Chargebacks are a nightmare for any merchant. They represent lost revenue, administrative headaches, and potential damage to your reputation. But what happens if you, as a merchant, simply don’t respond to a chargeback? Brace yourself, because the consequences can be dire.
The Grim Reality: Automatic Loss and Additional Fees
Failing to respond to a chargeback is akin to waving a white flag in the face of the customer’s claim. The issuing bank assuming the customer’s side, will automatically rule in their favor. This means you’ll not only lose the disputed funds but also be slapped with a hefty chargeback fee. The exact amount varies depending on the card network and your processing bank, but it can easily range from $20 to $100 per chargeback.
The Domino Effect: A Cascade of Negative Impacts
The repercussions of ignoring a chargeback don’t stop there. Here’s a glimpse into the domino effect that can unfold:
- Increased Chargeback Ratio: Every chargeback counts against your overall chargeback ratio, a key metric that reflects your risk profile as a merchant. A high ratio can make it difficult to secure future payment processing services or even lead to account termination.
- Damaged Reputation: Unresolved chargebacks can tarnish your reputation with both customers and card networks. This can make it harder to attract new customers and potentially lead to higher processing fees.
- Loss of Trust: Ignoring a chargeback sends a message to your customers that you don’t value their concerns or take their complaints seriously. This can erode trust and damage your brand image.
The Path to Redemption: Fighting the Chargeback
Fortunately, there’s a way to escape this grim fate: fight the chargeback. This process, known as representment, involves submitting evidence to the issuing bank that refutes the customer’s claim and proves the legitimacy of the transaction.
Gathering Your Arsenal: Essential Evidence for Representment
To successfully fight a chargeback, you’ll need to gather compelling evidence that supports your case. This may include:
- Transaction details: Date, time, amount, merchant descriptor, and any relevant order or invoice information.
- Proof of delivery: Shipping receipts, tracking numbers, and signed delivery confirmations.
- Customer communication: Emails, chat logs, or any other correspondence that demonstrates your attempts to resolve the issue with the customer.
- Fraud prevention measures: Evidence of AVS (address verification system) and CVV (card verification value) checks, as well as any other fraud detection tools you may have employed.
The Importance of Timeliness: Responding Within the Deadline
Remember, time is of the essence. Most card networks have strict deadlines for responding to chargebacks, typically ranging from 15 to 30 days. Missing the deadline automatically results in a loss for the merchant.
Proactive Prevention: Avoiding Chargebacks in the First Place
The best way to deal with chargebacks is to prevent them from happening altogether. Here are some proactive steps you can take:
- Implement robust fraud prevention measures: Utilize tools like AVS, CVV checks, and address verification services to minimize the risk of fraudulent transactions.
- Ensure clear and accurate billing descriptors: Make sure your billing descriptors accurately reflect your business and the products or services you offer. This helps customers easily recognize charges on their statements.
- Provide excellent customer service: Address customer concerns promptly and professionally. Offer clear return and refund policies, and strive to resolve issues before they escalate to chargebacks.
- Utilize chargeback management tools: Consider investing in chargeback management software or services to automate the process of responding to chargebacks and improve your success rate.
Remember, every chargeback represents a lost opportunity and a potential threat to your business. By understanding the consequences of ignoring chargebacks and taking proactive steps to prevent them, you can protect your revenue, reputation, and long-term success.
Get Commerce Protection Buyer’s Guide
Navigating the chargeback for goods not received process is a painful undertaking for any merchant.
The seller has the chance to refute a customer’s order dispute when they file a chargeback. A merchant must follow a set of procedures established by the card associations with the issuing and acquiring banks, who serve as middlemen between the customer and the merchant, in order to contest a chargeback and ultimately prevail. (A list of players in the payments ecosystem, like acquiring and issuing banks, payment processors etc. ).
Since consumers are protected by consumer protection laws, merchants frequently face an uphill battle in order to prevail in chargeback abuse disputes. To even take part in disputing the chargeback automation, merchants have to finish each step of the procedure within progressively shorter deadlines.
In light of this, we have described the entire procedure that any merchant must follow in order to combat chargeback fraud detection. Our goal is to shed light on ecommerce chargeback protection process and help merchants understand the intricacies involved. Vendor evaluation help.
