What Are Your Chargeback Rights as a Merchant?

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Last Updated on April 20, 2021 by Corepay

As consumers, we no doubt understand and appreciate the protection that the chargeback process offers us against unscrupulous merchants or those who have failed to deliver on their promise or obligation. It creates a level playing field and protects the consumer against large corporations.

For example, the airlines that were refusing to honor their own cancellation policies and were instead keeping the money from ticket purchases? A lot of travelers did not feel bad about hitting those airlines with chargebacks to get their money back.

But, what about when we’re the merchants? What if we’re the ones getting hit with the chargebacks? Now they don’t seem so fair, especially because so many of them are leveled against merchants who were never given a chance to fix a problem, never received the returns from the customer, or they’re a product of friendly fraud and malicious fraud. Now chargebacks are a royal pain and can really damage a merchant’s financial future.

That’s why merchants have chargeback rights, and you should exercise them on a regular basis.

A recent article on Business2Community.com listed the different chargeback rights, and how you can use them to protect yourself and your business from lying fraudsters and unwarranted returns.

The interior of a coffee shop. Small merchants like this need to exercise their chargeback rights.

  1. Reason codes. These codes give you insights into why a chargeback was issued. Since customers have to give a reason for why they’re issuing a chargeback, this tells you what kind of evidence you need to provide to the issuing bank. It also helps you know if you should even dispute the chargeback or just give the refund. One bright spot: Several reason codes require the customer to contact you before filing a chargeback.
  2. Late delivery returns. If an item arrives after the delivery date, the customer has to return the merchandise before issuing a chargeback. This protects you from the delivery provider’s errors, plus it at least lets you recoup your merchandise costs. And if your delivery company was the cause of the problem, you can (and should) demand a refund of your delivery costs.
  3. Purchase price only. Customers can only issue a chargeback for no more than the original transaction amount; they can also issue a chargeback for the partial amount. But they cannot issue several partial chargebacks added together that are more than the original purchase price. If a chargeback exceeds the original sale, be sure to tell the issuing bank, since this could be an indication of fraud.
  4. 15-day waiting period on returns. Banks need to wait 15 calendar days from the time of a return before they approve the chargeback. This allows you to file a refund and avoid any chargeback fees. Also, it’s important to note that you can request a product return when the customer demands a chargeback. If you get hit with a chargeback, even if you know you’re going to have to pay the refund, you might be able to reduce the odds of it being completed if you demand the return of the merchandise.
  5. No cashback transactions. If someone has received additional cash from a debit card transaction, they cannot issue a chargeback for the cashback amount. That is, if someone made a $50 purchase and received a $25 cashback amount, they cannot issue a $75 chargeback, only a $50 one.
  6. The right of representment. Representment is the right to submit evidence that shows you properly completed a transaction and that the customer’s claims are false or at least in error. You should absolutely exercise this right whenever you can. You do need to respond formally though, which may mean submitting a form in your merchant dashboard by a deadline. Then, gather all the specific evidence and records to show why you shouldn’t have to pay the chargeback.
  7. Chargeback arbitration. When the bank decides in favor of the cardholder, they will file a pre-arbitration chargeback to you, and you can decide whether you want to appeal or accept the decision. If you want to appeal it, make sure you won’t lose more money than if you were just to accept it. Save this for high-value purchases, not your low dollar purchase. Otherwise, set a minimum amount where you will contest chargebacks and grant refunds for all the rest.

Chargebacks are a blessing if you’re a consumer who needs protection, but they’re a huge pain in the ass if you’re an honest merchant just trying to make a living. If you’re hit with a lot of disputes and chargebacks, or you’re worried about being the victim of fraud and theft, there are several AI-based tools that can spot patterns of fraud.

So work with a merchant services provider who can help you with an efficient chargeback dispute process, including using some of these AI-based tools. Depending on who you work with you, can reduce the number of your chargebacks by as much as 19 percent.

Industries such as CBD merchant accounts, adult entertainment, and online dating are notorious for chargebacks. Having an adult content merchant account is crucial.

If you’d like to learn more about your chargeback rights and how to protect yourself from chargebacks and fraud, especially with different third-party tools, Corepay can help. To learn more, please visit our website or call us at (866) 987-1969.

Photo credit: Free-Photos (Pixabay, Creative Commons 0)

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