For years, Canadian citizens have been sounding the alarm on the unscrupulous practices of rental car companies. These companies have been involved in numerous scandals, overcharging customers for many reasons. While many of these issues have been brought to light, one policy often goes unnoticed: the exorbitant financial holds on renters’ credit cards. This practice not only harms rental car customers but also benefits the rental car companies themselves. This type of predatory practice needs immediate regulatory intervention.
When reserving a rental car, most companies require customers to provide a credit card that will be charged a substantial hold, typically ranging from $500 to $1,000. The ostensible reason for this hold is to cover potential speeding tickets or damages to the vehicle. However, there are two significant flaws in this argument.
Firstly, if the rental car company already has access to the customer’s credit card information, there is no logical reason to place a hold on their account. In the event of a ticket, the company can charge the customer’s card directly without needing a hold. Secondly, the notion that rental car companies would automatically bill customers for tickets or damages is misleading. There is a legal process to challenge and fight tickets and the option to pay lesser amounts. As a result, running a higher amount on a customer’s card is both unnecessary and unfair in the case of a ticket.
Additionally, most renters opt for some form of rental insurance, which makes the processing of credit cards for damages moot. Rental car companies often provide inferior coverage options at exorbitant prices, while the coverage provided by customers’ credit cards or their existing auto insurance can be more than sufficient. Thus, the financial hold becomes an unnecessary burden, tying up customers’ funds that they may need for other expenses.
We hypothesize the real reason behind rental car companies’ insistence on imposing financial holds on customers’ credit cards lies in the “Starbucks effect.” With billions of dollars stored in gift cards, Starbucks effectively functions as a bank, as this money remains in their accounts, accruing interest. Similarly, rental car companies stand to profit from the interest earned on the hundreds of thousands or even millions of dollars in the form of financial holds. This interest accumulates tax-free and amounts to hundreds of millions, if not billions, of dollars for the rental car industry.
Furthermore, the process is far from instantaneous when these funds are eventually returned. While some rental car companies may refund the amount within three to five business days, others subject customers to prolonged waits, often requiring the issuance of physical checks, which can take two to three weeks to arrive. This delay is unreasonable, considering that if the rental car companies can instantly charge the customer’s credit card, they should also be able to issue prompt refunds. Such practices unnecessarily inconvenience customers and can cause financial hardships.
Given these predatory practices by rental car companies, it is high time for the Canadian federal government and provincial legislation to enact laws that curtail such practices. These practices are exclusionary, disproportionately affecting marginalized individuals and perpetuating unfair business conduct. It is neccessary to protect consumers by putting an end to these sneaky financial strategies employed by rental car companies, which serve only to pad their own pockets.
It is utterly alarming and deeply concerning that rental car companies refuse to recognize Visa debit and Mastercard debits when renting a vehicle. This blatant discrimination only adds to the already perplexing situation. Visa debit and Mastercard debits offer the same functionalities as regular credit cards, serving as a valid and secure form of payment. The argument by rental car companies, suggesting that customers may not have sufficient funds in their bank accounts at the time of the hold or rental, is utterly baseless. Suppose insurance is already in place, and the companies are willing to hold a regular credit card. In that case, there should be no difference in accepting a hold on a Visa or Mastercard debit if the funds are available. Could this refusal have a hidden motive, which rental car companies fail to disclose to their customers?
The pressing question now lies in the government’s responsibility to protect its citizens. The existing laws are alarmingly weak, leaving Canadian citizens vulnerable to the predatory practices of rental car companies. It is high time for stricter regulations to be implemented. The government must prioritize the wellbeing of its people and take decisive action to rectify this unjust situation. For far too long, rental car companies have operated with impunity, taking advantage of a lack of oversight. It is imperative that the government step in, hold these companies accountable, and ensure the protection of its citizens’ rights and interests.
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