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What is a Bank Dispute?
A dispute occurs when a cardholder contacts their card issuing bank and demands to have their money returned. Disputes are a feature of the Visa, MasterCard, American Express and Discover card networks intended to protect cardholders from fraudulent activity.
Our Goal?
The goal is to understand where exactly the customer is in the dispute process. Our job is to probe to identify where the customer is in the Chargeback Cycle in order to provide the appropriate resolution for the client and the customer.
Parties Involved:
Customer: Party purchasing goods or services.
Cardholder Bank: Bank that issues the credit card account to the customer.
Merchant Bank: Bank that allows the merchant to collect payment from Visa, MasterCard, American Express and Discover
Merchant: Party supplying goods and services. Also known as our CLIENT.
What is Chargeback?
A Chargeback is the reversal of a credit card transaction. It comes directly from card holder's bank. It existed to give consumers protection.
Basically the customer receives their money back directly from the bank.
3 Different types of Chargebacks:
True Fraud - the unauthorized use of a credit card without the card holder's knowledge. This is the only category of the three where the card holder is encouraged to call their bank first instead of dealing with the merchant to resolve the matter.
Chargeback Fraud - the cardholder has ill intent & is trying to not pay for the product they righfully ordered. This is the type of chargeback that a business has to fight during the dispute process.
Friendly Fraud - the cardholder issues a chargeback with no malicious intent.
Friendly Fraud reasons:
Forgetful.
Unclear of what is purchased.
Didn't recoginize the charge.
Shipping delay.
Did not receive a product.
Damaged product.
Child made a purchase.
Mistakenly purchased the product.
Chargeback and Friendly Fraud are responsible for over 70% of all Chargebacks. We will be working mostly with these types of customers.
Chargeback Costs & Consequences
What happened when a chargeback is filed?
The Chargeback resolution process follows a conflict resolutions process where both sides have the opportunity to present their side of the story and attempt to prove their case.
The Chargeback process favors the cardholder.
Chargeback Cycle:
Customer contacts Financial Institution to initiate dispute. Customer explains what went wrong.
Bank reviews the complaint and validate it as a legitimate complaint or reject it as an invalid dispute.
If validated, Customer receives a temporary credit. The Merchant gets the money withdrawn. The money is held until the resolution decision is made.
Formal Chargeback and subsequent money RETRIEVAL trigger a fee to the merchant - typically around $40.00.
Merchant processor received chargeback & sends it to the Merchant. Merchant has 30 days to send a written response proving what was sent/provided to the customer. Some types of evidence include: Shipping Confirmation, Login Data, IP Addresses, Terms and Conditions and other data gathered at POS.
After the Merchant submits their evidence the bank makes a final decision on who wins the dispute and ultimately receives the money.
Once the RETRIEVAL/Chargeback fee is levied it can never be returned back to the merchant.
Why are Chargebacks bad for our Clients?
Lost time and effort needed to respond to the chargebacks.
Too many Chargebacks can get your merchant account shut down.
Even if our Clients win, they loose. Why?
The chargeback fee is charge to our client no matter who wins the dispute. Even if our Client retains the money from the customer, our Client must pay the chargeback fee.
Chargebacks are bad. We want to avoid Chargebacks.
What is our Goal?
Ask probing questions to determine if a Chargeback has been filed. Based on the answers make a DECISION and determine the best resolution based on the information received.
- Is this Chargeback Fraud?
- Is this Friendly Fraud?
Probing Questions?
Did the bank ask you to contact us?
Did you receive an email or a letter from the bank notifying you a chargeback has been filed and to wait for a response from the Merchant?
Did you get a new Credit Card / new number?
Has the money been returned to your account?
Make a Decision:
If we think the Chargeback has formally been filed, we cannot touch the charges. The customer must work with the bank directly to receive the refund.
If we do not think a Chargeback as been formally filed, we want to issue the refund and make sure the customer is totally happy with the resolution.
Difficult Customers/No Answers:
If a customer won't/can't explain where they are in the process we want to explain to the customer what we can do for them and why we need answers to the question. The response should have 3 parts:
Explain working with us directly is the fastest way to resolve this issue. Otherwise the process can take up to 90 days.
We respond to all chargebacks with proof of sale, delivery and agreement with our terms and conditions. We win 70% of the chargebacks we respond to.
Re-ask probing questions to determine best resolution.
If they won't give any answers, assume they have already initiated a Chargeback and the customer needs to work with their bank directly.
Why is this important:
We want to identify any situations where we can issue a refund and avoid the Chargeback Fee. Merchant accounts are the lifeblood for our clients. If clients cannot process transactions, we stop getting phone calls.
We can also very easily give the customer 2 refunds. If we issue a refund AFTER the chargeback has been filed, there is a chance the customer receives a refund from the Merchant (us) AND the Bank. This would cost our clients twice as much and they still get a fee for the chargeback. This is the worst case scenario.
Resolving Scenario:
It is important to understand where customer are in the dispute process. Appropriate probing leads to the answer we are seeking.
We want to identify two things:
If they have NOT filed anything with their bank yet. Basically if they were instructed by their bank to resolve the issue with the merchant.
If they have INITIATED with the dispute. Therefore, we are unable to do anything on the transaction and it should be dealt between the cardholder and his/her bank.
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