The Chargeback Representment Process Explained
Chargeback representment is a process that gives you a “second chance” to get paid for any legitimate transactions that a customer tries to dispute. Representment is an important and powerful tool, and it can dramatically impact a business’s profitability. Unfortunately, the complexity of the process means it’s often misunderstood.
Whenever payment cardholders feel they’ve been charged an inaccurate or unfair amount, they have the legal right to call the bank and request a chargeback—essentially, a reversal of funds. Before that happens, however, the customer has a responsibility to contact the merchant and try to settle the matter; only after failing to resolve the issue directly should the cardholder phone or email the bank.
That’s the way the system was designed to work. It could still function, too, except for one unexpected development: the internet. With the rise of eCommerce came a rise in chargeback fraud, as consumers used loopholes to bypass the merchant and go directly to the bank with any issues. At times this is done innocently, at other times maliciously. The end result, however, is the same: a serious hit to your revenue.
Chargebacks play an important role in the overall credit card process. But, with an estimated 80% or more of disputes coming from invalid customer issues, you can’t afford to simply accept chargebacks as a cost of doing business. That’s where representment comes into play.
- Chargeback Representment
Chargeback representment is a strictly-regulated process for responding to an unwarranted chargeback. Representment involves submitting evidence to prove that a transaction was properly completed, and the cardholder’s claims are untrue.
[noun]/* chahrj bak reprəˈzent ment/
In broad terms, a representment is an opportunity to defend a valid transaction and recover any revenue that lost due to an illegitimate chargeback (a phenomenon called friendly fraud). You literally “re-present” the transaction to the bank and card network, along with additional documentation that proves the chargeback was unwarranted.
You have two options whenever a cardholder files a chargeback: either accept the chargeback or fight it. Accepting is the quickest way to be done with the chargeback. However, you lose the sales revenue, any merchandise or service provided, and the wholesale cost of the goods. You’re also responsible for any associated fees, such as shipping or special packaging.
Fighting the chargeback means engaging the representment process. This involves collecting specific evidence that proves the customer’s claim is invalid. If you win a reversal, the funds from the transaction are returned to your account. It’s important to note that, regardless of whether you accept the dispute or choose to fight, you’re still responsible for the fees and administration costs associated with the chargeback process.
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Why Should You Re-Present?
No two chargeback situations will be exactly the same. That said, one thing remains constant: you will lose more if you never engage in chargeback representment. Beyond the obvious loss of revenue, allowing a string of chargebacks to go unchallenged makes you look like a bad risk to banks, whether the chargebacks are valid or not.
Refusing to contest friendly fraud has another, wider effect: it reinforces in consumers’ minds that that the behavior is acceptable. This explains why nearly half of consumers who get away with friendly fraud will do it again within 90 days. Simply put, if an act has no consequences, there’s no reason to stop doing it.
Fighting friendly fraud is your responsibility. In some cases—particularly if the item value is small—it may not seem worth the effort. But consistently choosing representment even for smaller invalid chargebacks will bring considerable long-term benefits in terms of your revenue and reputation. This could lead to seeing fewer chargebacks filed in the future.
The Representment Process Explained
The decision whether or not to file the dispute ultimately rests with the issuing bank. However, the process can be initiated either by cardholder complaint, or by the bank detecting a problem with the transaction.
Bank-initiated chargebacks are usually the result of a transaction processing error. If a chargeback of this type is disputable, the acquiring bank will usually handle the representment process without your involvement. The bank has access to the necessary paperwork, and will submit it on your behalf. With most cardholder disputes, though, the acquirer passes the case along to you.
The first step is to identify the chargeback reason code. This is a kind of shorthand banks use to explain why the transaction is being disputed.
As far as discovering a true reason for the chargeback, reason codes are notoriously inaccurate. Nevertheless, reason codes are critical to the representment process. They dictate which forms of documentation will be accepted as “compelling evidence” to prove the validity of the original transaction (more on this later).
CALLOUT: Even within the reason code, evidence requirements can vary based on the transaction type. Under these circumstances, you must build your response based on both the reason code and any transaction modifiers cited.
Creating a Representment Case: Step-by-Step
So, how do you go about actually submitting a chargeback representment? Let’s break down the process and examine it step-by-step. After you receive a dispute, you should:
Step 1: Note the Response Time Limit
It’s important to understand that you have a very limited time frame to respond to and dispute a chargeback. The response time can vary by card scheme and reason code, but will be specified at the time of the dispute notification.
Obviously, the faster you can respond, the faster the issue can be resolved. That said, unforeseen circumstances could delay the delivery of your response. If delivery gets pushed past beyond the allowed window, you will automatically forfeit the dispute. That’s why you need to respond as quickly as possible.
