The danger of hiring a Dollar car with a card

When you give a car rental company your credit card details, you expect to pay for the use of a vehicle for a week or so: you don't expect to pay for the whole car. This week Virgin launched a flexible credit card which enables customers to choose the card's key features. But how many people realise your credit card details can be a blank cheque in the wrong hands?

When you give a car rental company your credit card details, you expect to pay for the use of a vehicle for a week or so: you don't expect to pay for the whole car. This week Virgin launched a flexible credit card which enables customers to choose the card's key features. But how many people realise your credit card details can be a blank cheque in the wrong hands?

Your card can be charged for the full value of the car if something goes wrong, even if it is not your fault. And your credit card company has to guarantee payment while you argue about it.

I had the shock of my life when I returned from a recent trip to the United States, opened my credit card statement and found the car rental agency, Dollar, had charged a staggering $15,000 (£10,500) in addition to the cost of a week's hire. We had picked up the car at JFK airport, New York, and, as arranged by our travel agency, dropped it off a week later in Boston, Massachusetts.

We soon realised what had happened. Dollar New York had lost its vehicle, and Dollar Boston had not told New York it had been returned. When we got home two weeks later Dollar was still looking for its car. They sent us a threatening letter. We told them the car was in Boston. A week later, we discovered a heart-stopping $15,000 had been charged on our NatWest Mastercard, without warning.

Nick Gill of NatWest said: "Giving details or an imprint of your credit card on an open-ended basis when you hire a car or stay at a hotel relies on the retailer acting in good faith and behaving sensibly. The car rental company seems to have been very silly."

But the standard rental agreement does give the hire company the right to charge the whole cost of the car to your credit card, and the system is wide open to abuse. Mr Clayton, the Dollar manager at JFK New York, was robustly unrepentant. "So many cars go missing here," he told me. "Charging the full amount gets the customer to react."

I reacted by phoning NatWest credit card centre to try to stop the charge. I was told they could not unless it was fraudulent. When you give your credit card details to a car rental company and sign the standard contract you are apparently authorising any "adjustments" they make to the bill. You might end up with an extra charge if, for instance, you have not filled the petrol tank before handing the car back. Charging for the whole car was very unusual, but legal.

All NatWest could do was hold the $15,000 "in dispute" while the chargeback department obtained documents from Dollar's bank. This could take up to 45 days because they cannot deal with Dollar or any retailer direct. Mercifully, the cardholder is not charged interest on the money while this happens. I was furious. Despite all the tough talk from banks and credit institutions about the problems of credit card fraud, this massive sum, way above the card's £8,000 maximum limit, had gone through unchecked. Dollar New York had charged $1,000 initially. Then, a week later, three separate amounts of $2,000 on one day. The rest was charged in separate transactions of $6,000 and $2,000 the next day. Mr Clayton admitted it had been split in case there were safety restrictions or limits on the account.

Cally Salomane, of Dollar UK, denies it is company policy to charge first and ask questions later. "I've never seen anything like this," he said. "If a car is not returned on time you would expect the card to be charged rental on a weekly or daily basis. I have never known the cost of the whole car to be charged to the credit card, just like that. I can't explain the weird pattern of the charges."

Mike Naylor, of the Consumers Association, says: "You would imagine that such a large amount debited by one organisation in such a strange manner would have been picked up by the credit card company's fraud intelligence systems. These are designed to identify odd or exceptionally large payments so they can be investigated. It is accepted good practice for the credit card company to contact the account holder if there seems to be an unusual transaction before accepting the charge. You would think it would make sense in view of the hundreds of millions of pounds they say they lose in fraudulent transactions each year."

Mr Gill told me: "We do have fraud detection systems. No fraud would have been suspected in your case because you were dealing with a reputable hire company." Because I am regarded as a good reliable customer, Dollar's action in breaching the credit limit did not set off alarm bells either.

Finally, Dollar New York established that the car was at Dollar in Boston. The $15,000 was refunded to my credit card account. But not before my next credit card statement showed that Dollar Miami Florida, where I had rented another car the day I flew from Boston, had charged me an extra $561 (£390) a week after I arrived home. This time there was a muddle over prepayment vouchers. Although I had paid for the rental in the UK, Dollar had discovered, nearly a fortnight after I gave the car back, a gap in its paperwork so it had charged me a week's rental again.

How can credit card holders stop this abuse? Mr Naylor says you should always make sure credit card voucher or imprint taken as security is torn up or given back when you return a car or leave a hotel, although he admits: "There have been problems when people have settled hotel or car rental payments in cash, only to find the credit card given as security has been charged even after they have paid the bill."