Chargeback Terminology Explained

The following article will help you familiarize with the card scheme dispute-resolution process explaining the basic vocabulary used in this chargeback process.

Chargeback

The cardholder or the issuer may charge the purchase transaction back when the circumstances of this transaction meet the conditions of a chargeback reason code of Visa or Mastercard. Chargebacks reflect not only card scheme rules and regulations but also consumer protection laws worldwide. The reason codes thus may include fraud, authorization or processing errors, and consumer disputes. When receiving Chargeback, Merchant’s account is debited, and the chargeback fee is charged on this account.

Beware of the time limits for chargebacks as a cardholder can have 120 days from the transaction processing date (TPD) to file a chargeback. This period can even stretch to 540 days from the TPD in case the goods or services have a later date of delivery (for example holidays booked in advance).

Representment

The merchant can dispute the chargeback by providing the proof of the cardholder participating in the disputed transaction. By providing us with compelling evidence, TrustPay can re-present the transaction. That means the transaction will be resubmitted to the payment system and reprocessed.

Compelling evidence may be proof of delivery for the physical goods or cardholder’s IP address for digital products.

Pre-Arbitration

If the Cardholder further disputes the represented transaction, or the representment is refused by the Cardholder’s bank (the Issuer) TrustPay may file Pre-Arbitration. At this stage, TrustPay (the Acquirer) and the Issuer will try to resolve the dispute between themselves.

Best Practices for pre-arbitration are:

  • Validate that all of the opposing party have been addressed.
  • Supply all required documentation/information to remedy the opposing party’s rebuttal.
  • Accept liability for valid disputes prior to case filing.

 Arbitration

Failing resolution of the dispute at the pre-arbitration phase, the dispute may be escalated to Visa or Mastercard. Therefore the card association will give its final ruling on the case. Arbitration thus allows MasterCard or Visa to assign liability for a disputed Transaction when the chargeback and representment process fails to resolve the dispute. The Responsible party is financially liable for all the costs associated with the arbitration process, as well as the financial loss related to the disputed transaction.

 Compliance

Compliance allows TrustPay or the Issuer right to file a complaint against the counterparty for a violation of the card scheme rules in a situation when there is no valid chargeback, representment, pre-arbitration or arbitration right, yet the party involved incurred financial loss. The card scheme compliance committee will make the decision which is then communicated to the parties involved. The filing party will receive the filing fee. In the case of Compliance ruling, the financial responsibility may be assigned to one of the disputing parties, or it may be shared.

 Retrieval Request

Retrieval Request is not chargeback, and there is no financial liability. Issuers typically initiate retrieval requests when cardholders question or dispute transactions appearing on their billing statements and they require more detailed information regarding the transaction in question.

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