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Step 2: Assemble Compelling Evidence & Documentation
To win a chargeback representment, you need to provide a sufficient amount of what banks call “compelling evidence.” Knowing the evidence required in each situation is critical. But again, the acceptable evidence varies based on the reason code and the card scheme in question. Common examples of compelling evidence include:
- A clear, legible copy of the sales receipt or order form
- Any available order forms, especially those outlining special requests
- Tracking numbers
- A copy of your Return Policy, preferably with links to prove it is easily accessible on your site
- Descriptions and photos of the item in question, preferably with links to your site
- Any customer communications indicating successful delivery or satisfaction with quality
- Photographs, emails, or anything else that proves the cardholder is in possession of the product
- Proof the cardholder picked up a card-not-present purchase at the merchant’s physical location (the cardholder’s signature on the pick-up form, for example)
- Delivery confirmation for items shipped to an address matched with AVS
- Delivery confirmation for digital goods, such as IP address, email address, download dates and times
- Any documents showing that the cardholder accessed the merchant’s site for services after the transaction date
- A listing in the company’s directory or an email address with the company’s URL showing the individual who accepted delivery was, in fact, an employee of the business
- Evidence a traveler participated in the disputed travel arrangements (a scanned boarding pass, additional purchases related to the original transaction like seat upgrades or extra baggage, etc.)
- Evidence that any of the transaction data had previously been used for an undisputed purchase
- Proof the purchase was made by a member of the cardholder’s family or household
- A checked “accept” box or signed confirmation for the use of Dynamic Currency Conversion
- A signed statement from the acquirer stating the DCC choice was made by the cardholder and not the merchant
Step 3: Draft a Rebuttal Letter
Along with the documents proving your case, you must submit a formal outline of the case called a chargeback rebuttal letter. The letter should include a summary of the evidence you are providing, and how the submission collectively proves that the transaction is valid.
Your only job here is to prove that the transaction was properly authorized by the cardholder and legitimately approved. The letter should be concise and free of emotion; while the chargeback process is inherently litigation-based, this isn’t a jury trial. Your argument should stick to presenting the facts in a clear, professional, and dispassionate manner. Remember: this is not the place for overblown explanations or ranting against the system.
For more information, be sure to check our blog article with tips and examples to help write a successful chargeback rebuttal letter.
Step 4: Submit Your Representment
All evidence must be submitted to your acquiring bank, which will pass it along to the issuing bank. The issuer then reviews the case. If the reviewer feels your evidence adequately disproved the cardholder’s claim, the chargeback will be reversed (although most reversals are subject to a second chargeback).
If you miss a deadline, don’t follow the bank’s specific mandates, or are unable to provide enough evidence to contradict the cardholder, the chargeback will stand. The transaction amount will be permanently removed from the merchant’s account, and the case will be closed.
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Improve Your Odds of Winning
Winning a chargeback representment is not impossible...but it’s not easy. To stack the odds in your favor, consider the following tips:
Understand the systemIt’s hard to win a fight if you don’t know the rules. You must understand the most current applicable chargeback representment regulations before a dispute.
Documentation is everythingFinding necessary paperwork is difficult without proper organization—especially within a tight deadline. You should establish a system for collecting essential documents at the time of a transaction, then keeping them organized and available when needed.
Know the codesEach network or payment service has its own set of chargeback reason codes. Your representment filing needs to address the specific mandates for the given chargeback code, regardless of the card scheme in question.
Tell your side of the storyThe rebuttal letter is one of the most important pieces in the representment case. While writing a rebuttal letter, you need to keep the wording concise and professional.
Don’t waste any timeChargeback representment has a very short window of opportunity. You can’t procrastinate; you must gather evidence and respond as soon as possible (this is why a document filing system is so important).
Automated systems won’t cut itMany merchants assume automated systems make the representment process more efficient and cost-effective. In reality, their inability to detect errors and technical glitches means incomplete, misleading, and inaccurate responses can be sent without your knowledge.
Get to know the bankYou should take the time to consult as many issuing banks as possible to determine what successful chargeback representments contain. You may then pattern your representments to the banks’ request.
Fight all the battlesAny invalid chargeback that goes unchallenged is automatically lost. Responding to every dispute is the best chance to gain back the maximum possible revenue. But, remember to only challenge illegitimate chargebacks, not genuine cases of criminal fraud or merchant error.
Do the follow-upIt can be hard to obtain—let alone analyze—consistent reports on your representment results. Nevertheless, you should at least attempt to establish a system for tracking results (patterns, risks, KPIs, etc.) to learn what is or isn’t working. Check out our blog article on detailed chargeback report options.
Prevention is keyThe easiest chargeback to fight is the one that never gets filed. Do everything in your power to prevent chargebacks from even happening in the first place.
Solving the Challenges of Chargeback Representment
Here’s the sad truth: the chances of winning a chargeback reversal on your own are dishearteningly low. With the complex regulations, limited time frame, and required customization of each response, many merchants find it challenging to present a single chargeback reversal case—let alone prepare multiple cases on an ongoing basis. Plus, there are other barriers to handling representment on your own:
- You spend more time dealing with past issues than future growth.
- You won’t fully understand the terms, detailed scheme regulations, or consumer behaviors.
- You aren’t equipped to stay ahead of constantly-evolving fraud tactics.
- You could do more harm than good and increase your costs with an overly-aggressive approach to representment that doesn’t employ proper intelligence and analysis.
We at Chargebacks911® created innovative strategies and technologies to relieve the burden of representment. Our attention before and after every case ensures a better win rate than any other method, all backed by the only performance-based ROI guarantee in the industry.
Want to know exactly how successful your chargeback representment efforts could be? Contact us today for a free, no-obligation ROI analysis to determine how much more you could recover through expert chargeback management.