Merchant Gets Notified: If the bank agrees with the cardholder, they tell the business (the merchant) about the complaint.
After you dispute a charge, your credit card company has 30 days to confirm they received your dispute. Then, they have two billing cycles (no more than 90 days) to resolve the dispute. According to our findings, 91% of cardholders who disputed a charge had a resolution within a month.
By default, an acquirer will notify a merchant that they have received a chargeback after it has been filed. Merchants who wish to receive notification about chargebacks before they are filed must sign up for supplemental chargeback alert services from providers like Verifi or Ethoca.
In a Nutshell
These claims can result from misunderstandings, fraud, or attempts to bypass return policies. The cardholder can face consequences for chargeback abuse, including account freezes, losing one's bank account, damage to one's credit score, and even legal consequences.
What does the credit card company have to do? They must acknowledge receipt of your letter within 30 days. Within 90 days or two billing cycles, they must investigate your dispute.
Loss of revenue: Chargebacks result in a direct loss of revenue for merchants, as they have to refund the disputed amount to the customer.
Winning chargeback disputes is a challenge for merchants, with success rates typically hovering around 20-40%, depending on the industry and the quality of the evidence provided. Many disputes are lost due to insufficient documentation, delayed responses, or lack of expertise in presenting a compelling case.
Of those who've disputed a claim, 96% were given a successful resolution the last time they tried. As for why they disputed a claim, 75% had an unauthorized charge, 21% didn't receive the goods they paid for or they were defective, and 21% challenged a subscription charge.
Key Takeaways
In some cases, even if you willingly paid for something, you can file a dispute. This includes when there is a billing error, you did not get the item in acceptable condition, or you did not receive the full services promised.
If the issuer is able to explain the payment to the customer's satisfaction, the case will be closed. Otherwise, the transaction dispute is escalated to a chargeback, which is much worse for the merchant.
Who pays when you dispute a charge? Your issuing bank will cover the cost initially by providing you with a provisional credit for the original transaction amount. After filing the dispute, though, they will immediately recover those funds (plus fees) from the merchant's account.
Merchants must adhere to the deadline given by the acquirer. If they miss it, they will lose the chargeback dispute by default. Losing the chargeback means not only losing the sales revenue, but also the associated chargeback fees merchants typically must pay to cover the cost of the chargeback process.
The process kicks off for a merchant when they receive a notification from their payment processor or acquiring bank that a customer has disputed a transaction. This notification is the merchant's first indication that they need to gather evidence and prepare a response.
So, when a transaction is disputed, the payment the business received can be reversed and refunded to the cardholder. The original goal of such disputes — to maintain a fair and transparent payment system — is vital. Customers exploit this to their advantage and aim to keep the funds without a legitimate reason.
Yes, merchants can take cardholders to court for chargebacks, particularly if they believe the chargeback was fraudulent or unjustified. To do this, the merchant would file a lawsuit in small claims court, seeking to recover the funds that were charged back, plus any additional damages or costs incurred.
If the merchant chooses to fight the chargeback, they must submit a rebuttal letter and supporting evidence to prove that the dispute is invalid. The issuing bank will evaluate this evidence and decide whether to reverse or uphold the chargeback.
You might not always get a fair outcome when you dispute a chargeback, but you can increase your chances of winning by providing the right documents. Per our experience, if you do everything right, you can expect a 65% to 75% success rate.
Disputing credit report inaccuracies doesn't affect your credit, but some changes made in response to disputes can help your credit scores. The removal of inaccurate late payments, new-credit inquiries or bankruptcies could result in credit score increases.
Key takeaways
If the credit card issuer denies the dispute, the customer can request supporting documents and can also appeal the decision or file a complaint with consumer protection agencies. If the dispute is still not resolved, customers can seek legal advice and file a case.
If the merchant processes a large volume of fraudulent orders, and thus receives a large number of chargebacks relative to their orders, their acquiring bank will likely take steps to raise fees to penalize the merchant.
While most card networks give customers up to 120 days to dispute a transaction, there are a few instances where that time limit may drop to 45 or 75 days. The merchant's time to respond also ranges from 20 to 45 days, depending on the card network rules.
Cardholders can face consequences for filing false chargebacks. In fact, friendly fraud is considered to be a form of wire fraud, which means that, technically, you could go to jail for falsely disputing credit card charges.
If you have notified your financial institution about unauthorized transactions, but your bank won't refund stolen money, you may need a consumer fraud lawyer to protect your rights.
If you do not pay the disputed amount, the company may sue you to recover it.