What is Chargeback Representment?

What is Chargeback Representment?
By max May 26, 2023

Chargebacks are often seen as the cost of running a business. But leaving this money without fighting for it is your biggest mistake. Know that you can recover the money lost to the invalid chargeback requests. Chargeback representment is a long procedure that helps identify the causes of these frequently incurring chargebacks and fight them. This guide will help merchants dispute illegitimate chargebacks.

Chargebacks are the worst nightmare for a merchant. If a business fails to deliver a product/service as promised, the customer has the right to issue a chargeback request and get a refund. Chargebacks are also common in cases where the customer believes they are being charged for transactions they have not processed. Most merchants avoid fighting the chargeback, as they believe the results are often in the favor of customers. If anything, they will lose more money on dispute fees. But what if the chargeback is illegitimate? Is it a friendly fraud or a baseless request?

What is Chargeback Representment?

Chargeback representment refers to the process of reversing the chargeback by giving valuable evidence to the bank. It is done to prove that the transaction that took place between the customer and the merchant was valid and the customer has falsely accused the merchant of illegitimate transactions.

Do you know friendly fraud has become one of the most common causes of the chargeback issued worldwide? Since people have identified loopholes in the industry, they misuse this to request a refund for the transaction. To avoid the complex chargeback dispute process, merchants often overlook such requests and issue a refund to the customer. However, merchants have the right to fight these requests and win the case with all the money they have spent on the fees, along with the revenue they lost. The process is called chargeback representment.

Representment is basically the re-presentation of the chargeback. You submit the appropriate evidence suggesting the legitimacy of the transaction to the issuing bank, acquiring bank, card network, and other authorities. For example, if the customer has claimed that they never received the product they ordered, you can send the delivery details as evidence to the bank to prove successful product delivery.

Below we are going to explore everything about chargeback representment, how it’s done, and what are the chances you’ll win the dispute.

What Are Your Options?

With the chargeback requests becoming more prominent today, the knowledge of the chargeback representment process has become important for merchants, more now than ever. For every chargeback request, a merchant has two choices:

Accept It: The easiest and most convenient option for merchants who don’t want to get involved in a complex procedure is acceptance. Accepting the chargeback means you agree that you’ve failed to deliver the promised goods or services to the customer and are willing to issue a refund. This will, however, cost you the value of the service/goods delivered, your revenue from the specific product, and the associated fee, such as shipping, packaging, and order fulfillment cost. Accepting chargebacks will also affect your business’ reputation negatively.

Fight It: You can review the chargeback and fight it. You need to collect enough evidence to prove that the customer’s request is invalid and that the transaction was up to mark. If the bank approves your evidence, they will reverse the chargeback and credit the fund to your account. Sadly, you will pay the chargeback fee, even if the customers’ claims are proven invalid. But it will clear your name from the chargeback record and help recover your revenue.

Chargeback Representment Process

When a chargeback request is issued, the acquiring bank notifies the merchants about it. They send details, like the allowed response time and the reason code. If the merchant believes the request is valid, they can accept the chargeback and end the process. The funds will stay in the customers’ accounts.

However, if they believe it’s invalid, they must send a rebuttal letter to the acquiring bank within the given timeframe. The acquiring bank will submit the evidence to the issuing bank, which decides the validity of the evidence and reverses the transaction if everything is accurate. The issuing bank might request further documents that clarify the merchant’s case.

If the merchant is unsatisfied with the outcome, they can approach the card network. Likewise, if the customer loses the case, they can decide to go ahead with arbitration.

Some acquiring banks fight chargebacks automatically. They might issue a chargeback reversal request to the issuing bank without notifying the merchant, i.e. if they believe the chargeback is invalid and they have proof that the customer has issued false claims. Talk to your bank to learn more about the types of chargebacks it can automatically fight.

Why Represent the Chargeback?

Chargeback representment can be a hectic and expensive process, but it’s important for your business’ sustainability in the long run. It’s advisable to fight the chargeback if you have proof that it’s invalid and you can get the amount back, especially for expensive products. Paying a few dollars for the chargeback fee is much better than losing hundreds of dollars in revenue. Here are the reasons you should consider representment.

Friendly Fraud: At times, customers make a purchase and file a chargeback despite the proper product delivery. They claim that they never initiated the transaction or that the delivered product is not what they ordered. You can use delivery proof, security camera footage, and signatures to prove the validity of the transaction.

Unsatisfied Customers: A customer can also issue a chargeback if they believe your product quality or quantity did not match the advertisement. If you have a record that proves that the product was the same as advertised, you can initiate a chargeback dispute.

Not responding to the chargeback will encourage customers to issue another chargeback request within a few days. Since they are getting the product and the money back without any serious consequences, they will initiate the chargeback over and over again. Besides that, a large number of chargeback requests might ruin your reputation and make you look like a “risky merchant”. It will be harder to find an acquiring bank that’s willing to work with you.

What Evidence Do You Need to Win the Chargeback Dispute?

Submitting compelling evidence before the deadline will increase your chances of winning the chargeback dispute. Your acquiring bank will tell you the time by which you need to respond to the chargeback if you are fighting it. Stick to it. Note that if you delay the submission even by one day, your case will be closed.

The next step is gathering evidence. The documents you need in this step depends on the nature of the chargeback, the code, and other factors. Here’s what works as the evidence for chargeback.

  • Date and time of the transaction, receipts, and other transaction details
  • Camera footage
  • Order shipping and delivery details, customer signature, and the documents confirming that you delivered the product
  • Store policy
  • Chats, phone calls, and emails shared between the merchant and customers so that you can prove the customer ordered the product and received it.

It’s important to keep these documents handly for at least four months, as a customer can file a chargeback at any time during this period.

Another important step in submitting evidence is writing a rebuttal letter. This should be clear, short, and concise. You need to explain the reasons you are issuing a chargeback dispute and why your request is valid. If you have outsourced the representment task to a third-party, they will take care of the rebuttal letter.

What Happens After Representment?

Once you have submitted all the documents, wait for the bank to respond. Your issuing bank will review your claim and the evidence to make a fair decision. If they accept your claim, the chargeback is reversed and the amount is credited back to your account. However, if the evidence is insufficient or you fail to respond within the deadline, the outcome will be in the customer’s favor and you will lose the revenues and the chargeback fee.

As mentioned earlier, customers and merchants have an option to raise the dispute to the card network if they are unsatisfied with the decision. Although that might cost you extra time and money, the process will help you get your money back if your claims are accurate. This also means that customers can escalate the request to the card network or may file a second chargeback if they are not content with the decision.

This step is useful for large chargebacks where reversing the customer’s false claims is necessary to prevent a significant loss in revenues. Using a secure payment gateway is important to reduce the risk of unauthorized transactions. They are extremely important for card-not-present transactions where someone can use a stolen credit card to process transactions at online stores.

Chargeback representment doesn’t offer complete protection against chargeback fraud. But knowing the steps to fight chargeback can help you recover the loss while keeping your business’ reputation intact.