Instigating chargeback disputes

As merchants, receiving chargebacks is a horrible thing, particularly if we've been playing the game fair and square. It's expensive, time consuming and can really leave a sour taste in your mouth as there will be customers who will abuse the chargeback process. I published an article recently on the topic of preventing and challenging chargebacks.

But what about the flip side?

As an online business person, you're likely purchasing goods and services online and if you've been doing so for a while, it's also likely that you've shelled out cash for items that really weren't up to scratch, as advertised or the offer was intentionally misleading. It's important to know that you don't just have to wear the loss. Dispute it; charge it back to the merchant.

Chargeback dispute strategies

Sometimes you don't even need to go through the chargeback process, but just threaten it - this is the much easier path.

Recently, I purchased a rather pricey subscription service. My purchase decision was based purely on two things - what the merchant said the service consisted of; and the "rock solid" 7 day money back guarantee. I used the service for around 30 minutes and found it to be totally unsuitable and didn't live up to their marketing. It wasn't a case of me not knowing how to use the service, the features touted to be available simply weren't there.

So I politely asked for cancellation and a refund, briefly explaining why.

The merchant then attempted to retain me as a client; and there's nothing wrong with that. The problem was the merchant also said they'd only refund the money based on a defect in their service and my reasons didn't qualify. I saw red, as without the "rock solid" money back guarantee, I wouldn't have spent the cash. 

The first thing I did was take a screenshot of their refund policy, then emailed them back pointing them to it and told them straight out that any further attempt to deny the refund would see immediate chargeback proceedings - no further negotiations would be entered into. A full refund was made within two hours. The fact they even tried to pull the "sorry, no refund" stunt on me means that I'll never do business with them again and certainly won't recommend the company to anyone.

All this took about 15 minutes of my time; it just requires being assertive without being aggressive. You'll be surprised how often this will work, but the key is to be in the right, be blunt and present them with the evidence to back your claim. Remember that no merchant really wants to go through the chargeback process, particularly since it's heavily weighted in the consumer's favor and especially in the case of card-not-present transactions; such as those that occur in ecommerce.

Mysterious charges and fraud

Another situation that may occur is where a mysterious item appears on your credit card and you know for a fact you didn't purchase it. Some people will go straight to the chargeback process; but it's best to contact the merchant first; as it can save you both time, money and hassle. In many cases this scenario is no fault of the merchant; it's likely someone has gained access to your credit card and the transaction has bypassed their fraud screening systems. 

Report it to the merchant, tell them it's fraud, ask them to look at the transaction again and refund it. Make mention very politely that you're giving them this opportunity to rectify the situation before you perform a chargeback and that you are taking steps to cancel the card as it has been compromised. If a mysterious charge does crop up, do cancel the card - it's not worth the risk.

Chargeback time frames

Some people think that they only have a few days to perform a chargeback, but you can have months, even years in some cases to do so. The standard timeframe to be able to perform a chargeback is 45 -90 days. However, depending on the type of transaction, it could be up to 2.5 years!

For example, if you purchase a 24 month subscription, then *correctly* cancel it after the first month, yet the merchant continues to charge you for the remainder of the period; you can demand to be refunded from the first erroneous charge - even up to 6 months after the last charge. Given this could amount to a lot of money, the merchant will likely protest vigorously, but if you're sure you're in the right and have the evidence to back it, make them aware of this fact and again, let them know you'll commence chargeback proceedings immediately if they continue to resist. Again, be blunt, don't cut deals that see you lose money - right is right and wrong is wrong; just give the merchant the two choices after initially outlining the problem. 

Deciding to issue a chargeback

While the above strategies will work on many occasions, at times the merchant will dig their heels in; so you'll need to go through the chargeback process. Time is money, so you'll then need to weigh up whether it's worth your while to spend an hour or two in document preparation and the possible back and forth if the merchant should challenge the chargeback.

Also be totally sure that you are *entitled* to the claim - so many chargebacks are made by people that are trying to pull a fast one, and the merchant will likely fight it. While the process is heavily weighted in the consumer's favor, a chargeback you make with the knowledge of it being illegitimate can get you into very hot water. Even an honest mistake in issuing a chargeback dispute that's found in favor of the merchant can see you slapped with fees.

Here's a list of legitimate reasons for issuing a chargeback:

- Duplicate debit
- Refund not processed
- Unauthorized transaction
- Fraud
- Services not rendered
- Goods not provided
- Damaged goods
- Misleading advertising
- Error in amount debited
- Error in receipt
- Service cancellation not honored

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Chargeback process

If you've decided to go ahead with the chargeback, here's what you'll need to do and what to expect:

- Contact your back and ask for a transaction dispute form

- Complete and lodge the dispute. After receiving the dispute documentation, it’s important lodge the documentation within 14 days, otherwise you may lose your rights to dispute the transaction. It's critical to include as much supporting evidence as possible. Without it, the merchant may challenge the chargeback, you'll be asked to provide further evidence and this can *really* drag things out.

- The bank will send you a dispute confirmation letter which you'll need to sign and return. You'll receive an acknowledgement from the bank

- The bank will carry out some initial investigation at their end

- The bank *may* then increase your available credit while the investigation occurs and the merchant's account debited for the amount

- The bank will request a transaction voucher from the merchant's bank (retrieval request). The merchant's bank will review your evidence, forward it on to the merchant and request evidence from the merchant if the merchant wishes to challenge it.

- If the merchant challenges, there may be further back and forth while further evidence is compiled.

- If the merchant doesn't challenge, the credited funds will stay in your account.

- If the merchant is found to be in the right, you'll have a further opportunity to challenge.

- If your challenge fails or you accept the decision, any credited funds will be debited for your account and your bank may also impose a fee.

It can take anywhere from 6 weeks to 6 months for a chargeback dispute to be finalized, that's why it's important to include as much supporting evidence as possible in your initial submission.

Chargebacks - no real winners

.. except for the banks.

Chargebacks are a pain for everyone. While you shouldn't allow a merchant to take your hard-won cash without a fight as it just encourages them to do the same to others, also bear in mind the concept of fair play - remember Karma The Vengeful Elephant, do unto others, what goes around comes around etc. etc. Only issue a chargeback if it's totally necessary and based on legitimate reasons.

Related:

Preventing and challenging chargebacks
Fraud screening strategies

Michael Bloch
Taming the Beast
http://www.tamingthebeast.net 
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