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Coinbase blames Visa for glitch that overcharged users – TechCrunch

Coinbase blames Visa for glitch that overcharged users – TechCrunch
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While Coinbase has had its fair share of technical issues in the past few months, it looks like the most recent ones may not be their fault.

Earlier today, reports began appearing across social media and Reddit that Coinbase users were seeing strange fees on their credit and debit cards. Many of these were users who were charged double fees for a previous transaction, although there have been some (unconfirmed) reports of people being subjected to up to 50 duplicate fees.

Understandably, users were panicked. It’s never fun to be charged more than you should have, especially when you overcharge your bank account or top up your credit card.

While it wasn’t initially clear what caused the problem (some were claiming Coinbase was withdrawing unauthorized funds from users’ bank accounts), we’ve now heard from Coinbase and have some clarity on what happened.

According to Coinbase, the issue was with its credit card processing bars, and it can be traced back to Visa. Specifically, it’s the result of Visa’s reversal and recharging of previous fees in the wake of the decision to classify Coinbase transactions as “cash advances.”

As a background, last week most banks and card issuers changed the Merchant Class Code (MCC) for Coinbase, which means that all transactions will now be classified as cash advances (which usually means that your bank charges higher fees). None of these additional fees go to Coinbase, which is ultimately a negative for the startup because the higher fees will likely lead to a decrease in users buying cryptocurrency with their credit cards.

While one might assume that these changes will only apply to future transactions, it appears that today without warning Visa (but not MasterCard or any other card network) has reversed and recharged some transactions that occurred between January 22 and February 11, in order to classify them under the status of My new client.

All of these transactions were refunded at the same time they were recharged, which means that in theory users shouldn’t notice anything other than the increased fees attributed to the new MCC token. But as anyone familiar with the payments industry knows, banking and credit card systems are rarely updated right away—especially for refunds that can take several days to reverse. This delay means that some users may see a second charge come before a refund, which without explanation will only appear as a duplicate charge.

Ultimately, all users should be fully refunded soon. Coinbase said it is working with Visa to make sure this happens, and will also reach out to potentially affected customers to urge them to verify and ensure their transaction history is accurate. It is still unclear how many people will be exposed to overdraft fees related to the issue, but Coinbase has said that it will ensure that every customer is fully refunded for any erroneous fees.

While Coinbase has certainly suffered from several technical vulnerabilities in the past few months, they may not have necessarily caused this same error. Of course, this does not mean that Coinbase users should not be alarmed. Regardless of who caused it, no one should ever be charged with an error (even if temporarily), especially if it results in users’ accounts being overdrawn or without funds. Coinbase needs to understand that they are not operating in a bubble (no pun intended) – the crypto world is known to be full of scams and scammers, and no matter how legitimate the company is, people will assume the worst when credit cards are charged without their consent.

We’ve reached out to Visa for comment and will update this post when we receive a response.

Here’s the full statement provided to TechCrunch from Dan Romero, Vice President and General Manager of Coinbase:

“Based on an internal investigation into the issue, we have determined that credit and debit card fees were the result of Visa transactions being reversed and recharged. We are working closely with Visa to ensure that affected customers are refunded as soon as possible, as well as notifying all customers who have made a transaction within the past few weeks. that they may be affected.

This issue stemmed from a recent decision by major banks and card issuers for card networks to change the Merchant Class Code (MCC) to purchase cryptocurrencies. Visa has changed the MCC code for digital currency purchases to one that allows major banks and card issuers to charge consumers additional fees.

Coinbase is actively working with major card networks to create a new MCC for cryptocurrency purchases. For the benefit of consumers, we hope this does not have an additional “cash advance” fee as we believe cards provide broader access to digital currency than just bank accounts.

We are taking this matter very seriously and are taking all necessary steps to resolve this issue as soon as possible.”

Note: The author owns a small amount of cryptocurrency.

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