Credit card disputes occur when a consumer disagrees with the accuracy of a charge that appears on their statement. The Fair Credit Billing Act is a federal law that gives consumers the ability to dispute charges they did not make. However, in most cases, inaccurate charges occur because of fraud or merchant errors. These disputes can be charged back to the merchant account, which can significantly cost your business. There are several kinds of fraud that can be associated with disputes. Fraud can occur from fraudulent criminal activity where criminals obtain legitimate card credentials to make unauthorized purchases. The dispute typically begins when the victim discovers the fraudulent charge and reports the activity to their card issuer or financial institution. Not all dispute or chargeback fraud comes from criminals, it can also be “friendly” fraud. “Friendly” fraud is when a customer knowingly files a dispute for a legitimate purchase. For these reasons, prevention is always the best approach to help make sure you and your customers do not fall victim to fraud.
What Can Business Owners do to Prevent Chargeback Disputes?
Time is important when it comes to credit card chargeback disputes. Each card brand and card processor’s rules and timelines are different. For that reason, it is crucial to review the chargeback policies of both and respond in a timely manner.
Contact the Customer Directly
Oftentimes, customers bypass the merchant and go directly to the card issuer or their financial institution; however, contact the customer directly to see if there is a way to solve or better understand the issue. Some issues may just be a customer service matter and you can deal with these accordingly.
Documentation, Documentation, Documentation
Providing adequate documentation and records can help your case tremendously with chargeback disputes. Whether that be signed receipts, delivery tracking numbers, or transaction logs, document and save these to legitimize any transaction.
Your staff is the first in the line of defense against fraud, meaning that they must understand fraud and chargeback prevention techniques.
At the front line, make sure to use tools at your disposal to help prevent fraudulent transactions such as delivery confirmation, address verification, and the 3- or 4-digit code on the back of the card when the card isn’t present for the transaction such as purchases made online or over the phone.
Present v. Non-Present
Different rules apply to accepting a card in person vs. accepting a card via phone or web. Review card rules regarding each form of a credit card transaction. Refer to each card brand’s rules or contact your merchant services provider to learn more.
Integrating preventative procedures can help protect your business from chargeback losses, and it is also very important to partner with a merchant services provider that can help you navigate the dispute process. For information about the benefits included with Arvest Merchant Services, please visit https://www.arvest.com/business/borrow/credit-cards/merchant-services.