What Happens if You Never Reply to a Credit Card Dispute?

The credit card dispute and chargeback process is a great idea in theory. It’s part of consume protections: if a charge is made that the customer doesn’t believe is valid, they can dispute the validity, have it investigated, and get their money back if it’s not a valid transaction.

Unfortunately, the way the process stands today is heavily in favor of the customer, to the extent that many merchants are taken advantage of through first-party fraud and other means.

In fact, by the time you’re even notified that there has been a dispute, there’s a decent chance that the investigation (such as it is) has already completed and a chargeback is pulling money from your accounts.

For some merchants, this is a hassle. For others, it’s devastating. For yet others, it can result in closed accounts and a dying business.

I’ve talked a lot about how you can reduce the possibility of chargebacks, and I offer a solution to the late notification, but there’s one thing I haven’t talked as much about: replying to disputes.

What Happens if You Ignore a Dispute Notification?

When a customer submits a dispute over a transaction to their credit card company, the payment processor will perform an investigation. That investigation gathers data such as:

• Whether or not the card was present for the transaction.
• Whether or not the transaction fits the customer’s usual buying habits.
• Whether or not the transaction originated from a reasonable geographic location.
• Whether or not the customer has bought from you before.
• Whether or not the customer has disputed similar charges before.

There are a few reasons why the investigation might automatically go the way of the merchant. For example, if the customer had to sign a receipt for the purchase, and their signature matches the signature on file, yet the customer claims they didn’t make the purchase, it’s a possible sign of first-party fraud and the banks could side with the merchant.

Most of the time, though, a dispute errs on the side of the customer and will side against the merchant. When that happens, you are notified of the dispute, a chargeback is processed and you’re charged the monetary value of the transaction and the fees, and you’re given the opportunity to respond.

If you ignore this window to respond, what happens? Well, the investigation is already concluded and the banks have already sided with the customer. You lose. The money stays gone from your account, the fees stay charged, and your chargeback ratio increases.

The window to dispute a charge is short, usually only 7-21 days, depending on the credit card processor. You have to be on the ball with checking your notifications and responding if you want to have any hope of winning disputes.

If the Investigation is Already Over, How Could You Win?

It’s easy to look at the dispute process, recognize that you’ve lost before you begin, and decide it’s better not to waste your time on something you’re going to lose anyway.

After all, the process for fighting a dispute is intensive.

You have to investigate the transaction on your end and gather any data you have that supports the fact that the transaction was legitimate. That might include a valid tracking number and confirmed delivery, or communications with the customer that prove they made the purchase, or some other form of proof.

Then you have to go through the process of representment, where you re-present the transaction to the credit card company for processing. They take your new evidence into account and determine whether or not the dispute was actually valid.

Yet the statistics are dire. Some sources place the merchant success rate for representment at 12%, others at 21%, and the highest I’ve seen is a meager 45%. While “nearly half” isn’t a bad win rate for chargebacks, it’s still a lot of work to go through just to lose anyway.

It’s no wonder that some merchants adopt the attitude that it’s better to spend that time winning more valid customers than trying to win back a bad one.

Repercussions from Ignoring Dispute Notifications

Now some bad news: you don’t just lose the dispute when you ignore a dispute notification.

There are other repercussions as well.

First of all, some disputes are actually very easy to win. For example, if the customer doesn’t recognize your business name in their statement and disputes the charge, but if you tell them your actual business name (or DBA name) they would recognize it, they might remember and cancel the dispute, or you could win the dispute with proof that they did know.

Tip: This particular issue is caused by a disconnect between your visible business name and your credit card descriptor. Making sure those match is a big way to reduce chargebacks!

There’s also the option to resolve a dispute in a more friendly way, like with a refund. Say, for example, a user wanted to cancel a subscription to your service but forgot until two days after the renewal. A good refund policy should allow the customer to get a refund if they cancel within the first week or two after renewal, as long as they reach out to ask about it.

Unfortunately, some customers just go through the chargeback process instead, because they fear going through customer service and dealing with the hassle of AI chatbots and untrained service agents and policies that might be a nightmare to fight, and the chargeback is a lot easier.

You can often still win these kinds of chargebacks by issuing refunds according to your policy and delivering proof of that to the credit card company.

So, there’s repercussion number 1: you lose disputes you could have won with a trivial amount of effort.

Of course, you can’t win every dispute. Actual fraud does happen, after all. Should you just ignore those disputes?

Here’s the problem: your credit card company can see how you handle disputes.

• Goofus ignores fraud disputes and lets the credit card companies resolve them; Gallant responds proactively to fraudulent charges and adjusts his anti-fraud protections.
• Goofus ignores customer service and lets customers use the tools they have to deal with unfortunate situations; Gallant has active customer service and strives for customer satisfaction even in bad situations.
• Goofus doesn’t really keep effective customer records and only cares about the financial bottom line; Gallant maintains good documentation and can back up valid transactions to fight first-party fraud.

