1. Why chargebacks exist
The picture is complicated by the fact that chargebacks themselves are not a right provided in law – they are covered by the contract between the card provider and the merchant acquirer.
For this reason, as Milton Silverman, partner at law firm Streathers points out, there is no reason in principle why chargebacks should not also apply to business-to-business purchasing, such as a transaction between one dealer and another, though “they are less likely to occur in that situation in practice,” he says.
2. Card provider chargeback rules differ
The conditions governing how and why rules are enacted varies according to each card provider’s terms and conditions. Commonly these include a time limit on chargebacks – typically 120 days – so that merchants can find themselves subject to the hassle and expense of a chargeback request weeks or even months after the sale is made. Hence record keeping is important.
3 Chargeback paperwork
A merchant subject to a chargeback request will typically receive a letter from the card company informing them they have 15 days to produce evidence that the request is not legitimate. “I had recorded phone calls, emails, and the T&Cs the buyer had signed up to,” says Aubrey Dawson of his disputed Rolex purchase. “There were pages and pages of it, sent to the credit card company. But they are not interested in sellers. The system is skewed massively in favour of buyers.”
4. ‘Cardholder not present’ and the rise of chargebacks
Many chargebacks result from cardholder not present (CNP) transactions taken over the phone, the least secure way of taking a payment. But it is the rise of e-commerce in particular that has led to many more CNP transactions and thus to more chargebacks.
Using an e-commerce platform with 3D security – where the cardholder has to enter a password as well as their card details, such as Mastercard’s SecureCode or Verified by Visa – helps prevent fraudulent transactions but cannot eliminate the risk of chargeback for other reasons.