment methods not spelled out in the Rule, such as debit cards or prepaid gift cards;
• Require that refunds be made within seven working days for purchases that were made using third-party credit, such as Visa or MasterCard cards. For credit sales where the seller is the creditor (such as merchants using their own store charge cards) the refund deadline would remain one billing cycle.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.