Chargeback Representment

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In our technological age, criminals are becoming more and more advanced when it comes to committing credit fraud. The costs associated with this crime can negatively impact a company’s bottom line, which is why solid chargeback representment processes are more important than ever.

To first understand chargeback representment, we have to understand the concept of chargebacks. A chargeback, sometimes called a reversal, is a form of customer protection provided by banks. When a credit card holder files a dispute citing fraudulent activity on his or her account, the issuing bank will launch an investigation into the complaint.

If the investigation finds that the transaction does prove to be fraudulent, it refunds the value of the transaction to the customer. For merchants, this means the issuing bank will draw the entire value of the transaction from their account, plus a chargeback fee that can range upwards of $100.

According to the LexisNexis True Cost of Fraud Study, the volume of fraud cases is on the rise. The study reports that every dollar of fraudulent transactions costs merchants an average of $2.40. These costs add up quickly, which is why it’s important to understand the benefits of chargeback representments.

The most common reasons for Chargebacks are fraud, buyer’s remorse and disappointment with the product or service. According to Pinpoint Intelligence’s EVP of sale, Nicholas Ruggieri, “Merchant Fraud is classified in two ways. The first type of fraud is ‘Unauthorized’ use; this is when the card or card number is stolen and used by someone other then the cardholder. The second type of fraud is, ‘friendly fraud’. Friendly fraud is much harder to detect as the legitimate cardholder uses the card with all of the correct information, and then disputes their charge to take advantage of the system.” Regardless of the fraud type, this can cost a business everything. Fraud increases overhead costs, lost of merchandise and often can come with penalties from Visa, Mastercard, American Express or Discover. It can also prevent the business from qualifying for Merchant Processing or even Banking.

Chargeback representment is the process by which a merchant can contest a chargeback. By collecting and presenting evidence, retailers can attempt to prove that a chargeback is unwarranted and be refunded by the issuing bank. Chargeback representment give retailers an opportunity to prevent themselves from becoming victims of credit fraud.

 Factors to Consider – For businesses, it’s best to be selective about which chargebacks to dispute. Consider the chargeback amount and whether it’s cost-efficient to put the time, energy and resources into fighting it. When considering whether or not to dispute a chargeback, choose your battles wisely.

In addition, success rates for chargeback representment can vary greatly, so it’s important to dispute only cases you have compelling evidence to win. The documentation you will need depends on the chargeback reason code. Hundreds of reason codes exist for each credit card brand, so identifying the correct one for your dispute within a short timeframe is crucial.

How Chargeback Representments Work – If your pros outweigh the cons of disputing a chargeback, there are several steps to take. First, you must decide if you want to handle the chargeback representment in-house or use an outside vendor. Outsourcing to a third party can be costly, but it can also be much more efficient in the long term.

If you decide to dispute a chargeback on your own, start by identifying the proper reason code and collecting evidence in the form of signed receipts, customer information on file and other documentation to use as compelling evidence.

Depending on the chargeback, there are guidelines you will need to follow when it comes to submitting your documentation by a certain deadline. Should the issuer find you followed these guidelines, you will receive a refund in the form of a reverse chargeback. Arbitration, which can have extra fees, is an option for merchants whose chargeback representment is unsuccessful.

Chargeback Representment Process

Chargeback Representment Against Fraud

By understanding how chargebacks work, it can be easier for merchants to identify ways to improve their chargeback representment process – and their bottom line.

For merchants trying to increase their win rate for chargeback reversals, it’s helpful to have a solid understanding of the representment process.

The process is initiated once a cardholder issues a complaint regarding a transaction on their credit account. Sometimes, it may also be started by an issuing bank due to a transaction processing error. Acquirers may be able to process some of these chargebacks without even involving the merchant. If this is not the case, the following steps will occur:

Notification of Chargeback – Once the card issuer receives the customer complaint, the chargeback will be passed along to you. It will be accompanied by a reason code that explains the purpose of the complaint. You must then decide whether or not to fight the chargeback based on the reason.

Make Your Case – To fight the chargeback, you must build your case. Start by gaining a thorough understanding of the reason code and the types of evidence that you can use for your defense. Depending on the credit card provider, there will be certain guidelines that need to be followed when it comes to submitting the proper evidence.

Write a Rebuttal Letter – You will submit all of your evidence along with a rebuttal letter that outlines why a chargeback is unwarranted. A strong rebuttal letter can help you increase your odds of successful chargeback representment. The best rebuttal letters are professional in tone, focus on the facts, and utilize a clear, concise format.

