What is chargeback representment?
A chargeback is a transaction reversal process in which the cardholder disputes a charge with their issuing bank and requests the money be returned to them. The bank then reverses the transaction, and the funds are taken out of the merchant’s account and returned to the cardholder.
Customers use chargebacks to protect themselves against fraudulent activity, damaged items, or the non-delivery of goods. Chargebacks can also be triggered by processing errors from the merchant, such as accidental charges or mistakes on the billing descriptor.
Keep on reading to learn about the chargeback representment process, as well as information on how it can help protect your business.
What is a chargeback representment?
Chargeback representment is when a merchant challenges a chargeback and provides evidence to the issuing bank that the disputed transaction was legitimate. The merchant is essentially “re-presenting” the transaction to the bank. Chargeback representment can be a powerful tool for merchants to fight back against illegitimate chargebacks and to recover lost sales.
Once the issuing bank receives the representment, it carefully reviews the evidence and makes a decision. Depending on its findings, the bank will either reverse the chargeback and return the funds to the merchant or reject the merchant's evidence and uphold the chargeback.
If the bank rules in favor of the cardholder, the cardholder will retain the provisional credit for the disputed funds, and the merchant will lose the funds, items sold, and associated fees.
In contrast, if the bank rules in favor of the merchant, the funds will be returned to the merchant's account, and the cardholder will lose their provisional credit. This marks the end of the representment phase of the dispute process.
The bank will typically notify the payment processor first, and the merchant can find out the decision through the payment processor's online portal or by contacting them directly.
However, representment isn’t always the final stage of the dispute. Customers and banks may escalate the chargeback further to the “pre-arbitration” stage. At this point, you, the merchant, can either accept the loss or present new evidence to convince the issuing bank. If the bank remains unconvinced, they may further escalate the case to arbitration by the card network.
While cardholders have the right to dispute a transaction, you also have the right to challenge these disputes. Just think, you can defend a valid transaction and recover lost revenue resulting from an unwarranted chargeback claim.
What are my chargeback options?
When faced with a chargeback, you have two options: accept it or fight it.
If you choose to accept the chargeback, you can quickly resolve the issue, but you’ll lose the sales revenue, the goods or services provided, and the wholesale cost of the products. You’ll also be responsible for any fees and expenses associated with the transaction, such as shipping, packaging, fulfillment, and interchange.
On the other hand, if you decide to fight the chargeback through the representment process, you can contest the claim by presenting evidence that demonstrates the customer's dispute is illegitimate. Along with the evidence, you’ll need to include a rebuttal letter summarizing your case, and if your evidence is convincing, the bank may reverse the chargeback and credit your account with the disputed funds.
However, even if the chargeback claim is deemed invalid, you’ll still need to pay a chargeback fee to cover your acquirer's administration costs. Despite these costs, the opportunity to clear your company’s name and recover lost sales through a chargeback reversal is usually worth the short-term hit.
What do I need for a chargeback representment?
To increase your chances of winning a chargeback representment, you should gather and provide the following evidence:
A printed copy of your refund/return policy, which you should be able to find on your website or in the transaction receipt or order form.
- Evidence that the transaction was approved and authorized by the cardholder.
- Customer transaction history that shows any previous sales with the customer, if applicable.
- All records of communication with the customer who filed the chargeback.
- Proof that the product was delivered to the correct address, along with the delivery date and, ideally, a signature of the recipient.
- Proof that you took necessary steps around fraud prevention, such as requiring CVV codes for card payments.
- Tracking numbers to confirm the delivery of the product.
- The description of the product or service from your website, along with a photo of the product in question.
- Any delivery slips signed by the customer.
- Proof of download for digital products
Before you start gathering evidence, the first step in contesting the chargeback is to identify the reason code, which explains why the transaction is being disputed. This will help you address the chargeback in the most appropriate way.
The reason code may not necessarily reflect the actual reason for the chargeback, but you ought to respond to it based on the provided chargeback code.
What is the chargeback representment process?
When faced with a chargeback representment, you should take these steps.
1. Consider Deadlines
It's essential to respond within the time limit given by the reason code and the card network. In most cases, it’s between 10 and 45 days. Otherwise, you risk losing your chance to dispute the chargeback.
2. Gather Compelling Evidence
You need to gather all the compelling evidence to support your case, including the customer's transaction history, proof of delivery or pick-up, product descriptions, and communication with the customer. All evidence should be in response to the specific reason code, even if you believe that reason to be illegitimate.
3. Write a Rebuttal Letter
Along with the evidence, you need to write a rebuttal letter that presents your evidence and explains why the chargeback is invalid. This letter should be clear and concise and address the specific reason code for the chargeback. You should also make sure to include any relevant transaction details, such as the date and amount of the transaction.
4. Submit Representment
Finally, you need to submit your representment to the acquiring bank, which includes the rebuttal letter and all the supporting evidence. The bank will then forward the representment to the issuing bank for review, who’ll evaluate the evidence and decide whether to reverse the chargeback or uphold it.
Best practices for chargeback representment
Chargeback representment can be a complex and time-sensitive process for merchants, but there are several best practices to follow
- Act quickly: Time is of the essence when it comes to chargeback representment. The sooner you respond, the better your chances of success.
- Know the chargeback reason codes: Understanding the reason behind the chargeback is crucial to building a strong, compelling case for representment.
- Be informed about the chargeback process: Familiarize yourself with the chargeback process, including deadlines, required documentation, and potential outcomes.
- Keep records for everything: Maintain detailed records of all transactions and customer interactions.
- Write clear billing descriptors: Accurate and transparent billing descriptors can help reduce confusion and prevent chargebacks.
- Know your customers: Understanding your customers’ behavior and transaction history can help you identify potential chargeback risks, and to develop strategies to reduce them.
- Know your chargeback limit and build a refund strategy: You should be aware of your chargeback limit and develop a strategy for issuing refunds that minimizes chargeback risk. It is important to be mindful of the dispute represented win rate as, in some situations, the probability of winning is so low that a refund is the better option. Reviewing the dispute code will indicate whether it’s a dispute you stand a high chance of winning or whether you’d be better off refunding automatically.
- Avoid mistakes: Mistakes in documentation or communication can undermine your case for representment, so it’s important to be thorough and accurate at every step.
- Don’t ignore chargebacks: Ignoring chargebacks can lead to lost revenue, damaged reputation, and other negative consequences. You should always respond promptly to all chargeback claims.
- Make use of automation: Automating certain aspects of the chargeback representment process, such as document uploads, can help streamline the process and reduce the risk of errors.
Reduce chargebacks with Checkout.com
The easiest way to recover lost sales and avoid chargebacks is with Fraud Detection Pro, which uses a hybrid of machine-learning technology and rules to help your business fight fraud and reduce false positives.
Rapid Dispute Resolution from Checkout.com, in partnership with Verifi, can also help you reduce your chargeback ratio by automatically resolving disputes before they turn into chargebacks.
For more information on how to protect your business from chargebacks, talk to our team today.