A fraud dispute can mean a lot of things for a merchant. Lost money, lost time, and lost sleep come to mind. But a fraud dispute doesn’t have to mean you give up hope. Dispute resolution process, especially in the context of payment transactions like those handled by Visa, involves several key steps designed to address and resolve disputes between cardholders and merchants. This process is taken seriously, because it is considered crucial for maintaining trust and security in the payment ecosystem.
Here’s a general outline of the steps involved:
Fraud Dispute Initiation
- Cardholder Action: The process begins when a cardholder identifies a transaction they believe is incorrect, unauthorized, or fraudulent on their statement and contacts their issuing bank to dispute the charge.
- Bank Review: The issuing bank reviews the initial claim to determine if it meets the criteria for a dispute. If it does, the bank will formally initiate the dispute process.
Issuing Bank Files a Chargeback
- Chargeback Filing: If the issuing bank deems the dispute valid, it will file a chargeback on behalf of the cardholder. This action temporarily reverses the transaction, crediting the cardholder’s account while debiting the merchant’s account.
- Notification: The merchant and their acquiring bank (the merchant’s bank) are notified of the chargeback and are provided with details and a reason code that explains the basis of the dispute.
Merchant Response to Fraud Dispute
- Review and Decision: The merchant reviews the chargeback notice and decides whether to accept the chargeback or fight it by presenting compelling evidence to prove the transaction was valid and properly authorized.
- Compelling Evidence Submission: If the merchant chooses to contest the chargeback, they must gather and submit compelling evidence to their acquiring bank. This evidence can include transaction receipts, proof of delivery, customer communications, or any other relevant information that supports the legitimacy of the transaction.
Acquiring Bank Reviews Fraud Dispute Evidence
- Evidence Evaluation: The acquiring bank reviews the evidence provided by the merchant to determine its sufficiency and relevance to the dispute.
- Representation: If the acquiring bank finds the evidence compelling, it will represent the chargeback to the issuing bank, essentially requesting a reversal of the chargeback. This only happens if you present the specific things you need to win a fraud dispute.
Issuing Bank Re-Evaluates the Fraud Dispute
- Second Review: The issuing bank reviews the new evidence presented during the representation stage.
- Decision: Based on this review, the issuing bank will make a decision to either uphold the chargeback (if the evidence is deemed insufficient) or reverse it, effectively ruling in favor of the merchant.
- Unresolved Disputes: If the dispute remains unresolved after the issuing bank’s re-evaluation, either party may escalate the case to the payment network (e.g., Visa) for arbitration.
- Arbitration Decision: The payment network will review the case and make a final, binding decision. Arbitration may involve additional fees, and the losing party is typically responsible for these costs.
Resolution and Closure
- Final Decision: Once a final decision is made, either through the issuing bank’s re-evaluation or through arbitration, the dispute is considered resolved.
- Financial Adjustment: Depending on the outcome, the necessary financial adjustments are made to the accounts of the cardholder and the merchant to reflect the final decision.
It’s important to note that specific details and procedures can vary depending on the payment network’s policies (e.g., Visa, MasterCard) and the jurisdictions involved. Merchants and cardholders should familiarize themselves with the dispute resolution processes of their respective payment networks and adhere to any guidelines or deadlines to ensure a smooth and fair resolution.