There is nothing simple about dealing with disputed transactions, or chargebacks. Managing chargebacks can require a deep level of knowledge and a vigilance for staying up to date. Without such keen attention, the waters can be muddied rather quickly when you start digging into a chargeback to determine who is at fault. What can at first look like out-and-out chargeback fraud might turn out to be merchant error.
In such times—and others—you may need expert help and a firm grounding in all things regarding transaction disputes, including understanding your rights as a merchant. Your chargeback merchant rights are not something often addressed, as it almost seems to be a topic of discussion with little value, even easily dismissed. However, we’ve received more than a few questions and comments from a variety of businesses asking about rights for merchants, and we believe this is a very important topic.
The number one thing to keep in mind is this: You do have rights as a merchant. And although this may be unexpected, the customer is not always right.
Exercising your rights helps protect your business and ultimately strengthens the entire payments infrastructure—that being all merchants, issuers, acquiring banks, payment processing companies, credit card companies, and consumers.
Knowing Your Chargeback Merchant Rights
Your merchant rights are often overlooked (by yourself, the industry, and your customers) all too often. This behaviour most likely derives from two key aspects:
- Consumer protection: Chargebacks have evolved in the payments space to help protect consumers from credit card fraud. The idea was that consumers lacked confidence with the security of credit card transactions, so the chargeback solution would provide them with the confidence to rely on their credit cards.
- The customer is always right: How often have you heard the chant, read a statement, or viewed a sign in a shop that attests to the supreme rights of the customer—that the “customer is always right”? However it may be couched—as simple courtesy or sound business practice—this has created an underlying belief of the inviolability of the customer’s point of view, and that none would ever make a mistake or commit fraud. This industry-wide perception has made it inherently challenging for those in business to speak up about their own protective rights.
Your chargeback merchant rights are connected to the chargeback reason codes and rules associated with credit card issuers. Every credit card company has its own list of reason codes and associated processes for managing chargebacks, but in general it’s important to be aware of these following key merchant rights:
- Returned item chargebacks: When a customer has returned an item, a chargeback cannot be filed until 15 calendar days after the return date. This gives you time to issue a refund and review the returned item to ensure it meets the stipulations outlined in your refund/return policy.
- Issuer responsibility: Review the reason codes carefully and make sure that the card issuer is adhering to their own guidelines. Many issuer reason codes stipulate the necessity of the issuer’s attempt to resolve the problem with the customer before a chargeback is filed. Also, the issuer is supposed to confirm that they have done this before proceeding with a chargeback.
- Know the time limits: The reason code specifies how much time you have available to respond and how this time is calculated. Your customers are bound by several time periods ranging from 45 days up to 540 calendar days—it all depends on the chargeback reason code. Knowing all the details associated with chargeback reason codes can help protect you from abuse of the chargeback process.
- Delivery date rights: When a purchased item is delivered after the promised delivery date, the customer must first return the item before filing a chargeback. A late delivery is not grounds for a chargeback, and when this does happen, you might do well to consider the possibility of chargeback fraud.
- No cash-back chargebacks: When your customer requests a cash refund following the purchase of your product or service, this cash-back cannot be included in the chargeback amount. Often, customers will try to cheat the system by asking for cash-back and then include this amount in their chargeback claim. All too often the customer will win this “double refund”, because the merchant doesn’t know better or has become used to simply not representing the chargeback.
- Representment is your right: This is ultimately your most important merchant right—the right to represent. Remember that you should be guarded about becoming a victim of chargebacks. The strength of the industry depends on merchants like you who stand up for their rights and are willing to dispute or represent against invalid chargebacks. Doing so reinforces your rights, reminds issuers and banks that the chargeback process must be observed and followed, and signals to customers that they cannot assume that “the customer is always right” mantra will automatically win the day.
Exercising Your Merchant Rights
You do have rights as a merchant, and you are not expected to be a victim of the chargeback system. We suggest you do more research about chargebacks, chargeback solutions such as CDRN, and how you can better protect your business from fraud. Also, know that we welcome to contact us with your questions and let us work with you to ensure you’re taking advantage of the latest in payment solutions technology, and that you are up to date with the latest industry regulations.