Submit Your Documentation – You’ve gathered the evidence that proves your case. You’ve written your rebuttal letter telling your side of the story. Now, all that’s left is to submit everything to the acquiring bank. But remember, do so within the given timeframe. You must act fast. Oftentimes, you will only have a few days to provide your response. Failure to provide a response within the time limit means you are accepting the chargeback.

A Decision is Made – The acquiring bank will forward your documentation to the issuing bank, where it will be reviewed. If the bank feels you have made a solid case disproving the cardholder’s claim, the chargeback will be voided and you will receive a reversal.

The Key to Successful Chargeback Representment – The best way to fight chargebacks and recoup revenue is to ensure you have compelling evidence to disprove any claims made by the customer. Evidence can be found in the form of customer history, receipts, tracking numbers, invoices and other documentation. The evidence you need to make your case will depend on the reason code and the card issuer’s guidelines.

It’s important to evaluate which chargebacks are worth fighting before making efforts to dispute them. For instance, it may not monetarily make sense to invest resources to fight some chargebacks. In addition, you might find you don’t have the right evidence to fight the chargeback. If this is the case, you might want to consider implementing internal process improvements so that you will have better documentation to prevent chargebacks in the future.

Losing After Winning: Should I Fight a Chargeback Again?

Fighting chargebacks can be a major hassle for merchants. The entire process is complicated, costly and time consuming.

If you lost a chargeback dispute you thought you should have won, you might be feeling even more frustrated with the experience. After all, you’ve invested a lot of energy in fighting the chargeback to no avail. Feeling discouraged, many merchants will accept the resolution, try to learn from the process and move forward. But this isn’t necessarily the path you have to follow.

Even though a vast majority of chargebacks are resolved with the initial decision, if you truly feel you were entitled a reversal and have the proper evidence to support your claim, you do have another chance to make things right. As a last resort for merchants determined to fight a chargeback, there is arbitration. Arbitration gives you another chance to argue for your case and settle the dispute. Although it is also a difficult process that will require even more of your time and resources, it could be the solution you’re looking for.

Pursuing arbitration means an arbitrator will help you settle a dispute outside of the traditional channels. In essence, arbitration gives you another opportunity to defend yourself. Every card provider has its own sets of arbitration guidelines, so it will be important to do some research before initiating the process.

Like chargeback disputes, arbitration comes with strict time limits. In most cases, it must be sought within 45-60 days. Usually, to move forward with arbitration, all phases of the chargeback process must be completed before merchants can move forward with their request. Also similar to the chargeback representment process, arbitration can be costly. With filing fees, administration fees, withdrawal fees and technical fees, merchants are looking at spending a lot of money upfront just to file their request for arbitration. Different card providers will have different arbitration requirements.

In some cases, you will have to complete the pre-arbitration phases before they can advance to the next phase. If your request is deemed invalid, your case for arbitration will be rejected. If you do move onto arbitration and you are still found liable, Visa gives you the right to appeal the decision if new evidence that was not previously available emerges, or if the disputed amount is $5,000 or greater.

Unfortunately, you must be prepared for the possibility that you will go through the entire arbitration process and lose your case again. To prevent this from happening, be sure to put your best efforts forth when submitting chargeback disputes. Make sure to provide compelling evidence that addresses the chargeback reason code and compose a strong rebuttal letter to help your case. Making the strongest argument possible in the first place will help you avoid the time-consuming arbitration process.

Remember, you always have the right to defend yourself. But it’s still important to take time to consider whether you have a high chance of winning your case before fighting a chargeback a second time by pursuing arbitration.

What Type of Merchants Need Chargeback Representment?

Chargebacks cost merchants billions of dollars every year. Chargeback representment is their opportunity to defend their reputation and protect themselves from costly losses.

So how do you know if you need chargeback representment? There are two industry types for which chargeback representment typically applies.

Product-Oriented Businesses – Businesses that deliver physical goods to customers as the foundation of their business model are product-oriented. There are many reasons why chargebacks are issued for product-oriented businesses:

  • The customer claims they never received their goods. In this case, evidence like tracking numbers and delivery confirmation forms can help your case for representment.
  • The customer claims they never received a refund for returned merchandise. Demonstrating that the refund was issued or clarifying any technicalities in your refund process will help you defend against this type of chargeback.
  • The customer says he or she is dissatisfied with the quality of goods they purchased. If you can prove that your product was delivered as described, or that the customer has received similar quality goods in the past without any complaints, you will improve your odds of receiving a chargeback reversal.

