Chargebacks and Retrieval Requests

(Disclaimer: MultiCards® is not responsible for the contents of this information and the information given is only for your information. The information was copied from the internet and placed here to give you an idea of how these procedures work.)
The online merchant is much more vulnerable than a typical retail store with walk in traffic. We will explain this in detail so you do not get into accepting credit cards and then find out your losses from Chargebacks are seriously affecting your profits. Many merchants have suffered tremendous losses from fraud, stolen credit cards etc.
What is an online merchant to do?
Reduce the Chargebacks your business will receive by education and prevention.
(Read on, tips to avoid potential Chargebacks at the bottom.)

A Chargeback: the process the cardholder uses to reverse the charge

In other words the cardholder wishes not to pay for something he or she ordered. There are approximately 60 reasons for a Chargeback or reversal of a charge. The basic rule of thumb is that if the cardholder wishes not to pay for something purchased on the Internet they are going to have an excellent chance of not having to pay for it. They can claim the goods were defective, misrepresented, the sale was fraudulent, etc.
By law the cardholder has two years to file a dispute. Your sales can be reversible for two years... That means saving documentation for two years... Most banks will have a policy against handling disputes that are more than six months old but if the cardholder pushes it they have two years to file a dispute.

The Chargeback Process

  1. The customer disputes a transaction by contacting their card-issuing bank
  2. The card-issuing bank researches to determine whether the reasoning for the Chargeback is valid. (If not, the Chargeback is declined and the customer is held responsible for the charge.)
  3. A provisional credit is provided to the customer. The card-issuing bank initiates a Chargeback process and obtains credit from the merchant's processing bank.
  4. The merchant's processing bank researches the validity of that Chargeback. (If they determine the Chargeback is invalid they will decline the Chargeback and return it to the card-issuing bank.)
  5. The Chargeback amount is removed from the merchant's account and the merchant's processing bank provides written notification to the merchant.
  6. The merchant could provide documentation to remedy the Chargeback. If the provided documentation is found to be satisfactory, the Chargeback is declined and the customer is once again charged for the sale. If the documentation is found to be unsatisfactory, the Chargeback is successful and the process ends.

Swipe thru versus internet

A typical retailer maintains a store and has customers physically walk in, present their charge card which is swiped through a terminal, authorized and a charge slip is printed which the customer signs. This type of merchant pays a rate lower than what an Internet/Mail Order merchant pays and is afforded a much greater degree of protection in the dispute process. The merchant can establish that the customer did in fact walk in, made a purchase, and signed the charge slip. Additionally, a smart merchant will ask for ID and record a drivers license number on the slip to establish that the person did actually come in and made a purchase. The merchant has an authorization number which doesn't in reality provide too much protection but at least establishes the fact that the card wasn't reported stolen or lost at that time.
With an Internet or Mail Order charge all a customer needs to say is: 'I do not remember ordering anything from this merchant'. This is a dispute that is filed when the customer receives their bill and sees the ('unknown'-) charge on the statement. This is called a "Retrieval Request".

Retrieval Requests

Issuing a Retrieval Request
When a cardholder gets their bill and sees a charge appearing that they are unfamiliar with or don't want to pay for, they file what is called a Retrieval Request with the bank that issued them the credit card. The banks are usually most helpful in assisting their cardholders with the dispute process. These cardholders are their customers, you the merchant is the adversary.
When you get a Retrieval Request you have about 10 days to supply a signed charge slip to your credit card processor who in turn supplies it to the cardholder's bank. You will probably get charged something like $25 for each Retrieval Request and if you fight the Retrieval Request you should expect to incur more charges.
Of course as an Internet Merchant you will most likely not have a signed charge slip. Your orders would typically be phoned in to you, emailed to you, transmitted through a secure credit card browser or faxed in. Emails are not considered signed charge slips even if you have a record of the email coming from an account belonging to the cardholder. This means you will overwhelmingly lose the vast majority if not all of these Retrieval Requests because you have no piece of paper bearing the charge with the signature of the cardholder.
Having a proof of delivery from the post office or UPS won't help. The cardholder only needs to say that a delivery was in fact made. Some goods that he or she never ordered were sent and the cardholder unknowingly signed for them and then threw them out having no knowledge of them and didn't want them wasting space. In the case of a delivery to a business address it is likely that a person other than the cardholder would sign for the goods and this of course defeats the signed receipt process for the merchant. If the cardholder claims they never ordered the goods there is no obligation whatsoever for the cardholder to retain the goods and/or return them.
The cardholder does not have to explain or provide any explanations as to how the merchant got their credit card information, and is under no compulsion to report the card stolen since it wasn't stolen.

