Credit Card Disputes: What are they?

Credit Card Disputes: What are they?

What is a credit card dispute?

Credit card disputes, more commonly known as ‘credit card chargebacks,’ occur when a customer identifies a transaction, they believe is not valid and disputes the transaction to the issuing bank. 

A dispute is, in basic terms, a credit card reversal. If a customer discovers an unrecognizable transaction on their statement, then they can call the credit card company to investigate. If the transaction is ruled 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 there is an error in the merchant’s transaction, so the cardholder can’t solve the issue themselves.

A dispute is like insurance against fraud for the cardholder, ensuring that they can redeem lost finances when scammed or dealing with a dishonest merchant. They also secure the quality of service and goods by preventing scammers from selling defective or low-quality goods or services with the knowledge that they will eventually be faced with a dispute.

Customer Protection Authorities:

If you would like to file a credit card dispute, many different 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 Organization
  • 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
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The difference between refunds and chargebacks:

Refunds and chargebacks are often confused, and many fails to differentiate between a chargeback and an ordinary refund. If you compare the differences between these two services, then they are easy to distinguish. 

Here is an outline of how to differentiate between these two services:

Refunds:

  • Customers contact the merchant directly to receive their refund
  • The products are returned to the merchant, meaning they can be resold.
  • In most cases, the merchant is eligible to receive an interchange fee
  • The merchant’s reputation with the acquiring bank isn’t damaged in the process
  • Refunds can be processed in just a few days

Chargebacks:

  • Customers report immediately to the bank instead of the merchant
  • There is no good reason for the customer to return the products to the merchant
  • The interchange fee is unrecoverable by the merchant, and instead, they have to pay a chargeback fee
  • Hurts the chargeback to transaction ratio and damage their business in the long term
  • It can potentially take six months for the chargeback process to be completed

When is a cardholder entitled to a dispute?

In most cases, there are two different situations where a customer can legally claim a chargeback by filing a dispute. The two conditions in question are criminal fraud or merchant error.

The first is when a credit card is stolen or in cases of credit card fraud. This can result in the cardholder being legally entitled to file a dispute.

Or when the credit card holder approves a transaction, you then didn’t receive the service or was created by the broker, making you eligible for a chargeback.

Now, let us assume that a customer purchases an item that arrives is not as advertised. The customer reaches out to the merchant for a return and refund, but they have inconsistent customer service. The customer doesn’t receive a response from the merchant within a reasonable time frame. In this case, the merchant bears the responsibility, so the cardholder is justified in their dispute. 

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

The Credit card dispute process:

If you notice a mysterious charge on your credit card bill, then you should call the card company to inform them right away. You will also have to send in a written billing error notice to your card company within sixty calendar days from when the charge appeared on your statement.

The credit card timeframe for filing a dispute may differ depending on your credit card provider and the reason for filing a dispute, but generally speaking. Usually, the limit lies around 120 days. 

It is advisable to inspect your credit card agreement and review your rights regarding any unauthorized charges. You can find this by visiting your credit card distributers website.

If you have already paid the charge you are disputing, you can still dispute it; however, you probably won’t receive the money-back until the credit card provider has concluded.

If the card provider finds that your claims are correct, then the bill’s cost is removed. If the card company says that you were incorrect, they are obligated to inform you why your dispute was declined in writing. They also should tell you how much you owe and when this payment is due.

When a merchant is sure that the customer’s claim is invalid, they can avoid paying for a chargeback by filing a chargeback representment. This is practically when the merchant creates a case to demonstrate that its claim is not valid. 

There are two components of this: 

  • compiling evidence 
  • writing a rebuttal letter 

Once the case is assembled, it can be passed along to the acquiring bank, who then submits the claim on behalf of the seller. The cardholder’s issuing bank will then review the dispute to produce a ruling.

When is the cardholder wrong to file a dispute?

Many disputes also fall into the category of friendly fraud. Friendly fraud is when the customer, either deliberately, by mistake, or lack of understanding, files an unwarranted chargeback.

The most common types of friendly fraud:

  • The customer would like to return an item but avoid the handling or restocking fee, so they file for a dispute instead.
  • The customer is experiencing buyer’s remorse and regrets the purchase despite no faults on behalf of the merchant.
  • The merchant’s return process seems disadvantageous to them, so the customer files a dispute instead
  • The consumer misunderstood the delivery schedule
  • The customer wants a refund, but the time limit for a refund has expired
  • In cases of family fraud
  • The cardholder didn’t recognize the transaction on their billing statement, but it was an authorized purchase that they made themselves
  • The buyer is engaging in cyber shoplifting to receive items free of charge

How can Trader Defender help?

If you are settling a dispute or are about to file a dispute request, consider a consultation from us at trader defender. If you want some legal advice, to report a merchant, receive other legal services, or if you are just confused about the chargeback process, then you can rely on us to help you get the financial guidance you need.