How does Chargeback work?

pinkcloud

How does Chargeback work?

Does your credit card company refund the transaction by deducting it from the seller's account or do they have an argument about it?

InsideInsurance

pinkcloud wrote: »

How does Chargeback work?

Does your credit card company refund the transaction by deducting it from the seller's account or do they have an argument about it?

Your bank contacts the merchants bank with your grounds for asking for a chargeback.

The merchant then has a short window of opportunity to submit evidence if they want to defend the case.

The bank then decides which side to believe, if evidence is submitted, and assuming they rule on your side then the money is sent from the merchant's account to your banks.

If you ever look on the business forums outside of this site then most recommend not bothering to defend chargebacks as the banks normally rule against them anyway despite strong evidence and so they say not to waste the time and instead just issue county court case against the customer instead

thunderella

InsideInsurance wrote: »

...If you ever look on the business forums outside of this site then most recommend not bothering to defend chargebacks as the banks normally rule against them anyway despite strong evidence and so they say not to waste the time and instead just issue county court case against the customer instead

I can only base my advice based on our own business, and prefer to ignore comments by others found on the internet as they are often incorrect or do not tell the full story.

We always defend a claim if we think it is justified, and almost invariably the bank agrees to go back to the card holder (via the card company) and get more facts, or suggest the cardholder contacts us directly to try to resolve the matter. The majority of the cases we defend are where we are totally unaware of there being any dispute until our bank contacts us.

We rarely ever hear anything else again about the matter, either from the our bank or the customer.

On the odd occassion where it becomes clear to the bank that there is a matter of complicated law in possible dispute, the bank agrees that the card company should inform the customer he should, if they so desire, seek legal advice and take action directly against us. I don't remember any such legal claim being brought against us directly in these circumstances.

We have been involved in one claim where a disgruntled customer elected to take action direct against the card company rather than even discuss the matter with us. We attended court as witnesses for the card company, and the matter soon received short shift from the judge who dismissed the claim completely.

We only don't defend the defensible - if a customer contacts us directly with a complaint, we try to come to an amicable resolution with them.

Sadly, when you read comments on the internet such as you have read elsewhere, you often only get one side of the story. There will always be those that moan & groan when things don't go the way they want (even if they are in the wrong)

Yes. we too have had the odd chargeback successfully made against us that we were not entirely happy with, but the matter was not clear cut and in business, we accept we cannot please all the people all the time. In such instance, we have not taken any legal action against the customer because, as I said, the issues were not clear cut.

Our bank knows who their customer is and therefore where their income is partlially derived from (i.e. us) and if they started giving our money back to a card company just because they ask for it, they know they would be losing a customer and the associated income very quickly.

meer53

pinkcloud wrote: »

How does Chargeback work?

Does your credit card company refund the transaction by deducting it from the seller's account or do they have an argument about it?

Your bank debits the sellers account via their bank. This is when you see the refund on your account.

When the above debit is actioned, (the chargeback) the seller will be given a reason for the chargeback. They then have the option to defend the chargeback. If they don't defend it, you keep the refund, if they do, your bank will let you know and redebit your account again.

This is when the argument starts.

agrinnall

http://www.moneysavingexpert.com/shopping/visa-mastercard-chargeback

Aquamania

pinkcloud wrote: »

How does Chargeback work?

Does your credit card company refund the transaction by deducting it from the seller's account or do they have an argument about it?

The process varies a little based on whether it is Visa, Mastercard, American Express, etc.

But essentially the card company reviews a claim and if they think you have a valid claim, they refund you the money - usually takes about 48 hours to decide.

They then contact the supplier's bank to attempt to get a refund. If the suppliers bank disputes the chargeback, that is when complication can set in. Ultimately it can go to arbitration with the card network (Visa, Mastercard, American Express, etc) who will decide who is liable. Sometimes the card provider will just swallow the loss, but usually they will re-debit the customers card (especially if arbitration from the netetwork operator says it's the customer's fault). In such case you either have to then pay the bill as normal, or face the usual consequences.

I think this article probably explains it better:

Santander spokesperson Jonathan Akerman explains how the chargeback process works at the high street bank:

First, you must call the bank's contact centre with details of the transactions you want to dispute.

"If [the customer visits] a branch, they will be referred to the contact centre," Akerman says.

Then, you will be asked to provide the date of the transaction, the amount of the transaction, the merchant name and a description of the dispute.

"For certain type of disputes, [the customer] will be asked for additional information and may be asked to contact the merchant," Akerman says.

After you provide the necessary information, the contact centre will investigate the matter. The main requirement for getting a refund is proof that the merchant breached its contract.

