Merchant’s Protect Yourself Against Fraudulent Credit Card Claims

Are you a Merchant? If you’re selling your goods online, or at a brick and mortar store that  accepts credit card payments – you are considered a merchant. Beware merchants of the rules and regulations regarding credit card chargebacks, because they don’t accommodate you even if you have an iron clad contract or sales agreement.


The Card Association rules and regulations are in place to protect the customer and the Golden Rule that the customer is always right is in full effect even if it’s clearly a fraudulent claim for a refund! The merchant has the undue burden of proving their case, which usually cost more than the item/goods or services are worth. Here are some helpful tips use to protect yourself against fraudulent claims.

I’m going through this process now with a business (not LaCartera) managed by me and my husband, and we are choosing to protect our rights! Sometimes we all are so passionate and focused on our businesses that predators will try to take advantage of you. And it’s up to you to protect yourself in whatever business you may have.

The Process for Chargebacks

A customer has between 45 – 180 days to file a claim and to request a credit card refund from the time of sale and their dissatisfaction. A customer may contact you for a refund first or go directly to their credit card company to request a refund. It’s a bit alarming when you are notified of the reasons of the refund and they don’t match your situation, but there are only a limited number of catch-all standard complaint selections used by card issuers and financial institutions. The person taking the complaint is limited to one of the reasons or they can give a description in the “other box” on the form.

Here’s a list of some of the standard complaints

  1. I did not authorize the party to debit my account
  2. I authorized the merchant to originate one or more ACH debit  entry(ies) to my account, however, on this day (mm/dd/yyyy) I notified the merchant that I revoked the authorization.
  • Pleas provide a copy of the merchant’s cancellation policy
  • Please provide proof of written cancellation or cancellation number

     3.  My account was debited before the date I authorized.

     4.  The goods or service did not match what was described on the agreement or the verbal description presented at the time of purchase (or the goods/services were unsuitable).

Responsibilities of the Merchant

The merchant is responsible for disputing the claim with documented evidence. Any email or written documentation is perfect! Verbal claims are not acceptable and wont help you win your case with the credit card company. The merchant will need the following documentation readily available upon request, which is usually within 10 days from the date of the complaint.

Requested Documentation

  • Signed contract or terms and conditions agreed upon
  • Documents that prove the goods and or services are correctly described at the time of purchase
  • Screenshot of the “I Agree” button where the cardholder must click this box to agree to the terms and conditions (*Online terms)
  • Rebuttal letter addressing the cardholder’s claim, including any attempts made by the merchant to resolve this matter directly with the cardholder
  • Copy of a transaction receipt, if applicable

*Per Card Association Rules and Regulations, cancellation policy has no bearing on “not as described” chargebacks because the cardholder is disputing the quality of services or goods.

  • If the cardholder is due a credit and the merchant chooses to accept the chargeback, you must provide a brief explanation of why this chargeback should not be disputed.

Third-Party Sales Platforms

If you use a third-party platform to promote and sell your goods or services (e.g. Etsy, Ebay etc..) they have the resources to provide all of the documents they have on file associated with the sale. It’s so nice to have all of the email exchanges, receipts in one place online associated with the sell including the IP address, and acknowledgement of the contract. The third-party platform is not only an advocate for you but they are also caught in the middle of the dispute, because they’ve processed the transaction.  And this means that there’s an administrative fee for the chargeback and a cost to you for the amount in question.  The charges will begin to accumulate so you will need to make sure your associated or linked bank account has funds to cover those expenses, because you can expect overdraft charges from your bank when these fees are withdrawn.

Cost to Merchants

  • $25 or more administrative cost for the refund
  • Cost of goods or services
  • Cost of returned goods
  • $35 for each overdraft, which is processed in two or more separate charges

Please Note: The chargeback process is governed by the Card Association Rules and Regulations; therefore, the third-party platform cannot guarantee the outcome of the chargeback. Once the initial dispute has been filed, you will need to allow up to 45 days for a decision.

Action Steps

When the matter reaches your financial institution you can file a claim for the disputed charges.  In most instances your bank will credit your account and process your claim for 45 days while a decision is being rendered.

You will need to send a copy of all of the documentation mentioned above in to support your claim to your bank.

Here are some “Red Flags” when dealing with your customers.

  • Customer boasts about claims of future business: Don’t place your eggs in this basket!  In most cases the claims of future business is a ploy to negotiate lower rates for your service and the future business rarely materializes.
  • Customer is unresponsive to your emails during the dispute or unable to discuss this matter with you because they’re traveling:  Sometimes this is the truth, but more than likely it’s the beginning of a nightmare and provides an excuse of not understanding the terms and conditions of the contract.  Put your conversations and concerns in writing and make every effort to get the customer to acknowledge your efforts. Even if there’s no response you have record of your attempts.
  • Customer may make idle threats: Threats of legal actions, defamation of character or anything to intimidate you or extort money from you to avoid the dispute process.
  •  Customer remarks that they didn’t receive a copy of the contract: If you use an online platform it is best to have a button or link option to select acknowledgement of the terms and conditions of the sale or services before payment is received.

So let’s quickly recap the process:  The customer complains, you provide proof of the sale, customer agreement, and other communications.  You’re hit with penalties, loss of sale, merchandise, and possible bank fees. The credit card company make a decision in your favor!

It’s time for a Happy Dance right? Wrong…. When the decision comes back in your favor the third-party platform tells you that they are required to hold your money for another 60 days in case the customer disputes the decision made by the credit card company.  As the deadline approaches you’re expecting the full return of your money taken under false pretenses, but you’re notified that the customer disputes the decision made by the credit company and wants to take the matter through the appeal (pre-arbitration) process. And you are also given the option to opt out of the appeal process if refund the money.

At this point frustration sits in and there’s another process for the merchant to forego. If you agree to the pre-arbitration the merchant is responsible for the amount in dispute, which the third-party platform is holding and a $150 administrative fee assessed by the credit card company to review the case and render yet another decision.  Not including any any technical fees assessed at the time of the ruling if the case is found in favor of the customer.

Do you pursue the arbitration further or cut your losses? Or does the arbitration process exonerate the cardholder from criminal charges for filing a fraudulent claim?

Share this with other merchant’s and “Beware” of what lurks behind that credit card sale!

Stay tuned there’s more to come from LaCartera!




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