Visa wins legal battle with Tucson firm

A new court ruling shows that merchants who accept credit card payments for orders they get online need to know exactly what the card company is promising or risk having the money taken back.

In a unanimous decision, the state Court of Appeals turned aside arguments by a Tucson firm that Visa acted improperly in charging back what turned out to be a fraudulent charge. The judges said the contract ANS Distributing signed with Visa made clear that kind of thing can happen.

Appellate Judge Philip Espinosa acknowledged that there are times when trial judges can conclude that verbal representations made actually modify what is on paper. But he said the claims of an ANS employee that other promises were made hold no water.

ANS, which sells gasoline station supplies and equipment, signed an agreement with its bank allowing the company to accept its customers' Visa credit cards.

Under the terms of that agreement, when a customer charges an item, Visa forwards the money to an ANS account, minus a processing fee. But the contract also said if Visa discovered any charges that were fraudulent, it would institute a "chargeback," requiring ANS to reimburse the credit card company for the entire amount that had originally been transferred in.

In 2005, ANS received more than $150,000 worth of orders over the Internet from customers in Singapore.

Visa preauthorized the transactions and put the money into the company's account. But the credit card company later concluded the charges were fraudulent and took the money back.

ANS then sued. Among the arguments it presented was a claim that Visa had promised to engage in additional fraud protections anytime there were e-commerce transactions, deals where the credit card is not physically present where the purchase is made but where the information is instead obtained over the computer.

A trial judge threw the case out, saying there was no question but that the contract allowed Visa to do what it did. That resulted in the appeal.

ANS said the trial judges should have let the case be heard because there were questions about Visa's "responsibilities and actions" under the contract. The company specifically said that contract "fails to reflect oral representations that Visa would undertake, for an additional charge, additional activities to discover fraudulent e-commerce transactions."

To back that up, ANS presented an affidavit of Thomas Spencer, its comptroller, who said Visa charges a higher processing fee for e-commerce transactions than when a buyer actually comes to the merchant with a credit card. He said his company believed that the higher fee "paid for protection against the increased fraud risk inherent in e-commerce transactions."

But Espinosa said Spencer, in that affidavit, never said he had personal knowledge of any representations made by Visa, nor did he have specifics, like when, where and in what context they were made. In fact, the judge said, ANS presented no evidence that Spencer signed the contract, participated in negotiations or even spoke to anyone at Visa before the chargeback dispute.

All that, the judge said, made what Spencer had to say inadmissible hearsay. And without his affidavit, Espinosa said there were no facts to back up the company's claim that Visa had agreed to do fraud protection - and no reason to let the case go to trial.