A dispute (or claim) is made by the cardholder. A request for information is sent to your business to answer the query and needs to be responded to within a strict time frame. The outcome may be a chargeback.
A chargeback is a reversal of a transaction and usually occurs when a cardholder raises a dispute or claim with their financial institution or Issuer. Under the Credit Card Schemes, a cardholder may query a payment from their credit card for any reason.
A chargeback does not mean that your business isn’t entitled to the payments for the goods or services you have supplied, it also doesn’t cancel or change the agreement you have with the payer. It means the payment has failed and a new arrangement will need to be made with the payer to recover the funds.
A chargeback can also occur with no previous request for information when a fraudulent transaction has been made.
- The card holder queries a payment with their financial institution (also known as the Card Issuer), or the Issuer has reason to think the payment might be unauthorised.
- The Card Issuer raises a claim, or a chargeback via the scheme rules.
- eWAY’s sponsor bank is notified and request documentation from the merchant (eWAY) to verify the transaction. There is a set timeframe to respond to these requests (see below)
- eWAY notify your business of the request via email.
- Business accepts the chargeback and refunds the payment via MyeWAY and responds with proof, or documentation is provided that verifies and supports the payment, which is forwarded to our sponsor bank.
- If compelling documents are provided, an arbitration case is opened by the bank with the card issuer and the dispute is either resolved in your favour, or the issuer will determine that the dispute is upheld and a chargeback is the result.
- If the outcome is a chargeback, the payment is reversed to the cardholder and a chargeback fee may be payable.
- A chargeback can also occur with no previous request for information when a fraudulent transaction has been made.
Disputes are a known risk when accepting payments but you can take steps to reduce or prevent them. They are not always the result of something your business did or did not do. Errors can be made by all parties involved in the processing of a payment.
Following these guidelines will lessen the risk and help to protect your business:
- Ensure payers know the description that will appear on their statement
- Only take payments for goods and/or services your business is providing, if payments are transferred to a third party you are responsible for them if charged back
- Refund only to the card the payment was made from
- Respond to all dispute notifications within the timeframe required
- Be wary of anyone who offers numerous card numbers, asks you to transfer funds to another bank account or third party, or provides elaborate reasons for why you can’t talk to them. Take additional steps to check that the payer is the cardholder
- Do not accept “authorisation” for a payment from a person claiming to be the wife, husband, partner, friend, etc, of the cardholder. Only the actual cardholder can authorise a payment
- Remind payers of an upcoming recurring or auto renewal payment
We also recommend utilising Beagle to further protect yourself against fraud.