by Jeremy Malcolm, Internet lawyer
Credit cards make buying and selling online so easy, that it's hard to imagine the Internet without them. On the other hand, the Internet has increased the incidence of credit card fraud by many orders of magnitude as well. In this Net Law Roundup, we will touch on a couple of the legal issues raised by the use of credit cards online.
Consumers often wonder what exactly is needed to authorise a merchant to charge their credit card. This depends on a combination of the rules that the credit card company imposes on the merchant, and the agreement between the merchant and the consumer. A signature isn't necessary for most on-line merchants, of course. But you may not realise that your agreement with a merchant needn't require them to check back with you each time they want to charge your card - the agreement can give them a blanket authority to charge it for any costs you incur. The bottom line: read the fine print.
From the merchant's point of view, it's safer to check with the consumer on each occasion that the card is charged, because even if the consumer is wrong in challenging a transaction, the bank usually takes their side unless there is a signature to prove the transaction was authorised. Even a phone call to the consumer can sometimes be the next best thing, but do make a note of the call. If a merchant has too many chargebacks, the banks can levy some hefty penalties (although interesting recent court action in the United States suggests that these penalties are legally unenforceable - for those who wish to try to fight the banks in court!).