Chargebacks is a refund to the consumer, initiated by the instrument issuing bank used by the consumer to pay off the debt. In particular, it is a reversal of earlier funds transfer from a consumer bank account, credit line, or credit card.
Chargebacks also occur in the distribution industry. This type of chargeback occurs when the supplier sells the product at a higher price to the distributor than the price they have set with the end user. Distributors then apply chargebacks to suppliers so they can recover lost money in transactions.
Video Chargeback
United States Overview
The chargeback mechanism exists primarily for consumer protection. Credit card holders issued in the United States are given the right of reversal with the Z rule of Truth in the Loan Disbursement Act. US debit card holders are guaranteed the right of reversal by Rule E of the Electronic Funds Transfer Act. Such rights extend globally, in accordance with the rules established by the card association or network of related banks.
A consumer may initiate a chargeback by contacting the issuing bank and filing a proven complaint about one or more debit items in the statement. The forced involuntary threat of funds provides incentives for merchants to provide quality products, helpful customer service, and timely refunds. Reject pay also provides a means for invalid transfer reversal due to identity theft. A chargeback may also occur as a result of friendly fraud, where the transaction is authorized by the consumer, but the consumer then tries to fraudulently reverse the charges. Card-charging counterpart rules are available online for public inspection and review. They consist of systems to adjudicate transaction disputes between cardholders and merchants, especially where issues can be solved based on evidence of incidents for transactions. The rules provide for arbitration issues by card associations. This can happen where the card issuer generates a second (or "arbitrage") a charge against the merchant, after receiving the merchant's response to the initial chargeback. Normally this will require the cardholder to reject the merchant response elements. The second counter-claim resulted in a second credit from the cardholder's account for the disputed funds, after being credited back to the merchant with his response to the initial chargeback. The only option of the merchant after the second refund is to start a dispute arbitration by the card association. The cost for this is on the order of $ 250, and the arbitrator loser is then obliged to pay the arbitrage fee.
In 2014, a report by Chargebacks911 states that the top 5 US cities with the highest transaction percentages resulting in chargebacks are:
- Show Low, AZ
- Port Washington, NY
- San Jose, CA
- Miami, FL
- Astoria, NY
Maps Chargeback
Code reason
With each chargeback, the publisher selects and sends the numerical reason code. This feedback can help merchants and acquirers diagnose mistakes and improve customer satisfaction. The reason code varies by bank network, but falls into four general categories:
- Technical: Authorization period, insufficient funds, or bank processing error.
- Clerical: Duplicate billing, incorrect charge amount, or refund never issued.
- Quality: Consumer claims have never received the item as promised at the time of purchase.
- Fraud: Their consumer claims do not authorize a purchase or identity theft.
One of the most common reasons for chargebacks is fraudulent transactions. In this case, the credit card is used without proper approval or authorization from the cardholder. In some cases, the merchant is responsible for the fraudulent charge to the customer. Cheat card transactions often come from criminals who gain access to secure payment card data and set up schemes to exploit the data. In case the card is not present the merchant's transaction is usually responsible for the chargebacks and related charges. After the adoption of EMV (cards with chips in it), merchants who have not upgraded to EMV technology typically become liable for chargebacks received (unless others in the payment chain have also not been upgraded) even in cases where prior to EMV merchant adoption will not be liable answer.
A chargeback may also be caused by a customer dispute over a credit statement. For example, a customer may have returned merchandise to a merchant in return for credit, but credit is never posted to the account. Disputes may also arise if the customer does not receive the goods they have paid or if the goods are not as expected. In this example, merchants are responsible for providing credit to their customers, and will be subject to chargebacks.
Other types of chargebacks are related to technical issues between merchants and banks issuing them, for example when a customer is charged twice for a single transaction. Other chargebacks are related to the authorization process of credit card transactions, for example, if a transaction is rejected by the issuing bank but the account is still charged.
Offer merchant
For transactions where the original invoice is signed by the consumer, the merchant may dispute a chargeback with the help of the bank that acquired the merchant. The acquirer and publisher mediate in the dispute process, following the rules established by the appropriate bank or association card network. If the acquirer is applicable in dispute, the funds are returned to the acquirer, and then to the merchant. Only 21% of globally proposed chargebacks are decided to benefit merchants. The 2014 Cybersource Benchmark report found that only 60% of the disputes are disputed by merchants, and that merchants have a success rate of about 41% with what they do back.
To work around this more effectively, technology companies have written code and built algorithms that help merchants determine whether a chargeback is legitimate or cheating.
Merchant fines
The merchant acquiring bank accepts the risk that the merchant will remain solvent over time as long as the chargeback has to return the total amount to the customer and the amount to be reimbursed from the merchant, and thus has an incentive to take interest in product merchants and business practices. Reducing a customer chargeback is critical to this endeavor. To encourage compliance, the acquirer may impose a penalty on the merchant for each chargeback received. Payment service providers, such as PayPal, have a similar policy. PayPal Traders charge $ 20 for each chargeback (regardless of whether it's the first) plus it will retain the original transaction fee.
In addition, Visa and MasterCard may levy heavy fines on banks that get merchants with high chargeback rates. Acquirer usually gives such a fine directly to the merchant. Merchants whose ratios are too far from compliance may trigger a $ 100 or more card association fine per chargeback.
Other types
Accounts may also experience credit reversals in other forms. ATM reversals occur when ATM deposit envelopes are found to have fewer funds than those represented by depositors. A chargeback was made to correct the error. This can happen by a deliberate accounting or fraud mistake by the account holder, or the envelope or contents may be lost or stolen.
Reject pay also occurs when bank errors credit accounts with more funds than intended. The bank created a chargeback to fix the error. If the results of the overdraft and it can not be covered in time, the bank may sue or suppress criminal charges. When a direct deposit is made to the wrong account holder or larger than intended, a chargeback is made to correct the error. Finally, a chargeback occurs when the account holder keeps a check or money order and the stored item is returned for insufficient funds, accounts that are closed, or found to be fake, stolen, altered, or forged.
Banks may sue account holders or suppress criminal charges when a chargeback is necessary because fraudulent and insufficient funds are in the account to cover a chargeback.
Negative database
Credit card companies usually keep records of credit card owners who regularly charge back, in "negative databases".
See also
- Card security code
- Backcheck insurance
References
External links
- Announcement of reissue
Source of the article : Wikipedia
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