How to dispute a chargeback

The chargeback system allows buyers to reverse a transaction if the service or goods they’ve received isn’t up to scratch. If a product is damaged, faulty or doesn’t arrive, for example, a buyer may use the chargeback process to have their funds returned to them.

Although chargebacks are designed to protect consumers, they can have a negative impact on businesses. While some consumers use the chargeback process is genuine circumstances, others see it as an opportunity to claim a fraudulent refund.

When should chargebacks be disputed?

In some cases, dishonest consumers may instigate chargeback procedures even when they have received high-quality goods and services. Despite not meeting the criteria for a genuine chargeback, their attempts to play the system are often successful.

As a result, businesses suffer a significant loss due to fraudulent chargebacks. While incurring the costs of delivering a product or service, companies do not receive the income from the sale as a result of the chargeback. Clearly, this can have a devastating impact on organizations when the rate of chargebacks becomes too much to mitigate. For smaller businesses, in particular, a flurry of fraudulent chargebacks can be enough to disrupt operations and even cause businesses to close.

Can subscription billing be subject to chargebacks?

Yes. As the subscription economy has grown, consumers have begun to use the chargeback process to claim back the cost of daily, weekly, monthly and yearly subscriptions. Even though they may have used the services or products they have subscribed to, they are often unrepentant about seeking a chargeback.

In many cases, consumers claim that they were unaware they were going to be billed for the services they received. As businesses often use free trials to encourage users to sign up to their services, consumers do sometimes forget to cancel their subscription when the free trial ends. Although they are billed in accordance with the terms they agreed to, consumers then claim that they didn’t agree or intend to continue with a paid subscription. On this basis, they request a chargeback and attempt to claim a refund.

In fact, it’s not uncommon for consumers to try and claim back the cost of more than one subscription bill. If a buyer has paid for three weekly subscriptions, for example, they may claim that they didn’t notice the money going out of their account. They will use this reasoning to claim that a chargeback should be issued for each of the three payments they made.

Can chargebacks be disputed?

Yes. Merchants have the opportunity to dispute a chargeback and should do so if they feel the claimant is acting without merit. For a business that believes they are being faced with fraudulent chargebacks, the ability to dispute the consumer’s request is essential.

However, the chargeback dispute process isn’t always easy or straightforward. As buyers request a chargeback directly from their bank or financial service provider, the seller doesn’t have the opportunity to dispute the chargeback before it takes place. Instead, they must dispute the chargeback once it’s happened and requests that the bank or financial service provider charges the customer again, effectively rejecting their chargeback request.

Sometimes known as representment, a chargeback dispute can enable merchants to minimize their losses and overcome fraudulent actions committed by consumers.

How do you dispute a chargeback?

Unfortunately for businesses, disputing a chargeback can be time-intensive and tricky. It’s estimated that only 21% of chargeback disputes are successful, which means that businesses have to be careful to only use the process when they have a realistic chance of winning. Otherwise, your losses could be increased simply by allocating staff to deal with the matter.

The first step to successfully disputing a chargeback is familiarizing yourself with the issuer’s dispute process. As there is no standardized approach to chargeback disputes, every financial institution sets its own regulations and guidelines. As a business, you will need to identify a clear process for dealing with disputes via various financial service providers.

There are numerous deadlines and documentation requirements that are enforced when a chargeback is disputed. Failure to meet these strict guidelines will result in your dispute failing, so it’s vital you schedule your dispute activity accordingly.

Keeping accurate and up-to-date records will assist throughout the process, as you will need to refer to these regularly and submit copies to the relevant financial institution. It’s essential you assess each chargeback in detail before you decide whether or not to dispute it. By maintaining comprehensive records, you can ensure that you have all the facts before you engage in the dispute process.

Should you dispute chargebacks?

If someone makes a fraudulent chargeback, it’s natural to want to dispute it. However, doing so can be risky. Even if you’re in the right and the chargeback is illegitimate, the time involved in disputing it could add to the loss you’ve already incurred.

Furthermore, the successful management of a business means deciding when it’s worth enforcing strict regulations and when it isn’t. Disputing a chargeback could risk reducing customer loyalty and may even garner bad P.R. for your business. With consumers able to place online reviews in seconds, it doesn’t take long for a company’s approach to chargebacks to become public knowledge.

In some cases, managers and business owners decide that the time and cost involved in disputing a chargeback isn’t worth the gain, even if their dispute was successful.

Preventing chargebacks and losses

To minimize the losses sustained by your business, the best way to combat chargebacks may be to avoid them altogether. By offering exemplary customer service and issuing accurate subscription billing, companies can significantly reduce the rate of chargebacks. While some nefarious consumers will always try and get something for nothing, this approach is, perhaps, the most effective way of building a loyal customer base.

As subscription-based billing relies on the continual goodwill and satisfaction of your customers, avoiding chargeback disputes where possible can be advantageous. Keeping accurate records will enable you to identify customers who make repeated chargeback requests and you may decide that these chargebacks are worth disputing. Conversely, if your record shows that a regular subscriber has made just one dubious chargeback request, you may decide to suffer the isolated loss and retain them as a long-term customer instead.

By taking a flexible approach to chargeback disputes, businesses can choose when a chargeback is worth disputing. This ensures they can minimize their losses whilst also maintaining a positive reputation amongst consumers.