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It would be up to the police to determine whether or not they would take a report. It would seem a bit suspicious that you didn't file one to begin . with. If someone used your card without permission and spent almost 1000 dollars, that would be a crime unless you granted permission. The bank would likely look at those facts.
What would be better to do to write a letter to the merchant directly stating that your representative took an order and a payment from an unauthorized personnel, or to continue to pursue with the bank of my debit card? The bank told me that I can pursue the merchant and they are done with the case...
If your bank does not have an appeal process, then there is unfortunately nothing you can do with respect to the bank. You have the right to contact the merchant but you are going to run into the same problem you did with your bank. If you look at it from their perspective, someone came in with your credit card and made a purchase. They had the actual credit card in hand as opposed to just having the account number and info. You did not file a police report which implies that you did not believe that a crime was committed. The person who made the purchase was given the credit card by one of your employees who presumably had the authority to have the credit card (or else you would be going after that employee). You then wait several months to contact the merchant. That is all they know from their perspective.
May I ask why you are not going after the person who used the card? That is really the only person you have recourse with.
He was a potential buyer of the business, he's out of town. I do not have his info. He wanted a service done at my restaurant to have it cleaned before he bought it and used my card, employee thought I authorized him to do it.
Unfortunately, that does not change the law. The recourse is still against either the person who used the card or the employee who gave him the card and not the merchant.
I wish I had a different answer but there are not many options when this many months have passed.