People are spending more money on travel—which is great news for travel merchants. In 2018, Millennials are estimated to spend about $6,800 on vacations, and Gen Xers will spend $5,400. But with an increase in spending comes an increase of customer disputes. And for travel merchants, that’s the bad news.
Why? Disputes are already a costly problem for the travel industry. For disputes categorized under No Receipt Information reason codes, travel merchants potentially lost approximately 53% more in revenue than what the chargeback was valued ($111 per transaction).
Car rental companies get walloped with this type of dispute. Charges for no-show fees can surprise customers—no matter how much the rental company tries to disclose the necessary information.
Today, we’ll answer some common questions about Visa Guaranteed Reservations as they apply to car rental companies, and how they relate to no-show fees and customer disputes.
What are Visa Guaranteed Reservations?
With Visa Guaranteed Reservations, you can give customers an added sense of assurance when booking reservations using their Visa card. But these guaranteed reservations also give you, the merchant, the ability to better manage inventory and charge a no-show fee if necessary for one day if the customer does not cancel the reservation within your properly disclosed cancellation policy.
Visa extends this ability to the following merchants:
- Aircraft rental
- Bicycle rental
- Boat rental
- Car rental*
- Equipment rental
- Motorcycle rental
- Motorhome rental
- Trailer park or campground
- Truck and trailer rental
*Car rentals are currently allowed to offer Visa Guaranteed Reservations in Visa Europe and limited instances in the US; including peak-time reservations and specialized vehicles.
I’m a Car Rental Company in the US, Why Should I Care?
Even though only in certain situations can US car rental companies use Visa Guaranteed Reservations, it is still important to understand the requirements so you can provide certainty to yourself and your customers in peak-time and specialized vehicle reservation situations.
Visa Reservation Service Requirements for Car Rentals (US Only)
Whether you or your third-party booking agent offers guaranteed car rental reservations to Visa cardholders, requirements of the Visa Reservation Service for Car Rentals must be followed. These requirements are:
- Gathering specific information from the cardholder:
- Visa card number
- Card expiration date
- Cardholder name as it appears on the card
- Cardholder billing address, telephone number, and email
- Clearly explaining your cancellation and no-show policy, as well as the amount to be charged in event of either, in writing.
- No-show policies only apply to Visa Peak Time Reservation Service and Visa Guaranteed Reservations for Specialized Vehicles.
- General no-show policies for Visa Reservation Service are not allowed.
- Providing the cardholder with written confirmation of the reservation that includes:
- Cancellation policy and procedures
- Reserved car rental rate
- Transaction currency
- Cardholder name as it appears on the card
- Suppressed Visa card number
- Remember that the Visa account number and expiration date should be suppressed on the documentation provided to the cardholder in accordance with Visa rules and local laws and regulations.
- Visa recommends that all but the last four digits of the account number be suppressed unless local law or regulations require otherwise.
- Confirmation code
- The exact name and physical address of where the customer will collect the car
Visa Peak Time Reservation Service Requirements (US Only)
When you offer Visa Peak Time Reservation Service, you assure vehicle availability to Visa cardholders during the busiest times of the year. As we mentioned before, the service also allows you to charge a no-show or cancellation fee if specific terms stated in the written policy you provided aren’t met.
Visa designates the following times as “peak times” when you can offer their Peak Time Reservation Service:
- Legal holidays and holiday weekends
- Examples: Christmas, Thanksgiving, Memorial Day, Labor Day
- Resort rentals during the time of year where the resort’s activities occur
- Examples: Winter months at beach or ski resorts like Florida or Utah
- Special events that draw large volumes of attendees from outside the local area
- Examples: Super Bowl, Mardi Gras, Film Festivals
- Major national conventions
- Examples: Comic-Con, CES, SXSW
What if the Car Guaranteed under the Visa Reservation is Unavailable?
No matter how much we prepare, things happen and throw us for a loop. So what happens when these situations arise and make the vehicle guaranteed to the customer under the Visa car rental reservation is unavailable? Not surprisingly, Visa has rules for just such an occasion. If this happens, Visa rules require you to provide the customer with either an equivalent vehicle or an upgraded vehicle at no extra charge.
How Do I Handle Reservation Cancellations and No-Shows Under These Policies?
Like we said before, things arise and change plans at the last minute—and the same goes for your customers. If this happens and a customer needs to cancel a car reservation per your written policy, you need to provide them with two things:
- Cancellation code for them to use in case of later questions or disputes.
- Written confirmation of cancellation within five business days.
For peak time reservations, the customer can cancel without penalty at any time up to 8 hours before the time they scheduled for the rental. Furthermore, if the customer is arriving at the rental car location by air, and the flight is canceled or the airport is closed, they can cancel the peak time reservation without penalty up to one hour before their scheduled pick-up time.