Our free Commerce Protection Buyer’s Guide may be of use to you as an online retailer comparing commerce protection providers. This thorough guide describes the evolution of fraud prevention in commerce protection and the essential elements of a commerce protection solution. Takeaway resources include:
- A sample RFI template to leverage in your evaluation process
- Advice on constructing a business case for a solution pertaining to commerce protection
- How to assess return on investment and comprehend the instruments utilized to guard against fraud and stop chargebacks
- How to find the right solution for your business
Three dispute types, or cycles, are available to merchants who choose to contest a chargeback after receiving notification of it:
First chargeback: The initial chargeback dispute and pre-arbitration
All merchant chargeback disputes begin when a cardholder files a dispute on a transaction with their issuing bank. (Depending on the card association, a cardholder typically has 45 to 180 days to contest a charge. In certain cases, they can contest a charge that is more than a year old if certain conditions are met, like natural disasters or family emergencies. After that, the issuing bank examines the claim to ascertain its veracity, which can take two to six weeks. Visa gives issuing banks up to 30 days to review. If the claim is legitimate, they subsequently notify the merchant by sending it to the merchant’s acquiring bank or payment processor.
The acquiring bank has taken money from the merchant account to reimburse the cardholder for the transaction and to cover the costs of looking into the chargeback, and the merchant is also informed that they have received a dispute from the cardholders. (In the event that the merchant prevails in the chargeback dispute, the reimbursement will be temporarily credited to the cardholder’s account. ).
Below is an example of a standard chargeback notice that a merchant may receive. Each bank or processor may have a different format, but the details included will be the same.
Along with notifying the merchant of the chargeback dispute and providing their version of the notice mentioned above, the acquiring bank or payment processor also sends forms for the merchant to fill out and return with an explanation of the dispute. (Merchants typically have a very short window of time—roughly seven to ten days—in which to reply to the request. ).
Additionally, the merchant is frequently asked to provide comprehensive proof that they did, in fact, fulfill the customer’s order in the manner specified, including records such as:
- Evidence of shipment, which is typically provided by a tracking number, shipping receipt, etc. ).
- Sales or transaction receipt
- Matching bill-to and ship-to addresses
- Evidence of delivery (often in the form of an email confirmation, a delivery receipt from the shipping company, etc.) ).
- Positive AVS response
- Any exchanges with the client or additional proof that the seller completed the transaction
The forms that the acquiring bank receives back from the merchant will be forwarded to the cardholder’s issuing bank. The acquiring bank posts a temporary credit back in the merchant account for the chargeback amount after sending the evidence to the issuing bank. (At this time, two temporary credits exist — one to the cardholder and one to the merchant. When the chargeback dispute is resolved, one of these credits becomes permanent, and one reverses to a debit. ).
After that, it takes 4-6 weeks for the issuing bank to examine the evidence provided by the merchant to decide whether or not the merchant completed the transaction as stated. Visa only gives the issuing bank 30 days to review the evidence. It’s crucial to remember that when it comes to Visa chargebacks, businesses have one chance (one pre-arbitration round) to collect and present their case to the issuing bank before the bank chooses to take the merchant to court or not. One of three things will occur:
- The issuing bank will decide in favor of the cardholder and the chargeback will remain if they determine that the merchant has not presented strong evidence. Temporary credit reversal occurs for the merchant, and the cardholder’s provisional credit becomes permanent. At this point, the acquiring bank has the option to request arbitration.
- The temporary credit to the merchant will become permanent if the issuing bank determines that the evidence presented by the merchant has successfully refuted the chargeback. The original transaction will be charged to the cardholder’s account once more.
- The issuing bank stipulates that even though the merchant successfully contested the chargeback, they still decided to submit a second chargeback of pre-arbitration because the cardholder had updated their information or the chargeback code had changed.
Winning fraudulent merchant chargebacks
FAQ
What happens if a company doesn’t respond to a chargeback?
What happens if merchant doesn’t respond to dispute?
How long does a merchant have to respond to a chargeback?
Do merchants usually fight chargebacks?
What happens if a merchant files a chargeback?
Navigating the chargeback for goods not received process is a painful undertaking for any merchant. When a customer disputes an order and files a chargeback, the merchant has an opportunity to contest that dispute.
Can a merchant dispute a chargeback?
The merchant can decide to dispute the chargeback or accept it. A chargeback may begin simply enough when a cardholder contacts their bank to dispute a charge, but the merchant can fight the chargeback, banks can challenge each other’s decisions, the card networks can get dragged in to adjudicate—things can get messy.
What happens when a chargeback is filed?
When the chargeback is filed, the merchant must decide whether to accept it or dispute it. A bank or other financial institution that issues a branded payment card to the cardholder. Examples: Bank of America, Wells Fargo, Capital One. The merchant’s bank, which holds their merchant account and enables them to accept credit card payments.
What happens if a bank loses a chargeback dispute?
The card association will review all the evidence supplied by both the issuing and acquiring banks and make a final decision on what party to rule in favor of for the chargeback dispute. After the card association has made their decision, the chargeback dispute is closed and the losing bank must pay the arbitration fees.