Credit Card Disputes

Credit Card disputes are like an insurance policy against fraud for the cardholder, ensuring that he can redeem lost finances when scammed or dealing with a dishonest merchant.

What is a credit card dispute?

Credit card disputes, or as they are more commonly known as ‘credit card chargebacks,’ occur when a customer identifies a transaction that he believes is not valid and disputes this transaction with the issuing bank. The bank then files a dispute on the cardholder’s behalf.

A dispute is, in essence, a credit card reversal. If a customer identifies a transaction on their billing statement which they don’t recognize, then they can call the credit card company to investigate. If the transaction is deemed a fraudulent charge by either a fraudster or a dishonest merchant, then the card-issuing bank can file a credit card dispute. This may also apply if an error is made in a merchant’s transaction, and the buyer is unable to resolve the issue himself.

The credit card dispute was introduced in 1974 as part of the Fair Credit Billing Act. The idea behind this was to encourage trust in credit cards, which was a new concept. Credit card disputes continue to be used in the modern age and are still an essential consumer protection mechanism.

They also provide the quality of service and goods by preventing scammers from selling defective goods or services with the knowledge that they will eventually be faced with a dispute.

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Customer Protection Agencies:

If you are looking to file a credit card dispute, several worldwide agencies are dedicated to customer protection. Here is a shortlist of agencies you can rely on when in need of customer protection:

  • CFPV- customer financial protection bureau
  • FCA- Financial Conduct Authority
  • FSCS- Financial Services Compensation Scheme
  • Financial Ombudsman Service
  • BEUC- The European Consumer Organisation
  • ECLG- The European Law Group
  • Consumers international
  • Public Interest Advocacy Centre
  • Transatlantic consumer dialogue
  • North American Consumer Project on Electric Commerce
  • Centre for digital democracy
  • Consumer Confederation of America
  • Consumers union
  • National Consumers League
  • Public Citizen
  • U.S Public Interest research group

The difference between a regular refund and a chargeback:

Chargebacks and refunds are commonly confused with each other, and many people fail to see The difference between a regular refund and a chargeback. In both cases, the Customer gets the original funds back, and the business loses revenue from the sale. Though when comparing the difference between these two services, the difference between the two becomes obvious.

Here are two lists outlining the differences between a chargeback and a refund:

Refund:

  • The Customer works with the merchant directly to receive a refund
  • The goods sold are then returned to the seller allowing them to be resold
  • The merchant will be able to receive an interchange fee in most cases
  • Doesn’t damage the merchant’s reputation with the acquiring bank
  • Can be fully processed in a matter of days

Chargeback:

  • The Customer bypasses the merchant and instead goes to the bank.
  • The Customer has no reason to return the goods to the seller.
  • The merchant can’t recover an interchange fee and instead has to pay a chargeback fee.
  • Can hurt the merchant’s chargeback to transaction ratio and damage the long-term sustainability of the business.

When Can cardholders File a Dispute?

Generally speaking, there are two situations in which a customer is legally entitled to claim a chargeback by filing a dispute. These two situations are criminal fraud or merchant error.

A stolen credit card or a credit card fraud can result in reversed charges. If the credit card holder approves a transaction and then you didn’t receive the service or was created by the broker, re will bible for a chargeback.

In one example, a cardholder finds a transaction on their billing statement that they don’t recognise. The cardholder then calls the bank. Then the bank investigates the trade and concludes that it is a fraudulent charge. Next, the bank files a credit card chargeback to recover the cardholder’s lost money. If the merchant’s defenses were not strong enough to prevent the fraudulent account, the merchant must take responsibility and return the funds.

For another example, let’s assume that a cardholder places an order, but the merchant does not advertise the item that arrives. The Customer approaches the trader for a return and refund, but the merchant has inconsistent customer service, and the buyer receives no response within a reasonable timeframe. The merchant bears responsibility for the transaction, so the cardholder is justified in filing a chargeback.

A valid dispute is usually only filed when the Customer doesn’t have any other reasonable options to resolve the issue. Credit Card disputes should usually be the cardholder’s last resort once all other avenues are exhausted.

Credit Card Protections

If you are required to dispute a charge that appeared on your credit card statement, then you should call the card company and immediately notify them about the issue. You probably also need to submit a written report of the error in the statement of charges, to the card company, within 60 calendar days.

The Credit card dispute process:

The credit card dispute time limit will be dependent on your credit card company and the reason for disputing credit card charges, but generally speaking. Usually, the time limit lies around 120 days.
You should check your credit card agreement to review your rights regarding any unauthorized charges. This can be found by visiting your credit card company’s website or visiting the CFPB’s credit card agreement database.

If you have already paid the charge you are disputing, you can still dispute it; however, you probably won’t receive any money back until the credit card company has decided that you are right. If the card company finds that you are correct, then the charge is removed from your bill. If the card company says that you were corrected and that the disputed amount was authorized, they must tell you why your chargeback request was declined in writing. This must also tell you how much you owe and when the payment is due.

Please note that you may be required to go through a different dispute resolution process if you are using a credit card to pay for defective goods or services.

When are customers not illegible for a credit card dispute?

So, now that we know that customers are entitled to a chargeback whenever a case of criminal fraud is involved or in the case of a merchant error. This is all assuming the buyer has already attempted to resolve the issue through the proper channels. However, sometimes credit card disputes fall into neither of these two categories.

Many disputes can also fall under the category of friendly fraud. This is when the Customer, either deliberately, by mistake, or lack of understanding, files an unwarranted chargeback.

The most common types of outright friendly fraud:

  • If the Customer wants to return an item but the handling or restocking fee has been avoided
  • The Customer is experiencing buyer’s remorse
  • The merchant’s return process seems like too much trouble, so the Customer files a dispute instead
  • The consumer did not understand the delivery scheme
  • The Customer wants a refund, but the allocated period for a refund has expired
  • In cases of family fraud
  • The cardholder didn’t recognise the transaction on their billing statement, but it was, in actuality, an authorized purchase.

Fund Recovery- The Risks and Factors

If a merchant is optimistic that the Customer’s claim is invalid, they can attempt to recover the sale through a chargeback representment. This is a litigation-based process, which can also be called a second presentment. This is practically when the merchant creates a case to demonstrate that the Customer’s claim is not valid. This process’s two critical components compile evidence and write a rebuttal letter to give the evidence context.

The represented must strictly follow the specific guidelines given by the bank or card network. This also must be handled quickly. As usual, the merchant has seven days to process and compile their case. This time frame also includes document delivery time.

Once this information is complete, it can be passed along to the acquiring bank, who will then submit the case on behalf of the merchant. The cardholder’s issuing bank then reviews the case and produces a ruling.

The credit card dispute process is often complicated, challenging, and time-consuming. In addition to this fraud, tactics are continually evolving in response to new technologies and merchant strategies. This can make receiving a chargeback or producing a chargeback representment incredibly difficult, so understand that a credit card dispute is a last-ditch resort.

How can Trader Defense Advisory help?

If you are currently settling a dispute or are about to file a dispute request, consider a free consultation from the Trader Defense Advisory. If you want some quick legal advice, report a merchant, receive other legal services, or are just confused about the chargeback process, you can rely on Trader Defence Advisory to help you get the financial guidance you need.