Merchant Chargeback Rights – What You Need to Know |

Merchant Chargeback Rights – What You Need to Know

merchant chargeback rights

A credit card chargeback is a reversal of a credit card transaction at the cardholder’s request. This forceful retrieval occurs when the customer has been ripped off or scammed by a merchant. This feature aims to protect cardholders from unauthorized transactions or theft.

Alas, some individuals take advantage of this system, going around the merchant and contacting the bank directly. Often, it may simply be an error, a misunderstanding, or even intentional criminal fraud. This system is often used to the detriment of the merchant, so in this guide, we address the way merchants should react to illegal disputes, the merchant chargeback rights, and other essential factors to be aware of.

Should Merchants Contest Chargebacks?

Not all issues like this are legitimate, and it is necessary to be able to differentiate legitimate ones from fraudulent ones. It is always better to let the legitimate ones go because fighting it does not help your case or standing, but all fraudulent repayments should be fought using the “representment” process. Because when merchants contest chargebacks, they imply that the refund is not justified. Representment involves submitting valuable and convincing evidence to the customer’s issuing bank to prove the transaction’s legitimacy and overturn their claims. And this is actually one of the merchant rights.

Even if they can count on their merchant chargeback rights, some prefer to ignore the representment process, especially when the amounts are not high. However, lost revenue is not the only consequence. Chargebacks also add to your ratio. In fact, the chargeback ratio can affect the fees card companies collect from you for processing payments on your platform. We advise merchants to employ good management software to protect them from fraud and prevent consequences and lost revenue. Other than that, you should also know the merchant rights and the necessary steps and procedures to follow to help reduce the curve.

Key Protections for Merchants

Several protection mechanisms are available to merchants in every case. Some of these include:

merchant protection mechanisms
  • Original Purchase Price: The issuing bank cannot request a refund that exceeds the total of the actual transaction amount. But they can ask for one or more portions if they fall within the range. And more importantly, if a refund was already made, the chargeback demand will not be accepted because sellers shouldn’t pay twice for the same issue.
  • Zero Cashback Refunds: The cardholder cannot recover cash back from a transaction when asking for a chargeback. They can only receive a refund for the amount that does not contemplate the cashback.
  • Late Delivery Exemption: As long as merchants do not abuse any shipping policies, late delivery may not qualify for repayment if the reason for it was out of their control. In addition, merchant chargebacks rights clearly state that clients should go first to the company and ask for a refund if applicable. Only after that is it possible to file a chargeback.
  • 15-Day Refund: Merchants have up to 15 days to refund a client after the return of a product so that they can avoid chargebacks. Therefore, according to the merchant’s chargeback rights, even if the client asks for a chargeback before the end of the 15 days, the issuer must wait.
  • Reason Codes: Reason codes require cardholders to contact the merchant and try to resolve any issues before filing a case. The issuing bank will be infringing on the merchant’s chargeback rights if they do not ensure that the cardholder has contacted the merchant and tried to resolve the issue first.
  • Access to information: One of the merchant chargeback rights is to request documentation that helps understand the customer’s claim. They can also rely on the reason codes—alphanumeric 2 to 4 digit—that identify the reason for the dispute. With the code, merchants can have enough information to gather their documents for representment.
  • Representment: It is one of the most valuable merchant rights. Representment is the process of fighting against the case when sellers believe they face a friendly fraud. They will have to give evidence to the issuing bank to prove that the charge was valid. This process can also help prevent other customers from making fraudulent claims in the future and forces the issuing band to do due diligence.
  • Attempt to Resolve Before Chargeback: Merchants have the right to resolve disputes directly with customers before a chargeback is initiated. By offering efficient customer service, clear communication, and fair resolutions, merchants can address concerns and prevent chargebacks. Proactive dispute resolution promotes customer satisfaction and helps maintain a positive business reputation.
  • The Right to Arbitration: association (Visa, Mastercard, American Express) reviews the dispute. This provides an opportunity for a fair evaluation of evidence and a final resolution. Arbitration ensures merchants can present their case and seek a just outcome in chargeback disputes.

