What is Chargeback Representment?
Chargeback representment happens when the merchant decides to dispute the case. They give their evidence to the acquiring bank, who sends it back upstream to the issuing bank, who makes a decision and notifies the merchant and the customer.
One of the most important phases of the chargeback process is chargeback representment. There are many parties involved in a chargeback: it starts with a customer, who raises a complaint with their issuing bank, which contacts the acquiring bank, which notifies the merchant. Chargebacks encompass this entire process that flows from the customer through the banks to the merchant.
The chargeback representment phase is faster, more streamlined now. New regulations rolled out by Visa in April 2018 have reduced the allowable decision time for chargeback representment, meaning that most cases must now be resolved within between 15 and 30 days.
Three Merchant Types
Merchants have the right to fight their chargebacks, and chargeback representment is the process through which they can do so. Successful representment is based on the evidence the merchant is able to present. The right kind of compelling evidence can vary, depending on what type of merchant is involved in the chargeback case.
For our purposes here, there are three types of merchants:
Merchants who offer physical goods for sale
Merchants who offer digital goods, like software or website subscriptions
Merchants who offer digital services, like online marketing or debt counseling
Within these types, especially for the second, there is also the variation of onetime sales and recurring sales, as in a subscription that bills customers on a monthly basis.
Each type of merchant has different forms of evidence to gather and present when fighting a chargeback, but some evidence is applicable in every situation.
All merchants should provide a rebuttal letter that lays out their case, explaining why they think the chargeback is invalid. This letter should be short and to the point.
You must also provide a transaction record that shows that the AVS and CVV information you collected matches the customer's payment credentials.
It's also a good idea to provide a copy of your sales terms and conditions, highlighting or excerpting the relevant parts. If your customers have to check a box indicating that they have read and understood them when they place their order, include a record of that too.
Here is the specific documentation that we recommend each of the three merchant types provide:
Physical Goods Merchants should provide an invoice that describes what product was purchased, when and how it was shipped (with tracking information included), any refunds issued, and copies of any interactions between the customer and the merchant.
Digital Goods Merchants should provide documentation such as invoices, IP logs, internal data, social media postings, or anything else that proves the customer made use of the software or subscription they purchased. On chargebacks against a recurring billing, it can be helpful to attach receipts for previous billings that the customer did not dispute, to demonstrate that they accepted these charges in the past.
Digital Services Merchants may have a hard time furnishing proof that digital services like consultations have actually been used by customers who initiate chargebacks. For these merchants, it is important to obtain a written agreement, either physically or electronically signed, before providing service to a customer. Other than that, the best evidence is relevant documentation such as invoices, social media postings related to the receipt of your services, IP logs, etc
Chargeback Representment Outcomes
Your payment processor will usually let you know the outcome of chargeback representment after they receive a decision from the issuing bank. If your processor does not have an online portal, you can check on the status of a chargeback by emailing or calling them.
A successful representment is not always the end of the story.
Customers and banks can pursue the chargeback further, to the pre-arbitration stage. Your option at this point is to accept arbitration from the card network or provide new evidence. The best way to avoid pre-arbitration is to present the best, most compelling evidence you can in the chargeback representment phase.
If you lose your chargeback representment, you can request arbitration yourself, but there's a catch. According to Visa's new rules, whoever loses the case pays the fees for arbitration, which can run as high as $500. Previously, the initiator of the chargeback was responsible for these fees, but no longer. We do not recommend collection agencies for recovering fees—some of them act abusively, and customers can complain to state and local authorities. Association with abusive collection agencies can hurt your business.
Another option, if the chargeback amount is over $500, is to have an attorney represent you. A letter from an attorney can be enough to make some people decline to pursue a weak chargeback case
Options for Handling Chargeback Representment
There are three real options merchants have when it comes to handling chargeback representment.
Let it go. Accept the chargeback as a cost of doing business. For chargebacks that have a legitimate basis, this is usually the best approach. It may also be acceptable if you get chargebacks very infrequently.
Fight chargebacks with an in-house team. Recommended if you have high-volume or high-dollar-amount chargebacks. The advantages are security and minimal cost, but it can be difficult for an in-house team to keep up with all of the policy changes banks and card networks make to the chargeback process.
Hire a chargeback management company. The right company will have a solid knowledge of the industry, along with the tools and resources to effectively fight chargebacks and identify their root causes. They can be available 24/7, and can provide useful suggestions, reporting, and insights that can help you identify your vulnerabilities and incur fewer chargebacks. However, they can be expensive, and the wrong company can drain your money while providing little in the way of useful representation.
Whether you opt to deal with chargebacks on your own or hire an outside company, it helps to be familiar with how chargebacks work and how to fight them. That way, you will know how to ask informed questions that will enable you to choose the right company and get the most out of their services.