On 05 Nov 2024, the HKMA consolidated its consumer protection expectations for Authorized Institutions regarding payment card direct debit authorisation (DDA) during merchant suspensions or closures. Card Issuing Banks must provide timely assistance, explain DDA limitations to cardholders, and facilitate cancellations via merchant acquiring institutions, while Merchant Acquiring Banks must immediately halt DDA payments upon merchant closure to prevent further consumer losses.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 05 Nov 2024, the Hong Kong Monetary Authority (HKMA) issued a circular consolidating and clarifying its expectations for Authorized Institutions regarding payment card direct debit authorisation (DDA) arrangements when merchants suspend or close their businesses, with a focus on enhancing consumer protection.
Key Expectations for Card Issuing Banks
Card Issuing Banks must ensure effective communication channels to handle cardholder enquiries on DDA cancellation or chargeback requests, providing prompt and clear responses. They should proactively allocate sufficient resources (including hotline, email, internet banking, and mobile app support) to manage potential surges in enquiries following merchant closure announcements. Banks must explain to cardholders that DDA cancellations require merchant action, not bank intervention, and provide reasonable assistance by contacting merchant acquiring institutions to cancel DDA and seek reimbursement for disputed amounts. Frontline staff must receive training to avoid directing cardholders to contact uncontactable merchants without exploring alternatives like chargebacks.
Key Expectations for Merchant Acquiring Banks
Merchant Acquiring Banks must suspend or cease collecting payment card DDA payments for a merchant immediately upon the merchant's suspension or closure. This action is required to prevent further cardholder payments, protect consumers, and reduce the operational burden on Card Issuing Banks handling associated enquiries and assistance requests.
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