Chargebacks are an unfortunate reality for any business. They cannot be avoided, but you can mitigate their impact.
The chargeback representment process is how you fight chargebacks. You can take comfort in the fact that you can fight every chargeback you receive. However, fighting chargebacks with success is something only merchants who understand the process behind representment can accomplish.
When preparing to fight chargebacks, you should follow these steps to maximize your changes of winning the chargeback dispute:
Check for Chargebacks on your Merchant Statement
Get the chargeback reason code
Prioritize what to fight
Use meticulous records to prepare your case
Draft chargeback response letters
File a chargeback dispute
File the dispute within the statue of limitations
Check for Chargebacks on your Merchant Statement
Chargebacks appear on your merchant statements, which provide you with the information you need to identify the inflows and outflows of your account. Chargeback fees include the cost of the item as well as sales and processing fees. This is why chargeback accounting also includes other information like a summary of card deposits, card fees, and miscellaneous fees.
To find chargebacks’ total cost to your business, look for the amount under the heading “adjustments” and “chargeback fee”.
Get the Chargeback Reason Code
To successfully fight a chargeback, you need to know the reason it was filed. This is why chargebacks come with reason codes that inform merchants of the justification the cardholder provided for refusing to pay for the transaction.
Each chargeback reason code requires a different kind of defense. For example, you would not fight a chargeback for alleged lack of card holder authorization in the same way you would fight a chargeback for alleged failure to receive merchandise.
Unfortunately, chargeback reason codes are not standardized across all payment networks. Even within payment networks, changes tend to occur frequently. As a result, a best practice is to remain up to date on what the chargeback reason codes for each payment network you use mean.
Prioritize what Chargebacks to Fight
Merchants feel an impulse to fight every chargeback. However, some types of eCommerce fraud make it easier to win chargeback disputes than others.
For example, a chargeback filed by a card holder that claims they never received the goods they paid for might be friendly fraud. You fight this chargeback by proving you delivered the goods, so if you prepare yourself by keeping good records, there is a good chance you can win the dispute.
On the other hand, chargebacks that come from accounts attached to a fake identity are likely to be a sophisticated account takeover attack. Chargebacks from ATO attacks are extremely difficult to disprove because the information provided is completely falsified and the fraudsters behind them cover their tracks well. Fighting these chargebacks is very often not in your best interest because it takes a lot of time and effort to build a case, but the rate of success is very low.
Keep Meticulous Records to Fight Chargebacks
The chargeback reason code will indicate what kind of evidence you need to fight a chargeback.
The only way to have this evidence is to keep meticulous records of all transaction details so you can quickly and easily match up what you need with what you have when you go to fight a chargeback.
The chargeback dispute evidence you need to keep track of is:
- Logistical information. The time, date, and IP address, delivery address, or anything else you can collect to show how and when an order was placed.
- Customer communication. Conversations with accounts via any medium including phone, email, text, and chatbot.
- Proof of order receipt. Signed proof of delivery to the requested address, proof of residency or employment at requested address
- Chargeback history. Know if an account has previously filed a chargeback.
Draft a Chargeback Response Letter
Chargeback response letters are your formal response to the bank. They deliver your evidence for why the chargeback should be cancelled. You should tailor your response letters by chargeback reason code, because you will need to present specific types of arguments to refute each type of claim.
However, most chargeback response letters should include certain key pieces of information.
Order transaction history
Your letter should include a transaction history section. In this section, you should include any evidence of previous transactions. Your goal is to tie the logistical information (IP address, email, etc.) of the chargeback to previous orders. This can prove you have a history of providing legitimate services to the account. Ideally, you will be able to show the customer’s account has a history of chargebacks — an indicator of a repeat friendly fraud offender.
Description of services provided
Don’t Give-up in the Fight Against Chargebacks
At the end of the day, credit card companies do not set out to harm merchants. They understand the right of merchants to receive payment for their goods, and do provide resources and tools to help. But it starts with the merchant, who must be willing to protect themselves as much as possible.
It’s not easy to avoid problems, but knowing what to watch out for, what to bring to the fight, and how to press your case, is the best way to avoid as much lost revenue and payment processing nightmares as possible.
