Have Chargeback Disputes Become Too Easy?

Online shopping is getting easier by the minute. Almost too easy. Customers can make purchases with a single click — and they can often return them with not much more effort. This convenience makes it difficult for merchants when it comes to chargeback disputes.

Has the mantra of “the customer is always right” made it too simple for customers to file chargebacks?

When the 1968 Truth in Lending Act granted credit card holders reversal rights, it was intended to protect consumers against fraudulent purchases. But over time, it’s also created a chargeback challenge that costs businesses billions of dollars every year.

Here’s how chargebacks have become so easy to file and what merchants can do to try to prevent them.

The Evolution of Chargeback Disputes

Over the last several years, customers have become more vocal about what they believe are their consumer rights. In fact, you can barely scroll through Facebook without seeing a complaint tagging a merchant about slow service, incorrect orders or other perceived injustices. And many consumers have learned that they’ve been given the right by credit card issuers to file chargebacks on purchases that they aren’t happy with, even if they never try to resolve it with the merchant directly.

This “order protection” has given many customers the confidence to make purchases they might not have otherwise made. Consider the dramatic rise in sponsored ads on Facebook. Customers are buying products from these ads not only sight unseen, but also with limited information about the reputation of the company who’s doing the selling. In fact, nearly 61% of shoppers surveyed in July 2018 reported they’d purchased from e-retailers they were visiting for the first time.

But those leaps of faith don’t always pay off. Maybe the sizing is off or the fabric is of an inferior quality. What happens when they try to return it, only to find the overseas shipping is more than the purchase price — or the merchant refuses to accept returns? Knowing customers can still receive a refund by filing a chargeback dispute with their credit card company can give them the confidence they need to go ahead with an online purchase. Here’s how easy those chargebacks have become.

Chargebacks Can Now Be Filed Online

It used to be that customers had to call a credit card issuer’s customer service line to file a credit card dispute. But today, almost every issuer lets consumers quickly dispute charges online — with some even offering chargeback filing options on their mobile apps.

Unfortunately for merchants, as card issuers make it easier for customers to help themselves to a (sometimes undeserved) refund, customers will be more likely to take this way out rather than trying to communicate with the merchant directly to resolve the problem.

Banks Have Shortened the Dispute Timeline

While customers generally have 120-180 days to file a chargeback on a credit card purchase, the time merchants have to respond to chargebacks isn’t nearly as generous. For example, the 2018 Visa Claims Resolution Initiative reduced the window for merchants to respond to Visa chargebacks and challenge disputes from 45 to 30 days. Plus, issuers and cardholders now have only 30 days to respond to rebuttals.

That short timeframe can make it difficult for busy merchants to gather the compelling evidence needed to demonstrate that a disputed charge is actually valid. And if they can’t turn around the representment in time, it becomes even easier for customers (and fraudsters) to get their chargeback request accepted.

How e-Commerce Merchants Can Protect Themselves

Just because it’s easier for customers to win chargeback disputes doesn’t mean e-commerce merchants have to resign themselves to lost manpower, time and money spent representing them. Instead, merchants can lower their risk of potentially devastating chargebacks with just a few simple steps.

To minimize chargeback disputes:

  • Have a clear refund and return policy.
  • Encourage customer communication
  • Be clear in product descriptions
  • Implement the right chargeback solution

Let’s explore these steps in more detail.

Step 1: Have a Clear Refund and Return Policy

Sometimes, customers file chargebacks because they missed the return window or didn’t understand the refund policy. That’s why it’s important for merchants to make their policies clear and easy to find. Merchants should highlight these policies prominently on checkout pages — even requiring customers to check a box saying they’ve read and understand the policies. Merchants should also be flexible about their return policies when they can; after all, sometimes it’s easier to refund a customer their money than fight a chargeback.

Step 2: Encourage Customer Communication

Customers with questions about their orders should be able to easily contact a customer service department — whether that’s calling a 24/7 phone line, emailing a monitored email account, or sending messages via an online form or chatbot. Even setting up monitoring for social media can be helpful to keep up with your reputation and respond to modern customer communications.

Having contact information easily accessible from website pages, email communications, order confirmations and more can help you provide prompt, excellent customer service to customers and help prevent them from turning to chargebacks for resolution.

Step 3: Be clear in Product Descriptions

Ensure your item listings are complete and comprehensive. That means including product dimensions, colors, materials, and any damages or defects. Product photos from multiple angles can also eliminate confusion, while videos of the product in use can help customers ensure they’re getting exactly what they want.

Step 4: Implement the Right Chargeback Solution

With e-commerce on the rise and technology making it increasingly easy for customers to use chargebacks as an easy way to correct a purchasing mistake, merchants need to know how to protect themselves against chargebacks.

While chargebacks can’t be completely eliminated, implementing the right fraud protection solution with robust tools and protocol can help you minimize the financial and reputational effects of fraud on your e-commerce business. Contact the fraud analysts at ClearSale today to see if our 100% chargeback guarantee is right for your business and can help you balance the benefits of recurring billing with the financial risks of chargebacks.

New call-to-action