Helpful Advice On Chargebacks

Helping with Chargebacks. 

A chargeback is a transaction reversal which occurs when a transaction is disputed for some reason.

In the context of you, our sellers, a chargeback will most commonly be initiated by the cardholder of the card used to place an order. Typically, they let their bank know they aren't happy with a transaction, and a dispute is filed. The seller is then contacted by the issuing bank and is given an opportunity to reply to the dispute.

Chargebacks can be scary for many sellers, as not only can it mean money lost if a dispute is lost, but it can damage their standing with payment processors and banks and cause problems for their store.

However, don't worry, most of the time genuine chargebacks are quite rare, and non-genuine ones can be resolved in their favor if they are able to provide the right evidence. 

Here, we will explore the most common courses of action you can take as a seller when faced with a chargeback.

 

Why do chargebacks happen?

Chargebacks can happen for many reasons, but in the context of ShineOn and our sellers, there are typically two core situations where a chargeback will be filed:

 

Non-Genuine Chargeback

These chargebacks are where a genuine customer has used correct and non-fraudulent card details to purchase an order with our sellers, and have filed a chargeback due to some sort of dispute with the seller. In these situations, the customer has filed a chargeback because they were unhappy.

Most of the time, these grievances fall outside the remit of a chargeback, for example the customer may not be satisfied with late delivery, or the quality of an item. They may have already reached out to the seller for a resolution and been unhappy with the returns or refunds policy, or they may not have even gotten that far yet.

The good news is that these kinds of chargebacks are the most common, and can be handled and resolved in the merchant's favor fairly easily - so long as the seller is following consumer protection laws in the customer's country.

Most of the time they are considered non-genuine, because issuing a chargeback simply because the cardholder isn't happy with the merchant's terms of sale is not within the remit of a chargeback.

 

Genuine Chargeback 

These chargebacks most often occur because an individual has had their card information stolen and used to place a fraudulent order - which has successfully passed fraud checks and been allowed to ship.

In rare cases, chargebacks can happen because the seller has broken consumer protection laws in the customer's country, and the customer has requested a chargeback from the issuing bank. 

In the case of a genuine chargeback, the seller is required to co-operate with the bank in returning the funds. In the case of fraud, additional orders placed with the offending card should be cancelled ASAP to help the seller recover any lost funds.

While not much can be done to help sellers recover from a genuine chargeback, they have the virtue of being incredibly rare. Most of the time, the automated fraud checking tools available via the Shopify and Etsy platforms will pick up on fraudulent orders and flag them for review before being processed.

And so long as sellers have done their research and are acting in good faith, it's rare they will be breaking any consumer protection laws.

Even then, a lot of the time chargebacks are automated from the bank. Banks will blanket chargeback all payments over a period if the customer reported a single instance of fraud or a card lost/stolen. So if another unrelated transaction on the customer's account is reported as fraud, a non-fraudulent purchase from a merchant's store might be flagged even though it wasn't fraudulent. Sellers stand a good chance proving it was a legit order by just presenting some basic evidence.

Is the chargeback genuine?

The first thing a seller should do, it takes some time to determine if the chargeback is genuine or not.

The seller should reach out to the customer that placed the order under dispute, and try to get more information about why the chargeback has occurred.

This will require a gentle and inquisitive email to the customer explaining they had a notification from their bank about the payment for their order, and asking them if they could provide more information about this. Sellers should allow the customer to describe in detail why the chargeback was filed without accusations, as this will make for better evidence later.

The seller should also check with their platform (Shopify/Etsy) to see if the order was flagged as potentially fraudulent. In Shopify, they can do this by opening the order in Shopify and clicking the fraud analysis link, so it gives the popup of metrics that determined the order was Low, Medium or High.

In the case of a genuine chargeback, the person paying for the order is generally not the person who received it. Often the names and locations of the person paying will be wildly different from the person that received it.

Anything that shows that the person ordering the item is in no way related to the person receiving it, or the fraud analysis scores are high, my indicate that the chargeback was in fact genuine.

If the chargeback is non-genuine, the customer will typically explain that the chargeback was either issued by mistake, or was made over some other issue not relating to fraud, where the seller has acted within the remit of consumer protection laws.

A low fraud score is another indicator that the chargeback is non-genuine. In addition, sellers should look to supplement anything that shows the customer is the same person as the cardholder, or even from the same family (maybe just last name matches the name on the card used to pay, husband buying using wife's card etc).

With that covered, do you believe the chargeback is genuine?

• No
• Yes

Non-genuine chargeback

In the case of a non-genuine chargeback, the seller should provide the following evidence to the bank (where applicable):

• Clear indication that the cardholder is the same person that received the item (or is related to them).
• Any conversations with the customer that clearly explain the reasoning behind the chargeback (that it wasn't fraud).
• A screenshot of the orders risk analysis.
• Tracking information of the order showing the items were delivered or are in transit. (proof that the item was shipped)
• Links to the merchant's refunds and returns policy.

Providing this evidence to the bank will usually result in the dispute being found in favor of the seller, and the dispute will be closed.

 

Genuine chargeback

In the case of a genuine chargeback, the seller will be required to refund what was paid.

In these instances, you can mitigate any losses by cancelling any orders outstanding to the same name and/or address.