Charging credit cards for damages

Chargebacks and return situations are not uncommon in business transactions. Occasionally, goods or services are not delivered as promised or are damaged, and clients who have used credit cards for these purchases are afforded recourse through the banks issuing their cards to recoup their money.

Rental companies are in a unique situation as merchants because their goods are loaned, not sold. Occasionally, rental stores are in a position where goods are not returned as promised or are damaged. Rental customers are expected to return rented items in the same condition. When this does not happen, however, what recourse does the merchant have?

One of the best ways to protect your merchandise is full disclosure with a potential customer. Make sure you explain your policies on damaged equipment and what will be required of the customer if there is an issue with the rental items upon their return — whether it be repair, replacement or a portion of either. A mutual agreement is usually sufficient to address any problems that may arise.

However, not all customers uphold their end of the agreement, regardless of what has been discussed or signed. When credit cards are involved, there are very specific rules on what a merchant can and cannot do in an attempt to recover funds for damaged goods or losses.

Visa and MasterCard regulations will allow merchants to charge a client’s card for loss or damages only when the client has been informed of the charges and agrees to them. A merchant is not allowed to charge a customer’s card without the cardholder’s consent, regardless of the agreement made previously, verbal or written.

Any delayed or amended charges to the customer’s card also must be completed in a separate transaction and may not be added to the original. This also requires an authorized signature from the cardholder.

While merchant/client contracts typically hold up — particularly when there is full disclosure on the merchant’s part about what will be charged in the case of damaged or lost items — they do not supersede the rules and regulations of credit card companies.

The rules and regulations are part and parcel of the privilege of accepting their cards at any merchant’s business. If a customer disputes additional loss or damage charges from a merchant via chargeback, the merchant would not prevail without a signed, printed receipt for the delayed or amended transactions.

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Michelle Biddle is senior account manager and American Rental Association (ARA) program director for Veracity Payment Solutions, Moline, Ill. She can be reached at 910-333-8698 or email For more information about ARA’s Merchant Services Program provided by Veracity, contact ARA member services at 800-334-2177.