These are just a few examples of the types of chargebacks product-oriented businesses typically face. By ensuring you have strong processes when it comes to invoices, receipts and quality control for your products, you’ll increase your odds of having the right evidence to fight chargebacks, as well as minimize the amount of chargebacks you receive.

Service-Oriented Businesses – Service-oriented businesses do not provide physical goods to customers. Rather, they provide quality services to clients. Some examples of chargebacks for service providers include:

  • The customer is disputing a payment transaction made to their card. In this instance, you may simply need to provide clarity as to why the charge was made for your services. Outlining any charges ahead of time can help prevent these types of chargebacks.
  • A customer disputes they requested your services. If this is the case, be sure you can provide a signed contract or invoice outlining the services that were charged for.
  • The customer is dissatisfied with the level of service provided. Again, demonstrating a history of customer satisfaction for previous services rendered can be key to winning a chargeback reversal.

Disproving chargebacks for services can prove more difficult since service quality is a subjective measurement. Having documentation that thoroughly outlines your services ahead of time can help you prevent any future issues.

The Issue of Fraud – Fraud is something that affects everyone – customers, product-oriented companies and service providers alike.

If you feel that a cardholder has filed a chargeback for the wrong reasons, the chargeback representment process can protect you. For instance, if a customer has buyer’s remorse and they don’t want to go through a burdensome return process, this does not give them a legitimate case for filing a chargeback.

It’s up to all merchants to look into each chargeback filed and dispute the ones they have the evidence to win in order to protect their finances and their reputations.

Handling Chargeback Representment In-House Vs. Outsourcing

If you have decided to take control of chargebacks, you might ask yourself, “Do I have the resources to handle representment myself or should I outsource?”

While you certainly can have your in-house team handle chargeback representment, it doesn’t always mean you should. It can take a lot of time and resources to effectively fight chargebacks. Consider weighing the pros and cons to each method before deciding for yourself.

In-House Representment: The Pros – One of the biggest pros of in-house representment is the associated cost savings. You don’t have to worry about paying an outside vendor fees for processing your chargebacks. You will also have more direct oversight of your chargeback representment efforts.

In addition, your team will be most familiar with your internal process and financials, which alleviates any time you’d otherwise have to spend getting an outside vendor up-to-speed.

In-House Representment: The Cons – Although you might avoid paying outsourcing fees by using an in-house team, you have to consider how far you can stretch your resources. Will you have to hire additional team members or add to the responsibilities of your current team?

Another factor to consider is the complex, constantly evolving terms of the credit industry. Although your team may be educated on the current chargeback process, it could change in just a few short months. If you’re going with the in-house option, you’ll also have to make efforts to ensure your team members receive the constant training they need to abide by current industry standards and the various credit card providers.

Outsourcing: The Pros – There are a number of positives to using an outside vendor to help you manage chargebacks. For one, you won’t have to worry about stretching your existing resources. You can have peace of mind knowing someone is working for you and completely focused on increasing your number of successful chargeback reversals.

Another positive to outsourcing is the expertise you are able to tap into. These vendors specialize in chargeback representment, and know the ins and outs of what it takes to fight for reversals. They are familiar with the jargon and complexities within the credit industry, and can use their expertise to help you improve your chargeback win rate and your bottom line.

Outsourcing: The Cons – The most obvious con businesses will cite for not outsourcing is the cost. But consider this: If a vendor can help you improve your chargeback reversal rate without exhausting your own resources, does the payout become worth the price?

If your in-house team is struggling with successful chargeback representment, you could be losing money anyways. Plus, consider the cost of hiring salaried workers or paying overtime for current employees that might be needed if you undertake chargeback representment yourself. Although there might be upfront costs with outsourcing, it could save you time, energy and resources in the long run.

In the end, it’s up to you to decide whether handling chargeback representing in-house or outsourcing will work best for your business. Considering the pros and cons of each method will help you make the right decision.

Chargeback Reversal Win Ratio: What is Realistic?

There are many reasons why merchants choose to dispute chargebacks. Perhaps they feel they feel the quality of products or services they delivered met the customer’s satisfaction. Or maybe they suspect they are the victims of “friendly fraud” in which an online consumer makes a purchase and then requests a chargeback, even though they have received the goods or services as promised.

