FIGHTING CHARGEBACKS

In the past few years chargebacks from customers against merchants have increased dramatically. Here are the top questions asked:

HOW MUCH TIME DOES A CUSTOMER HAVE TO FILE A CHARGEBACK?

In most cases, cardholders have a 120-day window after the transaction in which to dispute a charge. However, there is also a shorter 75-day window for certain issues.

WHAT HAPPENS IF A MERCHANT LOSES A CHARGEBACK?

If you lose the initial chargeback determination, you'll have the option to appeal it directly to Visa or Mastercard. If your customer loses the chargeback but disagrees with the bank's decision, they can also pursue arbitration.

CAN A CUSTOMER GO TO JAIL FOR FRAUDULENT CHARGEBACKS?

Yes, absolutely. Fraudulent chargebacks are another form of theft. Merchants can take consumers to court over fraudulent chargebacks, and many jurisdictions will pursue criminal charges for chargeback-related fraud.

WHAT ARE THE TOP REASONS FOR CHARGEBACKS?

49%     The product didn’t match the website description

4%       The product didn’t meet the customer’s expectations

15%     The retailer shipped the wrong product

26%     The product never arrived

3%       The order was billed twice, or there were other clerical errors

30%     The purchase was made with a stolen credit card

WHAT CAN A MERCHANT DO TO PREVENT LOSING A CHARGEBACK DISPUTE?

Keep Accurate Records and Evidence

Disputes usually are more favorable to the customer than they are for the merchant. Therefore, the merchant needs to be doubly prepared to provide enough evidence to prove that the transaction was legitimate.

For this reason, always maintain detailed records and implement protocols and procedures for each sale from the very beginning. Carefully documented transactions are crucial for winning a chargeback dispute – confirmation emails, automated invoices, and follow-up emails with the relevant tracking details once the purchase was processed are a must for maintaining a compelling record to present during the dispute. Upon delivery, always ask for signature. If the merchant can’t prove that the item was shipped and received, they are much less likely to win the dispute. 

Other evidence that might be favorable for winning a dispute includes any communication (email, phone, etc.) between you and the customer concerning the transaction, the customer’s IP address and download time and date (if the service is digital), and proof that the customer lives or works at the delivery address, among others.

Find Out What The Reason Code Is

When a new chargeback has been filed against a merchant, always find out why. Reason codes provide valuable details on the reason why the customer decided to file a dispute in the first place. This will allow the merchant to mount a proper defense. Each card network (MasterCard, VISA, Discover, AMEX, etc.) has developed its own reason code system, so it’s imperative that the merchant knows which type of card was used for the transaction in question.  

A lot of times the reason code will not actually provide accurate details on the true motif behind a chargeback, but the dispute will be based on it. Merchants need to be very familiar with reason codes in order to fight chargebacks.

To prepare for winning a dispute, make sure to check the reason code system of the corresponding card issuer, and study carefully the one that correlates with the disputed transaction.

Try To Resolve Any Issues With Customer Service

Proactive customer service can go a long way towards resolving and preventing disputes from clients. Usually, chargebacks are initiated by a frustrated user who was unable to easily recover funds from the company’s customer service department. By providing clear contact information details and making refund policies available to customers, you can significantly reduce your chargeback volume. 

When a chargeback has been filed against you, you will usually have about 7 to 10 days to accept it or fight it through the card issuer’s channels. During this period of time, you can contact the customer directly and work with them on resolving the problem efficiently. If satisfied, they will most probably undo the chargeback by contacting the corresponding card issuer.

If the customer’s problem is legitimate, it is always better to issue a refund instead of fighting the chargeback. However, if you still consider that their reasons were not valid, you might have to go to a dispute process.

React Quickly

Once the dispute has been filed, you will have a very limited time to gather your evidence and prepare a winning response. Take note of all applicable deadlines, format your documentation properly according to the requirements, study carefully the reason code, and prepare a chargeback rebuttal letter to accompany your evidence. It might be helpful to prepare a response template with all the general information ahead of time, and just fill in with specific-case evidence when a chargeback happens.

Conclusions

Chargebacks can cause such a serious damage to businesses that simply having a high volume of chargebacks can lead to the termination of your merchant account. For this reason, winning a dispute is important, but preventing disputes from happening in the first place is even more important.