If the card issuer accepts the chargeback as valid, you will be refunded, generally within 48 hours. It's then up to the card-issuing bank to attempt to get the money from the merchant's bank.

Your bank charges the merchant's bank the disputed amount. If the merchant's bank disputes the chargeback, things can get complicated. The disagreement may then escalate to arbitration with the credit card network (in other words, American Express, MasterCard or Visa), which will make the final decision about where liability sits.

Is there a chance your bank will revoke your refund if the merchant protests?

"Only after the full review would the customer be re-debited, if there was proof of their involvement," Akerman says. "In some circumstances, we may decide to write off the transaction and not debit the customer."

Tips for success
It's always a good idea to try to resolve things with the retailer in question first, before pursuing a chargeback, says Neil Aitken, spokesperson for the UK Cards Association. Make sure you keep a record of any conversations or emails you may have exchanged with the seller.

"If you aren't getting a satisfactory response from them, contact your card issuer (bank) and explain the situation," he says. "They will then explain what the next steps are and what evidence you'll have to provide."

If your card provider rejects your chargeback claim, and you think it did so unfairly, you can take your case to the Financial Ombudsman Service within six months of your final correspondence.

http://uk.creditcards.com/credit-card-news/chargeback-can-get-your-money-back-1367.php

InsideInsurance

thunderella wrote: »

We always defend a claim if we think it is justified, and almost invariably the bank agrees to go back to the card holder (via the card company) and get more facts, or suggest the cardholder contacts us directly to try to resolve the matter. The majority of the cases we defend are where we are totally unaware of there being any dispute until our bank contacts us.

We rarely ever hear anything else again about the matter, either from the our bank or the customer.

You appear to have been lucky based on others experience.

I've only ever sold my own things through eBay and even that has been bad enough with disputes from buyers but a friend runs a moderately successful ecommerce site and has many cases where they send the item recorded delivery or equiv. RM or the courier deliver the item and get a signature.

First thing that the company hears of a problem is a chargeback for non-delivery of the goods. They send the evidence of the delivery and most the time they just lose the money often with the customer claiming that it wasnt their signature

Aquamania

InsideInsurance wrote: »

...First thing that the company hears of a problem is a chargeback for non-delivery of the goods. They send the evidence of the delivery and most the time they just lose the money often with the customer claiming that it wasnt their signature

Are they responding in time? 14 days is the norm else they may well lose out.

Here's what Barclyacard advise business customers how to act:

Responding to chargeback requests

You're given 14 days from the date of the chargeback request to respond to it and provide relevant proof and information, as set and regulated by the Card Scheme.
We'll do everything possible to defend chargeback requests that we receive, on your behalf. However, specific time limits and rules applied to each chargeback in line with the Card Scheme, greatly influence the actions we are able to take. If the Card Scheme rules were breached, the transaction amount may be charged back to your business and debited from your account. However, if the transaction wasn't in breach, we may be able to defend the chargeback.

http://www.barclaycard.co.uk/business/existing-customers/chargebacks

Or maybe they need to change their merchant services provider?
No need to let scamming customers get away with it. If evidence exists, and all else fails, the supplier can always take legal action against the scamming customer. It doesn't need to be the customer's signature of acceptance. It needs to be proof the item was delivered to the address (preferably the cardholder's address)

bod1467

Aquamania wrote: »

It needs to be proof the item was delivered to the address (preferably the cardholder's address)

Unfortunately, in many cases, all the signature proves is that a signature was given. It does NOT necessarily mean that the signature was by the purchaser, or even that of someone at the chosen delivery address. Just because a signature exists on a POD doesn't mean the item was delivered to the chosen address, at least not without supporting evidence (such as a photo of the property).

InsideInsurance

Aquamania wrote: »

Or maybe they need to change their merchant services provider?
No need to let scamming customers get away with it. If evidence exists, and all else fails, the supplier can always take legal action against the scamming customer. It doesn't need to be the customer's signature of acceptance. It needs to be proof the item was delivered to the address (preferably the cardholder's address)

If the prior link is correct and its the networks that are judge and jury on the case then changing merchant service provider would make no difference as all mastercard disputes would go to mastercard anyway

Certainly on the small business forums many people advise that they lose the majority of cases despite providing evidence of delivery etc hence others saying not to waste time defending and going straight to litigation.

Aquamania

InsideInsurance wrote: »

If the prior link is correct and its the networks that are judge and jury on the case then changing merchant service provider would make no difference as all mastercard disputes would go to mastercard anyway....

That's certainly not the way it happens in practise. If it did, all faith would be lost in the system and many more issues would end up in court, which is the ultimate judge and jury on the case.

The courts would soon get fed up with that, and tell the networks to get an effective (and fair!) disputes resolution process in place rather than clogging up the courts with them.