What Happens if a Merchant Does Not Respond to a Chargeback?

It's tempting to dismiss a chargeback as a minor hiccup, hoping it will resolve itself or simply accepting that it’s part of doing business and facing the losses that come with it. 

However, ignoring a chargeback can lead to more serious consequences. So what happens if a merchant does not respond to a chargeback? 

Beyond the direct and indirect financial losses you’ll incur, this could damage your reputation and strain relationships with payment processors. These outcomes can escalate to increased transaction fees and potential restrictions on your account.

That being said, now is not the time for inaction. You need to work quickly to resolve the dispute with your customer, or if a remedy is unrealistic, prepare your rebuttal package for the financial institution that will review both sides of the story.

We’ll walk you through your next steps below including investing in the best chargeback company to put these problems in the past for good. 

Disputifier prevents up to 99% of chargebacks in the first place and automatically fights on your behalf to win up to 70% of chargebacks that do slip through the cracks. Find out how it can protect your profits and reputation today!

Overview of Chargebacks

A chargeback occurs when a cardholder disputes a transaction directly with their bank or credit card issuer, bypassing the merchant entirely at first. This not only reverses a charge but also withdraws funds from the merchant’s account and imposes additional fees. 

Chargebacks were originally designed as a consumer protection mechanism, providing a safety net for consumers against fraud and unsatisfactory merchant practices. However, they are often used to take advantage of businesses, which is a massive source of frustration for merchants like you. Here are some of the common culprits for a chargeback:

  • Fraudulent Transactions: These are the most common reasons for chargebacks. They occur when a transaction is made without the cardholder's consent. This can be due to stolen or lost cards, or more complex identity theft cases where card details are used without the owner's knowledge.
  • Product or Service Disputes: Customers might initiate chargebacks if they are dissatisfied with a purchase. This could stem from receiving defective goods, incorrect items, or products that do not match the description advertised.
  • Credit Not Processed: If a customer returns a product but does not receive a refund, or if the refund is not processed promptly, they may file a chargeback to recover the funds.
  • Technical Issues: Errors such as accidental double-billing, incorrect transaction amounts, or problems with processing can all lead to chargebacks if not resolved swiftly.
  • Authorization Issues: This occurs when a merchant fails to obtain proper authorization to proceed with a transaction. This might involve processing a transaction after a decline, failing to confirm the identity of the customer, or neglecting to verify the cardholder's information.
  • Order Not Delivered: An increasingly common source of chargebacks over the past few years. These occur when a customer claims their order was never delivered even though the tracking information shows it was. This can be a result of fraud on the customer’s behalf, theft, or an issue with the delivery provider.

Whatever led you to this point, you’re considering your next steps - should you take action or just accept the loss and focus your attention on more pressing areas of a business? Here’s what happens if a merchant does not respond to a chargeback… 

What Happens if a Merchant Does Not Respond to a Chargeback?

As we briefly touched on at the start of this conversation, inaction is certainly one of your options when faced with a chargeback - but it’s a horrible approach

Even if you aren’t concerned about the monetary implications of losing a chargeback, there are more profound reasons this is an area worth investing time and resources. If you become known for consistently ignoring chargebacks you may have a hard time finding financial institutions willing to work with you.

Direct and Indirect Financial Losses

The most immediate consequence of not responding to a chargeback is the loss of revenue from the disputed transaction. 

The disputed amount is automatically withdrawn from your account, along with additional fees charged by the acquirer or payment processor, when a dispute is opened. 

These chargeback fees can range from $20 to $100 per transaction, depending on the merchant's agreement with their acquirer and the frequency of chargebacks they experience. Over time, these fees can skyrocket if you become known as a repeat offender. Banks and credit card companies will take note of your rising chargeback ratio.

These costs alone may not be enough to stir you into action, but they add up in considering the cost of goods sold or services rendered already. If you sell a high-ticket item this is a serious concern. You’ll also have to account for delivery costs, the work associated with packing and shipping orders, etc.

Impact on Relationships with Payment Processors and Banks

The real reason you should not ignore chargebacks is the impact it can have on your relationships with payment processors and banks. 

These institutions look at excessive chargebacks as a red flag indicating your business conducts fraud or poor business practices. This can lead to increased processing fees, the imposition of a reserve fund (where a portion of the transaction value is held back for a period), or ultimately, the termination of your account.

This could even lead to a hit to your credit score, which might make it difficult to secure future financing or open new merchant accounts with favorable terms.

Beyond financial institutions, the reputation of a business within the industry and amongst consumers can suffer. Remember, chargebacks often result from customer dissatisfaction. This means that failing to address these issues can lead to negative reviews and poor customer feedback, deterring potential new customers.

What You Need to Do When Facing a Chargeback

Knowing what happens if a merchant does not respond to a chargeback, it’s clear that inactivity is not acceptable. There is too much at stake. So, what should you do? 

Here is how to win a chargeback, from attempting to resolve the issue with the customer to preparing your rebuttal for the bank in question. 