Prosecuting and suing cardholders

This is a right you of course have. The problem is the law enforcement agencies will typically not work such cases, ask them if you don't believe it.
The cardholders are afforded certain rights under Federal laws. If you sue them it will be costly, especially since venue (where the correct jurisdiction is for the case) is ill defined in Internet transactions. Even if you do win you still need to collect.
Today the credit card holder is not the same as five years ago. The advent of secured credit cards and visa/mastercard debit cards have brought a whole different class of cardholder into the game. This is the person with bad credit who a few years ago could not get a credit card. Now they can get credit cards, practically anyone can get a secured credit card or a credit card/debit card. True with a debit card the dispute process is closed to the card holder UNLESS they say: 'hey I never ordered this' and then they get all the rights of a real credit card holder. It is also impossible for the merchant to tell a debit card from a real credit card unless you can look at the card.


If you get too many Chargebacks, usually more than 1 percent of total sales, your merchant account will be terminated by the processing bank. If you do 100 credit card transactions a month and get more than one of these disputes per month you are in serious jeopardy of losing your merchant account and this applies even if you win these disputes which is most unlikely. It is important to keep Chargebacks to an absolute mimimum, the best way to deal with Chargebacks is to prevent them from happening in the first place:
Consider these tips to avoid potential Retrieval Requests and Chargebacks:

  1. Duplicate transactions
    Ensure that transactions/orders are only made once. Entering the same transaction more than once (by customers pressing the back button or clicking on the CheckOut button more than once), can result in "duplicate transaction" Chargebacks.
  2. Refund policy
    Your refund policy should be clearly visible on your website. Make it a requirement that customers read the policy before their order can be processed.
  3. Refund in a timely manner
    Failure to process credits in a timely manner can result in Chargebacks for "credit not issued." Also inform your customer on how long it will take before the refund will hit their account.
  4. Cancelling a rebilling
    If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer. As a customer service, advise the customer in writing that the service, subscription, or membership has been cancelled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to Chargebacks.
  5. Contact information
    Your contact details should be clearly visible on your website. Including a physical address and a telephone number, so not just an email address or contact form.
  6. Shipping policy
    Your shipping details should be clearly visible on your website. If your customer knows when they will receive their product they will not issue a Chargeback because they feel 'it has been too long' and they 'should have received the product by now'.
  7. Order status update
    Keep customers informed on the status of their order.
  8. Delay in shipping
    If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
  9. Out of stock
    If the merchandise ordered by the cardholder is out of stock and delivery will be delayed or this item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible Chargeback.
  10. DBA on customers' statement
    Use a clear DBA (Doing Business As) name that customers will recognize. Vague corporate names that do not accurately describe what your company might do or sell will only confuse customers when they review their billing statements. An unrecognized DBA name on billing statements is one of the most common causes of Chargebacks. Inform your customers on your website what the billing name on their statement will be: "Please note: Our billing name on your statement will be: ..."
  11. Phone number on customers' statement
    Put your phone number on your customers' statements. If they do not recognize your DBA, they can call you to find out who you are and why you charged them.
  12. Responding to a Retrieval Request
    Always respond to a Retrieval request as quickly as possible. A limited amount of time is available to resolve a dispute. If you miss the window of opportunity to respond, you forfeit your ability to fight the Chargeback. If your processing bank has any more questions or requests, your quick response will ensure that they have enough time to get the relevant information from you.
  13. Customer satisfaction
    Some disputes are not the result of unauthorized credit card use. Rather, they start because the customer disputes the quality of the goods or services purchased. The best way to avoid this type of Chargeback is to work closely with the customer to establish a mutually satisfactory solution.
  14. Contact suspicious orders
    Call, fax or email any large or suspicious orders to ensure the order is legit. If you are unable to reach the customer, you might have intentionally been given incorrect contact information. Issue a refund to prevent a Chargeback by the credit card holder.
  15. High-ticket sales/Fast delivery
    Be suspicious of high-ticket sales requested to be sent next-day air or if a runner will be in to pick up the purchase at a later time. Be wary of orders for which the customer is willing to pay more for faster delivery.
  16. Verify the customer's address
    It is possible to verify the customer's name, address and phone number with the card-issuing bank. By calling the Voice Authorization Center for address verification, you can verify the address and also provide proof that you verified the address.
  17. Always get signed proof of delivery
    Be able to provide a shipping tracer log that shows that the customer received the shipped goods.
  18. Product information on website
    Provide accurate descriptions and images of your products on your website.
  19. Foreign orders
    Be very cautious of any foreign orders. Generally, orders from Asia, the Middle East, and most parts of Africa are considered high-risk.
  20. Different billing and shipping address
    Be wary of orders with domestic billing addresses and foreign shipping addresses. They are usually fraudulent.