Chargebacks occur if a Sales Draft Request (SDR) has not received a response within the defined time limit (Step 3 of the Sales Draft Request). Some card issuing banks (issuers) skip the SDR process entirely and proceed straight to a chargeback.
Banks keep a record of a merchant’s chargeback history, and a large number of chargebacks can affect the merchant’s credit score.
If a merchant successfully disputes a chargeback and wins a reversal, any associated fees are refunded. Chargebacks can occur months after an original transaction was processed—it depends on the reason for the dispute and the issuers bank chargeback policies.
The customer’s credit card issuer notifies Bambora's bank that a chargeback has occurred.
As with an SDR, the issuer provides a brief overview of the transaction (dates, card numbers, amount) and indicates the reason for the chargeback. The issuer does not provide full details, for example, the cardholders name.
Bambora informs the merchant about the chargeback by email.
The merchant must follow-up with the credit card company if they want to dispute the chargeback. To win a chargeback, the merchant must provide detailed information in a timely manner.
The card issuer makes a ruling on the chargeback issue. If the merchant’s dispute is approved, the bank issues a reversal notice to Bambora to process the reversal for the merchant and refund any applied chargeback fees.
Disputing a Chargeback
As a merchant, if you receive a Sales Draft Request (SDR), or a Chargeback, you have the option of disputing them. In this section there are tips to consider before launching a dispute, and what to do if you lose a dispute.
- Goods or services not received.
- Goods returned without a refund.
- A refund was promised but not processed.
- A transaction was processed after a recurring billing authorization was cancelled.
- A cardholder states they did not authorize or participate in the transaction.
- A cardholder states they paid for the goods or services by other means.
- Goods received were not as described by the merchant.
- Defective merchandise was received.
- Data entry errors.
- A split sale, where two or more transactions were processed for a single purchase.
Note: Merchants must prove that split sales were authorized by the customer.
If you receive an SDR or a Chargeback, there may be a simple explanation. Review your records for these common errors:
- Duplicate transactions – Accidentally processed a transaction twice.
- Refund errors – Verify that you properly processed any refunds; make sure you did not process a refund as a sale.
- Incorrect transaction amounts – Verify the original transaction amount was entered correctly.
- Other incorrect data – Confirm that you did not enter incorrect data for a legitimate transaction.
If you can provide documentation to show that these errors did not occur and that you processed the transaction correctly, there is a good chance you will win your side of the dispute.
If you notice one of these errors and you are still at the Sales Draft Request stage, you can contact the customer and move ahead with a refund to correct the situation. Remember to provide details showing the refund, or the situation may proceed to a chargeback.
See also The Transaction Report
You can lose a dispute for a number of reasons. For example, if you don't respond to an issue within the predefined time frame, or if the documentation provided to the card companies was not legible or incomplete.
When you respond to a dispute, make sure you provide as much information as possible to support your case to make it easy for a reviewer to follow your material. The onus is on the merchant to provide legible documentation and proof that goods were delivered to the client; include shipping information, preferably with a signed delivery slip.
If a merchant loses a dispute, they can ask the card company to reconsider their decision by sending a Request for Assistance letter to the issuer (for Start-up! users, to Bambora). Merchants must include supporting documentation, for example, delivery records and transaction receipts. This option is considered a last resort and further review should be requested only if you can provide substantial evidence the chargeback is invalid, or that you have corrected the original error.