![]() Continue below and learn how you can free-up time and resources and recover revenue in the process.The chargeback process is designed to increase consumer confidence - it’s very easy for credit card users to dispute charges, while businesses and banks have to do all of the legwork to figure out whether or not a transaction is legitimate.įrom a business’ perspective, however, chargebacks can often be a costly hassle. You can’t afford to let those efforts go to waste.īetter chargeback management is possible, and it can make everything a lot easier in the long run. After all, you should spend valuable time growing your business, not researching arcane credit card chargeback laws and network regulations. As a result, many businesses choose to simply write-off chargebacks as something that’s too complicated to bother with. Trying to navigate through decades’ worth of chargeback laws is not an easy task. Better Results.Ĭonfused yet? Don’t worry: you’re not alone. The chargeback laws, as they exist, are vital consumer protections, but they're in desperate need of an update to bring them in line with the realities of the digital marketplace. Others, simply unable to understand the rules, accidentally cause tens of billions dollars in losses every year due to friendly fraud. That’s why bad actors find it easy to abuse processes and leverage them to commit fraud. The payments industry is infamous for inconsistency. Other minor updates and rule changes happen constantly. Mastercard did something very similar with their Mastercard Dispute Resolution initiative. For example, Visa overhauled its entire process in 2018 with the Visa Claims Resolution system. Plus, those rules can change at any time. In fact, the guide outlining Mastercard chargeback rules alone is more than 400 pages long! The rules outlining how you conduct a chargeback vary based on the card scheme. You also need to account for decades of overlapping-and often redundant-industry policies and practices. The credit card chargeback laws outlined above form the foundation of the chargeback system here in the US. However, the bank is liable for any additional loss resulting from the delay.Ĭhargeback Laws are Just One Part of the Equation Also, if the bank delays filing, they can still carry out these processes. So, while the acquirer is initially responsible, they can recover their losses from the merchant. In simple terms, Paragraph A says a collecting bank (the acquirer) has the right to withdraw funds from merchants’ accounts to cover chargebacks. Instead, the issuer withdraws the money from the merchant's acquiring bank. When a customer demands a chargeback, that money isn’t drawn directly from the merchant’s account. These rights to revoke, charge back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final. If the return or notice is delayed beyond the bank's midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer's account, or obtain refund from its customer, whether or not it is able to return the item, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. Let’s look at each one, see if we can decode the legalese and give some clarification on what it really means. This section includes six key paragraphs. ![]() Right of Charge-Back or Refund Liability of Collecting Bank Return of Item. Collection of Items: Depositary and Collections Banks > § 4-214. – Article 4 – Bank Deposits and Collections (2002) > Part 2. Interpreting the UCC & Chargeback LawsĬurrently, the UCC outlines consumers’ credit card chargeback rights under U.C.C. This would be impossible for most businesses to do. Otherwise, they’d have to deal with a complicated patchwork of state and territorial laws to conduct interstate commerce. This is an important function the UCC ensures that companies can look to a single, reliable authority for compliance. The UCC aims to standardize the laws governing sales and commercial transactions throughout the US market. Ultimately, the Uniform Commercial Code, or UCC, outlines current chargeback practices.
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