The Importance of Winning a Chargeback Reversal

The Importance of Winning a Chargeback Reversal

By In Uncategorized On November 19, 2015


Learn How a Chargeback Reversal Can Recover Revenue

The popularity of online shopping continues to steadily grow, making eCommerce increasingly more desirable to merchants. However, with the good comes the bad. In the case of card-not-present merchants, the bad slithers in with the very customers they rely on to survive through fraud.

What Is a Chargeback Reversal?

A chargeback reversal comes on the heels of a chargeback being filed against a merchant. Chargebacks were created as a form of consumer protection from fraud. However, they have been manipulated over time and chargebacks are now used to take advantage of online merchants. The chargeback process is a lengthy one, and attention to detail is key.

The Chargeback Process

 

 

process

  1. First Presentment. When a cardholder makes a purchase and a transaction is completed, this is known as first presentment.
  2. First Chargeback. When a cardholder requests the transaction be reversed and the money be returned, they file a chargeback.
  3. Second Presentment. The merchant receives the chargeback and re-presents the transaction to the banks along with proof of the authorized and completed sale. This step is known as a chargeback reversal or representment.
  4. Arbitration (Second) Chargeback. The cardholder continues to dispute the charge by changing the reasoning for the dispute or providing additional evidence.
  5. Arbitration is the last chance for the merchant to save the sale and win the dispute. When a case reaches arbitration, the dispute is reviewed by the card network and a winner is determined.

Essentially, a chargeback reversal is the process of a merchant proving the validity of a sale. The re-presentment of a transaction, chargeback reversals allow merchants to fight to retain the profits from a sale.

Fraud for CNP merchants can be lethal. Most merchants will not be taken down by the type of fraud most commonly recognized as credit card fraud, but by what is known as friendly fraud. In order to protect their businesses and their bottom lines, merchants must work to not only prevent friendly fraud, but to fight back against it.

What Types of Chargebacks Will Merchants Encounter?

Generally speaking, the most common types of chargebacks can be filed into three distinct categories: merchant error chargebacks, criminal fraud chargebacks, and friendly fraud chargebacks.

Cardholders file transaction disputes under “merchant error” when they believe the merchant did not comply with the terms of the sale.

Merchant error chargebacks include reason code descriptions such as,

  • Services not provided or merchandise not received
  • Not as described or defective merchandise
  • Incorrect transaction amount or account number/Transaction amount differs
  • Fraudulent multiple transactions/Fraudulent processing of transactions

Criminal fraud chargebacks are a result of credit card fraud, identity theft, security breaches, etc.

Criminal fraud chargebacks include reason code descriptions such as,

  • Fraud (card-present)/No cardholder authorization
  • Counterfeit transaction/Chip liability shift/Chip/PIN liability shift
  • Fraud (card-not-present)/No cardholder authorization

True merchant error and criminal fraud chargebacks are valid transaction disputes. Chargebacks were created to assist cardholders in receiving refunds for these reasons. When to comes to fighting chargebacks, however, merchants should be fighting back against all friendly fraud chargebacks.

A cardholder files a friendly fraud chargeback when he or she files a dispute on an authorized transaction.

Friendly fraud chargebacks include reason code descriptions such as:

  • Cancelled recurring transaction/Installment billing dispute
  • Not as described or defective merchandise
  • Transaction not recognized
  • Fraud (card-not-present)/No cardholder authorization
  • Services not provided or merchandise not received

The difference between these reason codes in reference to friendly fraud, as opposed to merchant error or criminal fraud, is that they are falsely identified. A customer experiencing buyer’s remorse, for instance, may claim that the product was never delivered or that he never authorized the sale to begin with.

How Do You Know When to Fight Back?

FIGHTBACKIf merchants are able to determine that the sale was fully authorized and the product was delivered on time, in perfect condition, as described, and to the correct address, they are able to rule out merchant error. Additionally, if the billing and shipping addresses match, there is a good chance that the credit card holder is the one who made the purchase.

Once merchants are able to rule out merchant error and criminal fraud chargebacks, they are left with an instance of friendly fraud. These are the types of chargebacks that need to be fought back against.

How Do You Compile a Winning Chargeback Reversal Case?

There are two main steps involved in every successful chargeback reversal: compelling evidence and a rebuttal letter. Without either of these, the chargeback representment is incomplete and the cardholder will be awarded the money.

When a chargeback is filed against a merchant, they receive a letter in the mail called a Chargeback Advice, along with a form called a Chargeback Adjustment Reversal Request. Compelling evidence documents and a rebuttal letter should be mailed back to the bank in response.

Once a merchant has determined that the chargeback should be reversed, the first step is to compile all the evidence of the sale. There are lots of detailed forms and documents that can be extremely helpful when compiling proof that the sale was authorized and the product or service was delivered as promised.

Examples of compelling evidence include:

  • The sales receipt
  • Order forms
  • Proof of delivery
  • Electronic signatures

These details may seem tedious or redundant, but they can truly make or break a representment case.

The second step in completing the reversal documentation is to construct a rebuttal letter. A portion of the letter should be ready to go before the merchants even know they need it. As eCommerce merchants, they are most likely employing software that collects data in real time as transactions take place.

The letter itself is a written response to the cardholder’s claim. This claim is strongly dependent on the chargeback reason code assigned to the case. By understanding the chargeback reason code, the merchant is able to prove that the opposite is true of the case. For instance, if the customer is claiming that the product was not delivered as described, the merchant has the opportunity to prove that the product is true to the description, the advertisement and pricing was appropriate, and the product was delivered by the scheduled delivery date. The merchant’s description of the sale, backed up by the compelling evidence, makes for a strong reversal.

When drafting a chargeback rebuttal letter, attention to detail is vital. This must be a professional, legible, accurate description of the sale. Things such as spelling and grammar are important. Merchants should double and triple check any numbers or figures used in the letter. It will make all the difference.

What Else Do I Need to Know?

Chargebacks are an inevitable part of conducting business online. However, they should not get the best of you.

Work to prevent the chargebacks that are preventable. Eliminate merchant errors. Ramp up your customer service department and never let customers click away from your website unhappy.

For those cases that slip through the cracks, fight back.

Don’t wait until it’s too late to collect the appropriate documentation. Never throw out or delete a sales receipt. Stay organized and efficient in collecting information such as tracking numbers and email confirmations. Never erase communication between the cardholder and your customer service agents.

Pay attention to time limits. Most chargeback reversals must be filed within one week of receiving the chargeback. However, this varies based on networks, banks, and processors. You will be notified of your time constraints, but the best policy is immediate action.

Sometimes, when rushing to complete the process of representment, mistakes are made on the merchant side. You only have to screw something up once to realize the ramifications. Learn from the mishap and be sure to focus on all the little details the next time around.

Can I Ask for Help?

help

If you are simply overwhelmed by the idea of preventing and fighting your own chargebacks, you are not alone. Ask for help! DisputeChargeback can take the stress of protecting your business out of your hands and into our unique, detailed, proprietary system.

By outsourcing your chargebacks to our team, we will stop the chargebacks we can and reverse the ones we can’t.