A Guide to Credit Card Disputes

Overview

This article aims to cover the credit card dispute process. 

Preconditions & Important Information

The following conditions must be met before starting on the instructional steps below:

• Your facility must be using foreUP Payments as your integrated credit card processing solution.

The credit card dispute process involves several parties. Please see the definition of those parties below: 

• Cardholder: The owner of the credit card charged
• Merchant: The facility charging the cardholder's credit cards to complete a transaction (your business)
• foreUP's Acquirer: Entity processing the credit cards and holding the disputed funds in escrow until a dispute is finalized

Credit Card Dispute Process

Credit card disputes proceed as follows:  

1. Initial Dispute
   1. The cardholder will initiate a dispute with the issuing bank.
2. Provisional Refund 
   1. The bank issues a conditional refund to the cardholder. The issuer then attaches a reason code to the claim and sends it along to foreUP's acquirer
3. Chargeback 
   1. The issuer recoups the money from foreUP's acquirer and holds these funds in escrow until the funds are awarded to either the cardholder or the merchant (your facility).
   2. The acquirer sends a notification letter in the mail to the affected merchant
   3. The acquirer will then debit the original transaction amount and a non-refundable $15 dispute fee assessed by the issuing bank from the merchant's account via the next available settlement.
   4. foreUP is notified of a new dispute via our acquirer through our portal. foreUP checks this portal every day, Monday - Friday. If a new dispute has been added, foreUP will contact the applicable merchant via email through the foreUP support ticketing system with the following information:
      • Dispute Amount
      • Original Transaction Date
      • Cardholder Name (if available)
      • The last four of the credit card
      • Reason code for dispute (fraud, services not received, duplicate, etc.)
      • Dispute deadline/Respond by Date
      • Merchant's foreUP Sales ID (the sale ID the disputed amount is from)
      • Settlement Date (The date the disputed amount and $15 were withdrawn from the merchant's settlement)
      • Settlement ID (The ID of the settlement where the disputed amount and $15 fee were withheld)
4. Merchant Reviews Claim 
   1. The merchant will now have the opportunity to review the cardholder's dispute claim and decide whether to accept or challenge it.
5. Representment
   1. If the merchant elects to challenge the dispute, they must provide foreUP with a chargeback response BEFORE the respond-by date (review the chargeback response process in our Challenging Credit Card Disputes article).
   2. foreUP will then submit the chargeback response on the merchant's behalf to the issuer. PLEASE NOTE: Even if a chargeback response is submitted, the merchant is not guaranteed to win a dispute.
   3. foreUP will then monitor the challenged dispute and provide the merchant weekly status updates.
6.  Bank Review & Decisioning
   1. The issuing bank reviews the new information and will either rule in favor of the merchant or cardholder.
      1. If the issuing bank rules in favor of the merchant, the disputed amount will be returned to the merchant via their next available settlement. The cardholder, however, still has the option to further pursue the dispute by going into arbitration (see Arbitration below)
      2. If the issuing bank rules in favor of the cardholder, the merchant has the option to further challenge the dispute by going into arbitration (see Arbitration below)
   2. In some cases, the bank might accept the represented transaction and return the disputed amount to the merchant but still file a second chargeback anyway for a different reason.
7. Arbitration
   1. If the banks, merchant, and cardholder can't come to an agreement, the card network will step in. The card network (Visa, Mastercard, Discover, American Express) will review the case and issue a final ruling. 
   2. If the merchant elects to go into arbitration, they may be subject to up to $500-$1,000 in arbitration fees; however, the merchant has the option to accept the cardholder's dispute to avoid going into arbitration.

FAQ

Q: How will a merchant know when a cardholder has started a dispute?

A: foreUP is notified of a dispute via our acquirer. foreUP will then reach out to the merchant to let them know a cardholder has started a dispute case.

Q: Is the disputed amount pulled from the merchant's account immediately after a dispute has been started or only when a cardholder wins a case?

A: Funds are pulled from the merchant's settlement when the cardholder initially requests a dispute with their card-issuing banking institution. These funds are held in escrow by foreUP's acquirer until the banking institution has reached a final decision. If the cardholder wins the dispute, the funds are returned to cardholder's account; if the merchant wins the dispute, the funds are returned to the merchant's via a settlement.

Q: Should a merchant process a refund in their foreUP software account when a dispute is issued?

A: No, processing a refund after a dispute has been filed can sometimes generate two refunds: one from the merchant's refund and one from the dispute being won. Accepting the dispute as valid is best if the merchant wants the funds returned to the cardholder.

Q: How long does a merchant have to submit evidence?

A: Each dispute case has a unique deadline. foreUP will communicate the deadline for a specific dispute case to the merchant.

Q: What does providing a chargeback response entail?

A: Review the chargeback response process in our Challenging Credit Card Disputes article

Q: What does foreUP do as the mitigator?

A: foreUP takes the evidence provided to them by the merchant and submits it on the merchant's behalf. foreUP keeps the merchant updated on the status of the dispute once evidence has been submitted.

Q: What does "merchant refusing evidence" mean?

A: This means that merchant has declined to provide any evidence to fight against the dispute, leaving the dispute to run its course. The banking institution will decide the outcome of the dispute based on the evidence it has. Merchants sometimes choose to refrain from responding to a dispute or submitting evidence.

Q: What does the dispute status "arbitration" mean?

A: Arbitration is when the card networks (Visa, M/C, DCVR, AMEX) step in when banks, merchants, and cardholders cannot come to an agreement. See the FAQ section of the following article: Challenging Credit Card Disputes.

Q: Is the merchant subject to any additional fees for challenging a dispute? 

A: As long as the dispute does not escalate to arbitration, the merchant is only assessed the initial, non-refundable $15 dispute fee. 

If you have any additional questions, please contact us at [e-mail] or at [phone].