Whatever the case may be, merchants should set realistic expectations for the amount of chargebacks they can fight and win. According to, a chargeback management solution provider, a 1 percent chargeback rate is the industry standard maximum. That means if you process 100,000 transactions in a given month, and receive 1,000 chargebacks, you fall within the industry standard.

If you are meeting that 1 percent standard, does it mean you are in the clear? Not necessarily, since it’s highly likely there are still opportunities to prevent fraud, fight unwarranted chargebacks more aggressively, and protect your revenues. And if you’re in the 1 percent standard, that doesn’t mean you have a good chargeback reversal win rate.

So when it comes to the chargebacks you contest, how many cases should you expect to win? While there is no solid answer across all merchants, generally over 50 percent of contested chargebacks should be won. Meeting this goal means you are winning more cases than you are losing.

If you’re not winning more than 50 percent of your chargeback disputes, it’s important to reevaluate your team’s efforts and your business processes to identify the reasons why. Some contributing factors might be:

You’re not providing the right documentation – You might think you’re providing compelling evidence to dispute the chargeback, but it’s possible that your documentation isn’t truly addressing the reason code. For example, demonstrating a previous customer history of transactions is compelling evidence in some cases, but it won’t really address a customer’s claim that they never received their goods or services. Make sure you are gathering the right evidence that supports your defense.

You don’t have the right internal processes – Are you seeing multiple chargebacks every month with the same reason code? If so, you should be addressing the root of the matter to prevent them from happening in the first place. If you’re unable to provide the right documentation, improve your record keeping. Or if customers are filing chargebacks for card charges they don’t understand, find ways to clarify your payment process. You should do whatever it takes to address these recurring issues in order to prevent chargebacks and retain customers.

You fight almost every chargeback – Unfortunately, it’s not realistic to expect a reversal of every chargeback. That’s why you should be smart about which ones you choose to fight. While it’s certainly worth reviewing the cause of every chargeback, only dispute the ones you deem worthy of the money, time and resources. If it makes sense to fight a chargeback, you must also be able to gather the proper compelling evidence that addresses the reason code. Being smarter about where you invest your energy by focusing on fighting chargebacks you’re most likely to successfully reverse is a smart way to increase your win rate.

Chargeback Representment: When to Fight a Partial Claim

Customers are entitled to claim a full or partial chargeback amount when they file credit account complaints. There are many reasons why cardholders would file for only a partial amount. Most commonly, the customer has used a portion of their purchase, or there is only a fraction of their order they are unsatisfied with. Or perhaps they were charged more than their expected purchase amount, and only want a refund for the overage.

Although a partial amount might seem easier to accept than a full claim, merchants should still look into the chargeback and evaluate whether or not they would like to dispute it. So when should you move forward with fighting a partial claim? If you evaluate the chargeback and its accompanying reason code, find you have evidence compelling enough to fight the claim, and feel that it is worth the time and energy to fight the amount, then it is worth disputing.

Remember, merchants have the right to defend themselves just as customers do. Your reputation and revenues are on the line. Bankers will remember businesses with a history of simply accepting all chargebacks without attempting to prove their innocence. In addition, chargeback fraud is a crime that costs retailers billions annually. These are all reasons why the chargeback representment process exists to protect you.

To dispute a chargeback, simply state the amount of representment you are seeking (whether full or partial) and the reasoning behind the amount. Show evidence supporting your claim that aligns with the reason code cited for the chargeback. Remember to act fast within the timeframe provided for your rebuttal.

Be smart when it comes to choosing your chargeback representment amount. Representments can be in the full amount of the original transaction or in a partial amount. It will be all but impossible to secure a full reversal if you don’t have enough evidence to justify it. Review all of your documentation on hand – receipts, order forms, customer communication, and transaction history – when deciding the refund you seek. Go for the amount that you have the greatest odds of realistically receiving based on the evidence you’ve gathered.

In the best case, a full chargeback reversal will be issued. In other cases, a partial chargeback reversal will be issued for a corrected amount, mitigating some of the costs to the merchant.

In some cases it is advisable to file a lesser representment amount for the transaction. For example, if a customer is claiming a refund for a transaction in which he or she was overcharged, the retailer may wish to refund the overcharge amount but not the entire transaction.

Even if a customer is willing to settle for a partial chargeback, merchants should still perform proper due diligence to consider fighting it. As every businessperson knows, operational costs add up quickly. Every dollar counts when it comes to maintaining successful profit margins, so be smart when it comes to protecting your revenues, including fighting for full and partial chargeback reversals when you can.

To speak to a consultant call (305) 423-0261

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