The History of Chargebacks is not very old and is straightforward. As per law the cardholder has two years to file a dispute with the issuing bank for fraudulent ecommerce business transaction. That means saving documentation for two years. Most banks generally have policy to accept disputes for ecommerce business transaction that is six month old but if the cardholder pushes it, they have two years to file a dispute.
However at current point of time the chargebacks are used for entirely different purpose from lawmaker’s intention. Chargebacks today are turned into friendly Fraud. The platform which was created to provide protection to cardholders is being used by the customers for unfair practices.
Chargebacks are known as refunds that given to the cardholders also known as reversal of amount paid (By Cardholder) during the ecommerce transaction by the issuing bank for fraudulent transaction on the bank statements of which cardholders are unaware. Once the customer file complaint or raise dispute with issuing bank, the bank give temporary refund to the customer and investigate about the disputed transaction. If the customer claims proves to be untrue the refund is not initiated to the customer and money is not taken from the merchant. On the other hand, Merchants are given the time to dispute the claim of the customers by providing supporting documents to prove transaction was valid. If the merchant does not respond to the dispute within time frame, the chargeback is automatically ruled into the cardholder’s favor & the temporary refund converted in permanent credit.
The Fair Credit Billing Act
The Fair Credit Billing Act is a United States Federal law enacted in 1974 to protect the customers from unfair billing practices in ecommerce business industry providing a platform where they can raise disputes. The Unfair billing practice can be of any type such as:
- Amount not actually paid by the customer
- Wrong amount charged
- Damaged Goods delivered
- Not as described goods delivered
- Calculation errors
- Product or services not received
- Not authorized the transaction or unaware of the transaction
If the customer contact the issuing bank for the act which is not considered as unfair billing practice or, the bank may ask the cardholder to contact the merchant directly and solve the case.
The act provides a mechanism to cardholder to directly deal with their banks for unlawful credit or debit charges in their account.
Chargebacks Turned Into Friendly Fraud
The chargebacks were created to protect the customers from unlawful ecommerce business practices, however today the cardholders instead of contacting the merchant for the refund contact their banks and dispute transaction. Who could see this will happen.
From the Merchant point of view, there is nothing called friendly fraud. Merchant is going to receive the chargeback only. There are many people who make the payment online, get the product and dispute the transaction. They are the people who want to keep the products too and ask for money too.
The customers in the Friendly Fraud come up with the following type of cases in ecommerce business industry but merchant have to dispute the claim. Following are the cases and the ways to resolve:
- The product was not delivered: Provide the transaction receipt, proof of delivery (Signed by Customer), delivery receipt provided by courier partner and any communication with the customer that shows they received the product.
- The product is not as described: Provide the same documents as above along with proof of description about the product clearly displayed on website prior to make any order for customers, Return policy Clearfield that refund can be issued if the product is returned within the reasonable time as mentioned in the policy.
- Product returned but refund not received: Ask the customer to provide proof of delivery to your address. If product is returned after allotted time period show your return policy.
SUFEERING FROM CHARGEBACKS AND FRIENDLY FRAUD IN Ecommerce Business: NEED HELP
Because of the wrong use of chargebacks, consumers/ cardholders and merchants are suffering. Merchants pay chargeback fees, increase their processing risks, and lose revenue with each chargeback filed. Consumers are also being penalized, usually without their knowledge. To compensate for inevitable chargeback fees, merchants are raising their prices. If you are suffering from the chargebacks and wish to run your business with peace of mind Contact Chargeback Expertz.