Many merchants believe that chargebacks are an unavoidable part of running a business and have come to accept them as a necessary evil. But that doesn’t make them any less frustrating. While there are ways to reduce the frequency of chargebacks, one should be prepared to handle them when they do crop up. Sometimes, it takes only one chargeback dispute to shatter a perfectly good day at work.
The chargeback process starts when a customer questions or disputes a purchase. Here’s a quick overview to help you understand the life-cycle of a common chargeback, followed by some tips and advice to help you write a solid and persuasive rebuttal letter:
Step 1: The customer initiates the chargeback. The customer doesn’t recognise a transaction on the credit/debit card statement and contacts the card company requesting they investigate the charge in question.
Step 2: The issuing bank contacts the merchant’s bank. Once a customer initiates the chargeback process, the customer’s bank will contact the merchant’s bank and ask for proof that the purchase was valid.
Step 3: To dispute or not to dispute. At this point, the merchant is notified of the chargeback and can dispute the claim according to the chargeback reason code. This is called a representment. If it’s a case of friendly fraud, the merchant should seek representment and write a chargeback rebuttal letter. If the merchant opts not to dispute it, they can simply do nothing.
How do I write a chargeback rebuttal letter?
Once you receive notification that a chargeback has been initiated, you should quickly prepare a professional response. You’ll typically have a brief window of time (7-10 days) to dispute it. If you believe the chargeback is fraudulent, you will need to provide the ‘compelling evidence’ that proves it. First, reference the accompanying chargeback reason code. This will help you understand why the customer is disputing the transaction and how you can respond to their argument.
‘Compelling evidence’ for your case can include:
- A clear copy of the sales receipt, invoice, or order form
- Proof of delivery or pick-up confirmation, particularly with signature, or that a service was fulfilled
- Proof that the customer was satisfied with the quality of the item or service
- The correct recording and delivery of the customer’s CVC or AVS
- Indications that previous transactions from the same IP address, email address, physical address or telephone number were undisputed
- Evidence of the customer’s IP address and the download time and date (if a digital service)
- Proof that the customer lives or works at the delivery address
- Proof that someone related to the customer could have made the purchase with the customer’s card
After you submit your rebuttal to the card network, the chargeback dispute is out of your hands.
Step 4: Decision time. After reviewing all the proof submitted by the merchant’s bank, the customer’s bank must decide if the purchase was actually legitimate.
Step 5: The customer is informed. At this point, the acquiring bank will either request that the customer pay the charge if the purchase was valid, or debit the merchant’s account because the customer’s claim hadn’t been handled adequately.
The advice provided here is meant to serve as a basic guide for merchants who decide to manage their chargebacks internally. While internal efforts might be appropriate for chargebacks that are issued in error or are obvious mistakes, chargeback dispute management in the vast majority of cases is very complex and time-consuming. Enlisting an expert will increase your chances of winning and make your day at work a whole lot easier.