In other words, the credit card companies, and your bank in particular, will probably not be happy if you’re just ignoring dispute messages. While you probably aren’t going to have your accounts shut down just for this, it’s not a point in your favor, that’s for sure.

And, if you reach the 1% chargeback ratio that triggers penalties from the credit card processors, your account may be closed on you. Some merchants can argue that they deserve more chances, but if you have a history of ignoring your chargeback notices, why should the credit card company believe you’re going to be any better about it now?

Think about it; who would you rather work with, a client that actively communicates and is pleasant to work with, or one that ignores all communications until you threaten to sever contact?

It’s a no-brainer.

How to Successfully Respond to Credit Card Disputes

As I already mentioned, responding to disputes is difficult and time-consuming, and the success rates can be pretty low. So, how do you do it successfully?

Step 1: Identify the Reason for the Dispute

The way you respond to a dispute differs depending on why the dispute was filed.

Consider some of the most common reasons disputes are filed:

• The transaction was fraudulent. Real fraud does happen, from stolen card information to identity theft.
• Customer dissatisfaction with the product. If you promise the moon and underdeliver, customers might file a dispute due to not getting what they thought they would get.
• Technical problems. For example, if you accidentally double-billed the customer, they’ll want to dispute one of the charges.
• Product was never delivered. If a customer orders a product and it never arrives, they certainly don’t want you to still have their money, though if you shipped it out and it was stolen from their porch, there’s a fight to be had.
• Refund not processed. If a customer goes through your process and you tell them you’ll refund them, but you don’t actually do so, they’ll file a dispute to get their money back one way or the other.

Even just from reading these examples, you can already see that the way you respond to one of them won’t be the same as how you respond to the others.

Step 2: Determine How to Fight the Dispute

Once you know what kind of dispute was filed, you can determine what you need in order to fight it.

Some, like fraud, you can’t really fight. If a customer in Ohio files a dispute and you find the transaction was initiated from India (not Indiana), obviously it’s not something that you can claim they actually did. You can still try to issue a refund to cancel the chargeback fees, but you aren’t going to win the dispute.

Some, like a refund not processed, an accidental double-charge, or a subscription cancel, can be solved by issuing the refund and delivering proof of that refund to the credit card company. You still lose the money (and any products you had shipped out) but you can avoid the chargeback ding on your account and associated fees.

Sometimes, you can win the dispute. You might be able to gather evidence like sales receipts, invoice details, proof of delivery confirmation, communications and chatlogs with the customer, and even clear lines in your terms of use and return policies that put the customer outside of the valid window. This is part of the representment package.

Step 3: Prepare a Response and Represent the Transaction

If the dispute was a type you can fight with representment, you need to prepare a representment letter and evidence package.

For example, if a customer claimed a product was not delivered, but you have a tracking number that proves it was delivered, you can give that evidence to the credit card company. It’s not your responsibility, nor the responsibility of the credit card company, to avoid package theft. Though, many companies will take a nicer stance and re-issue shipments to promote customer satisfaction.

You’ve probably seen a lot of delivery services, form Uber Eats to Amazon, now require their delivery drivers to take photos of packages when they’re delivered. These photos serve as proof that can be used if a dispute comes up.

There are many examples of chargeback rebuttal letters out there, and you may even have templates available in your merchant hub, depending on what you use. In general, they will include:

• Information about the transaction, including the date of transaction, date of dispute, and value.
• Information about you, including your MID, merchant descriptor, case ID, and contact information.
• Information about the customer, including the card number.
• Information about the dispute, including the reason code.
• A quick summary of who you are, what the transaction was, and what evidence you have to the contrary. You can embed or attach the evidence, however the credit card company prefers it to be handled.

Putting one of these together for every dispute is, obviously, tedious and time-consuming.

That’s why many companies these days simply hire someone to do it for them. That’s where I come in.

FightDisputes.com is my service for dispute alerts and managed responses. I’ll help you out in two major ways.

First off, through direct connections to the credit card companies, I can get word of impending disputes long before you would receive notice of a pending chargeback. This gives you a lot more time to respond, including the possibility of resolving the dispute before it becomes a chargeback, freeing you of fees and penalties.

Secondly, my managed replies service puts my team of experts on your case. We can reach out to customers on your behalf and offer a refund instead of a chargeback, which can cancel the entire process before it happens. Alternatively, we can handle the entire representment process with the credit card company. With your evidence and our expertise, those representment letters are compiled and submitted with ease.

With win rates as high as 95%, you’re losing out if you aren’t using our service, so give me a call to get started today.