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Total Merchant Center Chargeback

Chargeback

From Wikipedia, the free encyclopedia

A chargeback is a reversal of a credit-card transaction, as viewed from the perspective of the merchant. It usually occurs when a consumer files a complaint with their bank or credit/debit card provider. This usually happens when a consumer discovers fraudulent transactions on their statement.

The bank will investigate complaints, and will "take back" the value of the original transaction, together with an additional fee (from $0 to $50 USD, depending on the bank/provider used) directly from the merchants account, unless the merchant can prove the transaction was legitimate.

Sometimes the consumer complaint is untrue, and their refund claim gets denied. In these situations, the merchant will sometimes still be charged processing fees. The merchant loses the goods or services sold, the payment, the fees for processing the payment, any currency conversion commissions, and the chargeback penalty.

Reasons for chargeback

Most chargebacks are initiated by the cardholder, who may contact the cardholder's bank (issuer) regarding an inconsistency in his monthly credit card statement. This begins the dispute process that may eventually lead to a chargeback, and a reinstatement of credit to the cardholder's account. Then the merchant bank usually charges the transaction back to the merchant account and the merchant is financially responsible.

One of the most common reasons for a chargeback is known as a fraudulent transaction. A credit card is used without the consent or proper authorization of the card holder. In most cases, a merchant is responsible for charges fraudulently imposed on a customer.

Chargebacks are often the result of a customer dispute over credit. This type of chargeback is usually described as credit not processed. A customer may have returned merchandise to a merchant in return for credit, but credit was never posted to the account. In this example, the merchant is responsible for issuing credit to its customer, and would be charged back.

Other types of chargebacks are related to technical problems between the merchant and the issuing bank, whereby a customer was charged twice for a single transaction (duplicate processing) or other various mistakes. Yet other chargebacks are related to the authorization process of a credit card transaction, for example, if a transaction is declined by its issuing bank and the account is still charged.

Another reason for chargebacks are when a customer does not receive the item they paid for. In this case, a chargeback is initiated and the payment to the merchant is reversed.

List of reasons for a chargeback:

Card holder requests a copy of the transaction receipt.
Card holder did not authorize the transaction.
Non-matching account number.
Transaction was processed more than once.
Transaction receipt was not imprinted.
Refund not processed.
No authorization.
Customer never received merchandise/services.
Card not used within valid expiration date.
Services not rendered.
Error in transaction amount.
Transaction receipt is incorrect, incomplete, or illegible.
Transaction processed for incorrect amount.
Product different from what was described or promised.
Counterfeit transaction.
Transaction not processed within Visa or MasterCard time frames.
Failure to obtain card-holder signature.
Signature on the card was blank.
Signature on receipt different from card.
Card-holder claims merchant changed transaction amount without permission.
Merchant knowingly participated in a fraudulent transaction.
Incorrect Transaction Date.
Card-holder claims invalid mail or telephone order transaction.
Card-holder was denied ability to return item.
Transaction was not canceled successfully.

Card-holder not satisfied with quality of product or services.

Handling chargebacks

A merchant is billed for chargebacks as they occur, along with other fees and settlements associated with credit card acceptance. Because a merchant may be charged back in error, and because chargebacks may often involve complicated customer disputes, a chargeback may be appealed by the merchant. This process varies by credit card. If the chargeback is found to have been in error, a merchant will be granted a reversal.

Thieves occasionally abuse the chargeback system. For example, in a "Friendly Fraud", an unscrupulous customer will make a purchase over the Internet with his own credit card and then issue a chargeback once the product or service is received. In such cases merchants can have difficulty recovering payment.

Chargeback processing (handling) is complex as a result of frequent rule changes by the major credit card companies (MasterCard, Visa, American Express, etc.). There is an emerging market for business software that simplifies the chargeback process as well as separate chargeback processing services.

It is possible for the chargeback and associated fee to cause an overdraft or leave insufficient funds to cover a subsequent withdrawal or debit from the merchant's account that received the chargeback. This could cause pending checks to be returned due to non-sufficient funds. Unless the merchant detects the chargeback in time to cover pending debits, a snowballing effect of penalties assessed could result.

Credit card companies require that for internet purchases, when the items are delivered, the cardholder must sign in their name and other names like roommates or family members do not count. Without the cardholder's own signature, it is not counted as delivered.

Address verification also provides protection by partially verifying the cardholder's address, however the cardholder's signature is most important.

Case Study

The transaction was a manual transaction with invalid imprint. The reason that the it was invalid was because the credit card could not be imprinted and the merchant had written the credit card number on the imprint. According to the merchant the credit card almost looked like a non-embossed card. The cardholder denied having any other alternate payment methods to pay for the food. The merchant accepted this because that was the only way of payment that he could receive and if he did not receive this method of payment, the food would go to waste. The merchant obtained signature for both the credit card slip and the imand wrote down the cardholder's driver's license number and her telephone number. The merchant called the number after being informed of this chargeback but it appeared that she provided wrong number to the merchant. This case was represented on 12/20/07 and was resolved in our favor on 02/19/08

Retrieval Request

A retrieval request or copy request occurs when the cardholder's bank requests the acquiring bank to provide a copy of the transaction receipt for a particular credit card sale. The merchant must provide this record to the acquiring bank.

What was purchased
Who purchased it
Where it was shipped
When it was shipped
Signed proof of delivery, if available
Card number, cardholder name, cardholder signature
Transaction date & amount
Authorization number
Merchant name, location, merchant ID

If a merchant does not respond to a retrieval request within a specific time period, the request can result in a chargeback for "Non-Receipt of Requested Item". Once again, the retrieval request is a pre-chargeback and a request for information (RFI). This may also attract a fee. Some providers charge $10, and others do not refund this.

Chargeback Cycle

From Visa USA's website

Here is a quick snapshot of the streamlined Chargeback Life Cycle in a customer-initiated dispute situation.

The customer disputes a transaction by contacting their card-issuing bank
The card-issuing bank researches to determine whether the reasoning for the chargeback is valid. If not, the chargeback is declined and the customer is held responsible for the charge.
A provisional credit is provided to the customer. The card-issuing bank initiates a chargeback process and obtains credit from the merchant's processing bank.
The chargeback amount is removed from the merchant's account and the merchant's processing bank provides written notification to the merchant. The merchant's processing bank researches the validity of that chargeback.
The merchant provides documentation to remedy the chargeback. If the provided documentation is found to be satisfactory the chargeback is declined and the customer is once again charged for the sale. If the documentation is found to be unsatisfactory the chargeback is successful and the process ends.