Review the Dispute Claim and Gather Evidence

Begin by thoroughly reviewing the chargeback notification to understand the reason code associated with the dispute. 

This will tell you why the chargeback was initiated - unauthorized use, non-delivery of goods or services, or a product not meeting customer satisfaction. Each reason has its own set of rules and evidence requirements.

At this point, you can reach out to the customer directly in an effort to resolve the dispute amicably, either by phone call or email. It’s in your best interest to offer to refund the customer and make things right to see if they’ll withdrawal their dispute claim.

If not, it’s time to start gathering evidence that supports your case. This can include: 

  • Sales receipts or invoices showing the purchase details.
  • Proof of delivery documents such as tracking numbers and delivery confirmations for shipped items.
  • Emails or communication logs between you and the customer.
  • Terms of service or return policies that the customer agreed to.

You’ll use these to form a compelling rebuttal package that will help you win the dispute.

Preparing Your Rebuttal Response

Align your evidence specifically to counter the reasons cited in the chargeback. 

For instance, if the chargeback is for a “product not as described”, provide detailed descriptions and photographs of the product that prove otherwise. 

If the issue is “order not delivered”, provide tracking information showing proof of delivery, and ideally, a signature accepting the order. 

Prepare a rebuttal letter that clearly outlines your case against the chargeback. Include references to the evidence you’ve gathered showing why the chargeback should be reversed. Keep it factual and to the point - as hard as it may be when you feel as if you’re being wronged, avoiding emotional language is important.

Understanding Deadlines and Procedural Requirements

Chargeback rules strictly enforce response deadlines - typically between 20 to 45 days from the date the chargeback is filed. Missing a deadline almost always results in a lost chargeback by default.

That being said, each payment processor has specific procedures for submitting a chargeback rebuttal. Familiarize yourself with these to ensure your response is accepted. This might involve using specific forms or online portals provided by the processor.

Now What?

After submitting your rebuttal you’ll just need to patiently wait for a response. If necessary, you can often add to your rebuttal package after submission should new evidence come up.

Hopefully, the chargeback will work out in your favor and you’ll not have to worry about this problem any further. But if you lose the chargeback, you’ll want to then proceed with pre-arbitration. 

This is the process of presenting new information or reiterating your position with the hope that the financial institution will take a closer look at your case and reconsider its findings. If the bank does uphold its decision, you’ll then move to arbitration, where the card network makes a final ruling.

You may be wondering…how often do merchants win chargeback disputes? The odds are not in your favor, unfortunately. High-risk businesses win less than 20% of the time while low risk businesses still fall under a 30% win rate. 

But what if we told you that you could boost your odds of success to as high as 70%? Or better yet, prevent chargebacks from happening in the first place? You can, and it’s as simple as getting set up with Disputifier: the #1 chargeback company you have at your disposal.

Prevent Chargebacks in the First Place and Automate Dispute Resolution With Disputifier!

Disputifier transforms the way you handle chargebacks using automation to fight and prevent them without you having to lift a finger. 

As soon as a dispute is initiated, our system begins to analyze the transaction details against a database of known chargeback indicators and previous cases. A customized, data-driven rebuttal to the claim is then generated based on this analysis, tailored to the specifics of the case and the associated chargeback code.

This automated response system handles the entire dispute process from start to finish without needing anything on your end. This includes submitting all necessary documentation and evidence to the bank or credit card processor, thus saving internal resources from the hassle and wasted time of manually managing this process.

The best part is you only pay when we boost your win rate - so you’ve got nothing to lose. But, investing in chargeback prevention from the start can help you avoid these headaches in the first place. Disputifier can flag 99% of disputes before they escalate to safeguard your business.

It integrates with your transaction processing system to track each transaction in real time. You’re immediately alerted when a suspicious transaction is detected, providing you with detailed information about the risk. You can then take preemptive action, such as contacting the customer for verification or even halting the transaction before it is finalized.

By stopping potentially fraudulent transactions before they result in a chargeback, Disputifier not only protects your revenue but also maintains your standing with payment processors and banks. 

A lower rate of chargebacks contributes to a better merchant reputation, which can lead to lower processing fees and fewer penalties from financial institutions. So, why not get started for free today and see how Disputifier can offer peace of mind and protection for your business?

Parting Thoughts on What Happens if a Merchant Does Not Respond to a Chargeback

There you have it - what happens if a merchant does not respond to a chargeback. This is like ignoring a leak in your business's financial pipeline. It not only leads to significant losses but can tarnish your reputation, damaging your standing with payment processors.

Thus, managing these disputes with an effective strategy is not something you can overlook. We hope this conversation helps you understand the gravity of this situation and leaves you feeling clear of your next steps.

Our blog has other resources on chargeback insurance, what happens if you lose a chargeback, chargeback email to customer, and more to help you round out your dispute management process. But, why not put all this stress behind you once and for all with Disputifier?

Embrace our AI-powered dispute prevention and resolution tools to safeguard your revenue, your reputation, and your internal resources. Proven protection is just a few clicks away!

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