If the canceled reservation was made through a Third Party Agent, the customer can cancel the reservation with you or through the Third Party Agent. Remember, it’s your responsibility to make sure Third Party Agents supply cancellations to you.
When Should No-Show Fees be Applied?
You can bill a no-show transaction equal to one day’s rental, plus applicable taxes, if and only if the rented car is not picked up by the scheduled pick-up time and the customer has not properly canceled the reservation following your properly disclosed policy. Which begs the question, what does “proper disclosure” really mean?
How Do I “Properly Disclose” the Cancellation Policy?
As a car rental company, proper disclosure of your cancellation policy to the customer at the time of reservation improves satisfaction and reduces potential disputes. Visa rules describe several different options for disclosing your return, refund, or cancellation policies to your customers depending on the channel where the reservation was made:
- In-person: provide a copy of your policies in writing to the customer at the time of the transaction.
- Phone: provide a written notice of policies by mail, email, or text message.
- Ecommerce: provide written disclosure on your website, application, or either of the following:
- Pages preceding final checkout that include an acknowledgment button, checkbox, or Electronic Signature.
- On the final checkout page preceding the “Submit” button.
Remember, if you fail to properly disclose your policy, fail to prove the customer received the policy, or the customer can prove they canceled according to the policy they were provided, the issuer retains their dispute rates.
What Happens When a Customer Disputes a No-Show Fee?
So a Visa cardholder made a car rental reservation with you, you adequately disclosed your cancellation policy, yet they never showed up nor canceled the reservation. Accordingly, you charge the applicable no-show fee. Then you’re slapped with a no-show dispute from the customer for the additional charge.
Now, either the reservation was made by a fraudster with a stolen credit card to see if the card was active or had an available balance, or the customer feels the no-show fee charged is invalid. Disputes of these nature are typically categorized under the following reason codes:
|Card Network Reason Code||Dispute Reason Code||Definition|
|American Express||C18||“No Show” or Card Deposit Canceled|
|Discover||AA||Does Not Recognize|
|MasterCard||4840||Fraudulent Processing of Transaction – Multiple|
|Visa||12.4||Incorrect Account Number|
|Visa||12.5||Incorrect Transaction Amount|
After a customer disputes the additional charge, the next steps depend on your specific circumstances. You can make sure you’re getting the most out of your no-show dispute responses by including the following based on the dispute situation:
- For disputes where the cardholder claims fraudulent activity:
- Provide transaction details that show the customer name matches the cardholder name.
- For card-present transactions, provide a signed receipt.
- For card-not-present transactions, provide AVS and CVV data.
- Provide any correspondence between your car rental company and the cardholder.
- For disputes where the cardholder claims non-disclosure of no-show policies:
- Provide terms of service presented to the customer which show cancelation and no-show policies and associated fees.
- Provide evidence that the customer was presented and acknowledged these terms of service.
- For disputes where you’ve already issued the customer a refund:
- Provide proof of the full refund. (But remember, never issue a refund after a dispute is initiated! The transaction amount has typically already been re-issued.)
How Do I Prevent No-Show Disputes?
As with all disputes, an ounce of prevention is worth a pound of cure. Getting your procedures set to ensure thorough data capture and verification goes a long way in preventing no-show disputes. These quick tips will help get you started:
- Record the customer name, phone number, duration of rental, and expected arrival date and time.
- For card-not-present transactions, capture the customer’s name, billing address, card expiration date, and the CVV/CV2 code.
- For customers making reservations on behalf of another party, obtain written cardholder authorization.
- For customers making reservations on behalf of a company or organization, record the name of the entity along with the cardholder information.
- Ensure the customer is clearly presented with your cancellation or no-show policies and explicitly consents to the terms of the reservation.
- Provide a phone number, email, or chat to the customer should they need to cancel or adjust their reservation in accordance with your policies.
Nip Invalid No-Show Disputes in the Bud
When you properly disclose your no-show canceling policies, getting a customer dispute for a properly applied fee is nothing short of frustrating. In this case, there’s a simple way for you to stop these disputes before they become chargebacks. It’s called Real-time Resolution, and it creates a direct line to Visa Merchant Purchase Inquiry (VMPI).
After a customer initiates a dispute, Real-time Resolution sends hundreds of data elements and contextualized details to help the issuer and cardholder make an informed decision on whether or not it’s necessary to finalize the dispute. This allows you to play offense and either prove that the charge was legitimate or provide a refund, effectively stopping a dispute in its tracks.
As long as you’re ready to prevent and manage the customer disputes that follow, using Visa Guaranteed Reservations is a great way to provide assurance to your customers and better maintain your inventory. What does the dispute landscape look like for car rental companies? Download our Industry Dispute Ratios white paper to see how your company stacks up against the rest of the travel industry.