The Payment Dispute Process Step by Step

Table of Contents

Every chargeback has an origin report, and in most cases, that report involves a cardholder with a problem. They might suspect that their card was used without their mandate, or they might feel like the merchant ripped them off somehow. Whatever the reason, they don ’ triiodothyronine feel obligated to pay back the charge—so they contact their circuit board issuer to dispute it .

While not every dispute leads inescapably to a chargeback, about all chargebacks originate out of cardholder disputes. Understanding how quarrel work can help with fight and avoiding chargebacks, so what do merchants need to know about how banks and card networks manage this march ?

The right to dispute a care on your payment card and demand a chargeback was established by the Fair Credit Billing Act of 1974. The captive behind this law makes sense—in order to feel safe about freely using their payment cards, cardholders need a means to appeal deceitful and wrong transactions.

To fulfill their requirements under the jurisprudence, banks and card networks allow their customers to dispute these transactions. If they find that the dispute has merit, they grant a chargeback, taking the money back from the merchant and returning it to the cardholder .
not every chargeback requires a customer challenge. Issuers can and will initiate chargebacks on their own volition if they find that a merchant has processed a transaction improperly. For most merchants, however, it ’ s much more coarse to encounter chargebacks that arise from cardholder disputes .

What is the dispute process?

The law requires card issuers to provide a dispute and chargeback march, but it does not spell out in bang-up detail how that serve needs to be structured .
The major batting order networks, with an eye toward creating a healthy and trustworthy payments ecosystem, have developed largely like processes that have undergo revisions and updates over the years as the ways consumers use their requital cards have evolved .
When a cardholder calls or writes to their issue savings bank with a dispute claim, the first thing the issuer must do is determine whether the claim provides a legitimate basis to grant a chargeback. Each net has its own list of reasons for which a cardholder can dispute a mission, but although they may be categorized differently, on the hale the approve list of reasons tends to fall along roughly the same lines for all the major networks. Fraud, wrong or duplicate charges, and damaged, defective, or undelivered goods or services are the chief cases where a chargeback is allowed .

If the claim is square and unambiguous, the issuer may immediately assign a reason code and escalate the claim to a chargeback .

For exemplar, let ’ s say a cardholder calls to dispute a charge made at a restaurant hundreds of miles from where they live, when they made charges at local stores that lapp day—this would be a clear subject where a genuine fraud chargeback would be allow .
many claims, however, are subject to differing interpretations. A customer may call to dispute a charge by saying that they don ’ deoxythymidine monophosphate recognize it, or that a product they ordered did not live up to their expectations .
Download the eGuide, 4 Reasons to Hire a Chargeback Management Company In cases like these, the issuer may want to get the merchant ’ randomness position by sending a question known as a retrieval request to the merchant through their acquiring savings bank. If the merchant responds in prison term, they might be able to provide information that invalidates the dispute claim—but sometimes the issuer will find the merchant ’ s answer insufficient, and proceed with a chargeback .
Customers who attempt to dispute a charge for an bastard argue will typically be turned away by the bank before the quarrel is always opened. however, customers who know that their rationality for wanting a chargeback is n’t on the number but think they should get one anyhow may lie about their reasons for filing a chargeback, thereby committing “ friendly imposter. ” Banks do n’t typically make much of an feat to stop friendly fraud, erring on the side of their customer and leaving the task of separating fact from fabrication to the chargeback action .

What happens when a dispute becomes a chargeback?

When a merchant receives a chargeback, they have a option to make. They can accept the chargeback by acknowledging it, or they can fight it by presenting the charge a second time. A merchant may besides fail to respond to the dispute at all, in which case the chargeback is mechanically accepted when the deadline passes. The merchant may besides be charged an extra fee for failing to respond. Fighting the chargeback, much referred to as “ representment, ” means the merchant must present compelling testify that disproves the cardholder ’ sulfur claims. If the evidence is insufficient, the issuer will uphold the chargeback .

With sufficient attest, however, the issuer may decide that the chargeback was undue and give the challenge funds back to the merchant.

unfortunately, flush if the merchant wins the quarrel, they are still responsible for paying the chargeback tip. Chargeback fees vary, but are typically between $ 10 and $ 25 USD. In addition, chargebacks reversed through representment still count against a merchant ‘s chargeback proportion, and there are severe consequences for merchants who let that ratio creep excessively high .
A successful representment does not inevitably mean that the dispute serve is over. If one of the parties involved ( typically the merchant ) refuses to accept the issuer ‘s decision, they may escalate the chargeback to arbitration. In arbitration, the card network examines the evidence and makes a decision, charging a brawny fee for doing so. The network ‘s decision is final and can not be appealed .

How does the dispute process differ between card networks?

While all of the menu networks have like dispute processes, there are some differences in the details—especially after the dispute reaches the representment phase .
Visa streamlines their serve by assigning disputes to one of two workflows— “ Allocation ” for disputes related to fraud and authority errors, and “ Collaboration ” for all early disputes. In the Allocation work flow, liability is automatically assigned to the merchant .
collaboration disputes follow the more traditional process that allows the merchant to provide data and, if they choose, represent the transaction. If the issuer rejects the represent charge, the merchant can appeal to Visa for arbitration .
American Express, as a menu network that is besides its own issuer, dispenses with the arbitration phase entirely, which makes sense—if they reject a merchant ’ s representment, there ’ s no higher authority to appeal to for a second opinion .

How can merchants stop disputes from becoming chargebacks?

These most effective way to stop a dispute from becoming a chargeback is to avoid getting involved in disputes in the foremost place. This tip can help :

  • To avoid confusing customers when they review their bank statement, use a merchant descriptor they will recognize, ideally with a customer service phone number included.
  • Use anti-fraud tools and AVS/CVV matching to deter fraudsters.
  • Market your products with transparency and honesty to avoid setting unrealistic expectations.
  • Provide excellent customer service, and don’t hesitate to offer a refund if a customer is unhappy.
  • Send customers delivery updates and tracking information when their orders ship.

once a challenge has already started, be sure to respond to all recovery requests within the needed time-frame, and provide all the relevant information that the issuer is asking for .
When you get a chargeback that you believe is illegitimate, represent the transaction and relegate compelling tell that proves your event .

Know your dispute options

When you ’ re comfortable navigating the dispute march, it ’ sulfur much easier to avoid unnecessary chargebacks .
retrieval requests frequently provide you with an opportunity to neutralize a likely chargeback, but you have to be ready to respond promptly with attested facts on your side. It ’ s besides very helpful to know when you should fight a chargeback and when it ’ sulfur best to accept the legitimate ones .
If you ’ re having disturb giving your disputes the care and resources they need, remember that chargeback experts are constantly available to help you craft your responses and develop an effective strategy for preventing disputes, fraud, and chargebacks.


How long do transaction disputes take?

transaction disputes typically take 60 to 90 days to resolve, although peculiarly complicated disputes may take longer .

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