Chargebacks

Chargebacks occur when a cardholder disputes a charge through their issuing bank, which then reverses the transaction. Chargebacks are one of the most significant challenges for businesses since they result in lost revenue and lead to fines or an increase in processing fees.

A new challenge has arisen with the increase in contactless card usage. In fact, Visa reported a 500% increase in customers using contactless credit cards from 2019 to 2022.

Some common reasons for chargebacks include:

• Unauthorized transactions, such as fraud, where the cardholder claims they did not authorize the transaction in the first place
• Defective or not as described, refunds when an item arrives at the consumer defective, damaged, or not as advertised
• Product or service not received by the consumer
• Recurring billing issues, where the customer was charged for a subscription or service they thought was canceled
• Duplicate transactions, when the same transactions are processed multiple times

Refund Requests

Refund disputes occur when a customer requests a refund due to dissatisfaction, a damaged product, or changes in their decision after the purchase was made.

Common reasons for refund requests include:

• Customer dissatisfaction with the product or service ordered
• Billing errors or mistaken charges
• Failure to meet promised delivery times, often resulting in the consumer no longer needing the product or service

Authorization Holds and Pending Charges

Businesses may place an authorization hold on a customer’s card to ensure sufficient funds are available before finalizing the charge. If these holds are not released properly, they can lead to disputes, such as the customer not understanding why the funds are temporarily unavailable.

In addition, holds may not be released in a timely manner, which can be frustrating for the consumer. Multiple authorization attempts can lead to duplicate pending charges as well.

Subscription and Recurring Payment Disputes

Businesses that operate on a subscription basis frequently encounter disputes related to recurring billing. This can include customers forgetting they signed up for a subscription or thinking they canceled the subscription previously. Subscription models can be difficult to cancel, and unexpected price changes without proper notification can irritate customers.

Merchant Errors

Sometimes, disputes arise due to errors made by the business, such as double charging, incorrect billing, or failure to process cancellations properly. This can also result from incorrect customer information entry that leads to a failed transaction.

How to Prevent Payment Processing Disputes

Disputes happen, no matter how prepared you are. However, implementing certain strategies can significantly reduce their occurrence. Some of these strategies include the following:

• Improve transaction transparency. Ensure clear and detailed product descriptions on your invoices and website. Provide transparent pricing with any additional fees, and use easily recognizable merchant descriptions so customers can easily identify transactions on their statements.
• Enhance Customer Communication. Make sure order confirmations or receipts are delivered promptly to the customers, with clear refund or cancellation policies noted. Let customers know of subscription renewals in advance.
• Offer excellent customer service. Offer multiple channels for customer inquiries, including chat support, phone numbers, or email addresses, to address concerns early.
• Strengthen security. Implement multi-factor authentication for higher-value transactions, and use secure payment methods that include fraud detection. Fraud is a growing problem in the country, with 64,124 cases of fraud reported in 2023. Of these, 15.2% involved credit cards or other instruments of fraud.

FAQs

Can You Dispute a Processing Payment?

Yes, it is possible to dispute a processing payment under certain conditions. If you notice an unauthorized transaction, an incorrect charge, or a duplicate payment, you can contact your bank, credit card company, or payment processor to file a dispute. This process involves providing evidence, including receipts or communications with the merchant.

Disputes take time to resolve. Each financial institution holds its own policies and timelines for handling them, but transactions can be disputed if they violate consumer protection laws.

What Is an Example of a Payment Dispute?

An example of a payment dispute might include a customer who was charged twice for one transaction. In this event, the customer calls the merchant to request a refund, but the issue is not resolved. They then file a dispute with their credit card company, providing evidence, such as order confirmations and transaction details. The bank can investigate and refund the duplicate charge if the claim is valid.

What Are the Odds of Winning a Credit Card Dispute?

The odds of winning a credit card dispute depend on the claim, the quality of supporting evidence, and the credit card issuer’s policies. If the dispute involves unauthorized charges, the chances of winning are higher, especially if the issue is reported promptly. However, disputes related to merchant policies, dissatisfaction with a purchase, or unclear terms can be harder to win.

Can ACH Payments Be Disputed?

Yes, ACH payments can be disputed under specific circumstances, such as unauthorized transactions, incorrect amounts, or duplicate charges. Consumers typically have 60 days from the date of the transaction to dispute an authorized ACH debit under the Electronic Funds Transfer Act.

The account holder should contact their bank and complete a written statement, providing all relevant details to initiate a dispute. Legitimate payments authorized by the customer are harder to dispute, and business-related ACH transactions might have different dispute procedures.

Contact an Electronic Payment Processing Litigation Lawyer Today

Common payment processing disputes are an unavoidable aspect of doing business, but these can be minimized and managed. When disputes do arise, responding swiftly and with sufficient documentation is essential to achieving a favorable outcome.

The experienced Los Angeles County electronic payment processing litigation lawyer of Rome LLP can help protect your business, navigate complex payment processing laws, and defend you against unfair claims. Time is critical in these cases, so don’t wait to seek legal help to resolve these matters. Contact our Century Park East office today to schedule a consultation.

Contacts

Rome LLP

Eugene Rome, Esquire
 [email protected]
(424) 544-3071
 https://romellp.com/

Bradley O. Cebeci, Esquire
 [email protected]