Security and Compliance in Chargeback Management

When merchants outsource chargeback management, they are entrusting a partner with access to sensitive data. Cardholder information, transaction records, and supporting documentation all flow through dispute management systems. If mishandled, this information can expose businesses to regulatory fines, reputational damage, processor penalties, and even lost consumer trust.

That is why security and compliance are not optional—they are foundational. A chargeback management provider must be able to demonstrate robust data protections, adherence to industry regulations, and the certifications to back it all up.

Why Security and Compliance Matter

Chargeback management inherently involves large volumes of sensitive data. In addition to transaction information, chargeback vendors may have access to processor integrations, CRM systems, and merchant accounts. Without proper oversight, vendors could inadvertently introduce vulnerabilities that put merchants at risk.

For merchants, these risks translate directly into business outcomes. A breach of a chargeback vendor can have the same regulatory and financial consequences as a breach within the merchant’s own systems.

Beyond compliance exposure, poor security practices can complicate merchant audits, delay acquirer onboarding, and undermine trust with business partners. Conversely, partnering with a security-focused provider reduces vendor risk, simplifies audit processes, and contributes to long-term business resilience.

Relevant Regulations and Industry Standards

The payments industry is governed by a complex web of standards and regulations. Merchants should prioritize working with chargeback vendors that can demonstrate compliance across this landscape.

PCI DSS v4.0

The Payment Card Industry Data Security Standard (PCI DSS) establishes requirements for securing cardholder data. Version 4.0, the most recent update, strengthens requirements for authentication, encryption, and risk analysis, ensuring vendors evolve alongside emerging threats.

Level 1 is the highest tier of PCI compliance, requiring business to undergo an annual onsite audit, conduct annual penetration tests, and submit to quarterly network scans. A PCI DSS 4.0 Level 1 certified provider demonstrates that it has met the strictest standards for protecting cardholder data.

SOC 2 Type II

SOC 2 focuses on controls relevant to security, availability, processing integrity, confidentiality, and privacy. Type II certification goes beyond documentation and assesses the effectiveness of these controls over a defined period of time.

For merchants conducting vendor risk assessments, a SOC 2 Type II report provides valuable evidence that a provider’s controls are not only in place but operating effectively day to day.

GDPR

The General Data Protection Regulation governs the handling of personal data of EU residents. It places strict requirements on data processing, storage, and transfer, with significant penalties for noncompliance.

Chargeback vendors that serve international merchants must be prepared to handle data in compliance with GDPR requirements, ensuring that customer rights to access, deletion, and portability are protected.

CCPA / CPRA

In the United States, the California Consumer Privacy Act (and its amendment, the California Privacy Rights Act) establishes privacy rights for California residents. It requires transparency in data handling, gives consumers the right to opt out of data sales, and obligates vendors to respond to access and deletion requests.

Even merchants outside California may be affected if they serve customers in the state, making vendor compliance with CCPA an important consideration.

NIST Framework

The National Institute of Standards and Technology (NIST) cybersecurity and privacy frameworks provide a widely adopted model for managing and mitigating risk.

These frameworks map legal obligations to technical controls, giving organizations a structured approach to securing systems and data. Vendors that align with NIST demonstrate a proactive stance on risk management that extends beyond baseline compliance requirements.

What to Ask a Chargeback Management Company

Selecting a chargeback partner should involve thorough due diligence. Merchants can reduce their risk by requesting the following information before signing an agreement:

• Proof of certifications, including PCI DSS and SOC 2 Type II, with the date of last attestation.
• Copies or executive summaries of SOC 2 reports, including scope and testing periods.
• Data flow and data retention policies.
• Details on encryption protocols used for data in transit and at rest.
• Breach notification service level agreements (SLAs) and disclosure history.
• A list of any subprocessors and evidence of their own security and compliance audits.
• Processes for handling data subject rights requests under GDPR and CCPA.
• Documentation of secure development practices, vulnerability scanning, and penetration testing schedules.