Credit Card Chargeback Merchant Rights

You must fight any illegal issues filed against you. By doing so, you get a chance to regain lost revenue. Frequent repayments make your platform an easy target for fraudsters, so fight when you can.

You need compelling evidence to win any case, so ensure you have all the necessary documents before committing time to fight. The great idea is to get experts like Chargebackhit to take over such strenuous tasks while you focus on your company.

Credit Card Chargeback Merchant Rights Contract Clause

The policy does not focus on protections for merchants. It was created with the customer in mind, so it does not offer many safety nets for sellers. The Fair Credit Billing Act says that buyers do not require your permission to lay complaints with their issuing bank and file for a chargeback. It means that a “no refund policy” or “no return policy” does not protect your company.

It is crucial to clarify your terms and conditions and keep evidence of transactions and purchases that can prove your case. By following the strict rules set by credit card companies, you can scale out of the problem without hassle.

Time Limits for Credit Card Chargebacks

Depending on the reason code and card provider, customers can file a dispute with their banks within 60 to 120 days of a transaction. Merchants must respond to the query within 30 to 45 days, based on the reason code and card issuer. Until the repayment is challenged and proved illegitimate, it remains legal in every way.

Customers can also file a case if they do not get a refund after returning the merch. According to the law, they must wait 15 days, and if the seller doesn’t reply within that period, you can file a dispute. The consequence for not responding within the specified timeframe is usually an extra charge from the issuer bank. This time limit favors both sides, especially the merchant, who can ensure that the goods have arrived and the refund is rushed out.

Merchants Must Defend Their Rights

Merchants must defend their rights in the chargeback process to protect their revenue, reputation, and overall business interests. By actively participating in the process, merchants can present their case and provide evidence to challenge unjustified chargebacks. To prepare for chargeback disputes, merchants should have the following information:

  • Sales receipts and/or order forms: Merchants should keep copies of sales receipts or order forms as proof of the customer’s authorization and completion of the transaction. These documents help demonstrate that the customer willingly made the purchase.
  • Tracking information and proof of delivery: Maintaining tracking information and proof of delivery is crucial, especially for physical goods. This evidence shows that the item was shipped and successfully delivered to the customer, reducing the likelihood of a dispute.
  • Return policy documentation: Merchants should have a clear and easily accessible return policy on their website. They should keep a copy of the policy and provide evidence that it was visible and available to the customer during the transaction. This helps to counter claims of dissatisfaction or misrepresentation.
  • Items’ descriptions and screenshots: Merchants should keep records of the product or service descriptions and take screenshots of how they appeared on their website at the time of purchase. This evidence can be used to refute claims of false advertising or misrepresentation.
  • Correspondence demonstrating delivery success or customer satisfaction: Merchants should retain any communication with customers that proves delivery success or customer satisfaction. This can include emails, chat logs, or any other form of communication where the customer expresses satisfaction with the product or service.

By having this information readily available, merchants are better equipped to respond to chargeback disputes with compelling evidence. It helps strengthen their position, demonstrate the legitimacy of the transaction, and increase the chances of a successful defense in the chargeback process.

Get Professional Chargeback Help

Unfortunately, credit card chargebacks are on the rise. And we know you want to focus on growing your business instead of worrying about theft and fraud.Leave it to us! Chargebackhit will make decisions based on your business’ transaction and user data to Prevent, Resolve, or Recover chargebacks. These are precisely the three solutions we have available to reduce your chargeback ratio.

Our Prevent solution will act on your pre-disputes to ensure that chargebacks are not filed by sharing all the details about the purchase to validate the transaction. The Resolve solution will help sellers quickly solve disputes, either automatically or based on the seller’s decision. Last but not least, our Recover solution is the one that will give all the support to build a robust repesentment package with solid evidence against abusive chargebacks.

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