Chargebacks and dispute management
Edited

Overview

This article provides an overview into managing chargebacks and disputes for dealers on our platform. In the event of a dispute or chargeback, TOOLBX will promptly contact you to determine if you wish to challenge the claim. It’s important to note that dealers are financially responsible for transactions without liability shift (no 3DS) and in cases where 3DS does not cover the specific type of fraud. For a comprehensive understanding of our risk management strategy and associated fraud risks, refer to our article on managing fraud and reducing risk.

Understanding and defending disputes

A dispute arises when a cardholder challenges a payment, initiating a chargeback through their issuer. Disputes generally fall into two categories:

  • Fraud

  • Consumer disputes

The defensibility of a payment depends on the method used; credit card payments can be disputed, while ACH bank transfers cannot. When a dispute is raised by the issuing bank, TOOLBX will communicate this to you, and the dispute cycle starts.

The dispute process

  1. Notification of Chargeback (NoC): Chargeback has been initiated by the issuer, and can be defended. The NoC may follow a RFI (Request for Information), or occur immediately after the payment status is set to 'Settled' or 'Refunded', skipping the RFI step. The chargeback debit usually occurs a few days after you receive the NoC.

  2. Optional Request for Information (RFI): If the issuer seeks more details, TOOLBX will contact you for the required information, should you choose to defend the chargeback.

  3. Adyen Auto-defense: Adyen (our payment provider) will automatically dispute certain chargebacks, requiring no action from your end, including already refunded transactions or fraud chargebacks with liability shift (e.g., 3DS transactions).

From there, the dispute continues through the following steps:

  1. 1st chargeback: The disputed amount is withdrawn from your account. If you accept the dispute, or fail to send your defense documents, this is the final stage.

  2. Information supplied: TOOLBX forwards your supporting documents to Adyen. No further changes can be made to these documents.

  3. Chargeback reversed: The disputed amount is transferred back to your account. In this stage, the issuer reviews the defense. If they accept the defense, or the issuer response timeframe expires, this is the final stage.

  4. Pre-arbitration (Only Visa, Mastercard): If the issuer declined your defense, they open pre-arbitration, which Adyen will review.

  5. 2nd chargeback: If the issuer declines your defense, or Adyen accept their pre-arbitration case, a second chargeback occurs. You can not upload defense documents. This is the final stage.

Defense timeframes

Each issuing bank has different timeframes for handling the dispute process. If a dispute is raised, and the bank initiates a chargeback, you need to respond and provide defense documents within the specified timeline to defend the chargeback. After that, you can expect a final decision.

In general, a cardholder has a maximum of 120 calendar days from the transaction date to dispute a transaction. This is the moment that the cardholder expects the product or service to be delivered or fulfilled. In some cases for Visa and Mastercard, the cardholder has a maximum of 540 calendar days from the transaction date to dispute a transaction. For example, when the product or service is not immediately delivered or fulfilled, such as a pre-order.

The time frame (in calendar days) to exercise and defend a chargeback are:

Stage

Visa

Mastercard

Amex

Discover

Bank initiates 1st chargeback

(from transaction date)

120

120

120

120

Your response to 1st chargeback

(from NoC date)

18

40

14

25

Final decision: Chargeback reversed or 2nd chargeback

(from defense date)

60

70

50

80

Defense requirements

The requirements for defending against disputes vary depending on the reason for the dispute. For all types of dispute, you must provide documents with details of transactions to help you build a strong case to challenge the dispute.

Acceptable file formats include JPG, TIFF, and PDF, with specific size limitations for Discover and Mastercard.

  • JPG (maximum file size 10MB)

  • TIFF (maximum file size 10MB)

  • PDF (maximum file size 2MB)

For Discover, the maximum file size is 3MB. For Mastercard, the maximum number of pages for a chargeback defense document is 19.

Specific defense requirements by dispute type

Fraud - card absent transaction

The cardholder claims that they did not authorize or participate in the transaction. You should demonstrate that the cardholder did legitimately purchase the service or merchandise.

  • Copy of invoice

  • Email conversation with cardholder

  • DHL-signed proof of delivery, and AVS.

  • Record of previous non-disputed payments

  • Courier’s GPS location providing delivery of the product

Duplicate processing/Paid by other means

The cardholder claims that a single transaction was processed more than once. To defend this dispute you must provide:

  • Copy of invoice of two separate orders.

  • Documentation to prove that no other form of payment was used

Services not provided/Merchandise not received

The cardholder claims that merchandise or services that they ordered were not received or not received on time. To defend this dispute you must provide:

  • Description of the goods.

  • DHL-signed proof of delivery, and AVS match.

  • Communication where the cardholder confirms possession of the goods.

  • Explanation why shipment was delayed.

Canceled merchandise/services

The cardholder's bank received a notice from the cardholder stating that they returned merchandise or canceled services, but the credit has not appeared on the cardholder's statement. To defend this dispute you must provide:

  • Copy of invoice / confirmation email.

  • Proof that the cardholder received your cancellation or return policy and did not cancel according to the disclosed policy.

  • Proof that the cardholder initially received the merchandise, and did not return the merchandise.

  • Proof that cardholder has not contacted you to solve the issue.

Goods not as described/defective

The cardholder claims the goods were not as described or disputes the quality of the merchandise or services. To defend this dispute you must provide:

  • Proof that the cardholder has not contacted you to solve the issue or returned the merchandise.

  • Evidence to prove that the merchandise was as described or was not damaged or defective.

  • If the merchandise was replaced/repaired, provide a DHL-signed proof of delivery.

  • Email communication with the cardholder.

Misrepresentation of the purchased good and/or service

The cardholder claims that the terms of sales (Terms and Conditions) were misrepresented. To defend this dispute you must provide:

  • Proof that your terms and conditions were clearly communicated before the transaction was processed.

  • Proof that the cardholder acknowledged your terms and conditions (for example, a screenshot of the checkout page of your website showing that the cardholder accepted the terms and conditions by selecting a checkbox before proceeding to the payment).

Credit not processed

The cardholder claims that you agreed to refund the cardholder but the refund was not processed, or that you didn't process a credit when the cardholder canceled or returned merchandise, canceled services, or canceled a guaranteed reservation. To defend this dispute you must provide:

  • Evidence that a credit or reversal that you issued was not addressed by the issuer.

  • Evidence that the cardholder didn’t return nor attempted to return the merchandise

  • Evidence that the cardholder’s return does not comply with your written policy.

This guide outlines the necessary steps and requirements for understanding and navigating the chargeback and dispute management process. For further assistance or more detailed information, please contact TOOLBX support.