A chargeback is, in short, a dispute raised against a transaction made with a credit card when the transaction was not made by the cardholder or the cardholder does not recall it. Naturally, the types of disputes vary according to the situation. Let's examine these dispute types:
Authorization Error Disputes
This is a dispute that arises because the merchant did not correctly follow the authorization flow. It occurs when the merchant fails to obtain authorization, or obtains it after the transaction date.
Sample Documents the Merchant Can Provide:
If authorization was obtained for the disputed transaction, the merchant should share the transaction details and the authorization code with the acquirer/POS bank. If authorization was not obtained for the disputed transaction, the merchant should accept the incoming chargeback request.
Fraud Disputes
This is the type of dispute in which the cardholder states that they did not approve the transaction or that it was not made with their knowledge.
When the physical card is used and the transaction is completed without a PIN, a signature field appears on the transaction receipt (slip), and the merchant is required to check the customer's identity and signature. In transactions completed without a signature on the receipt, liability rests with the merchant.
Transactions completed without the cardholder's approval, without the physical card, and not face-to-face — mail order transactions, e-commerce transactions (except 3D Secure, GO, and BKM Express transactions), and periodically recurring transactions (subscription payments, insurance payments, etc.) — are considered risky transactions for the merchant.
Sample Documents the Merchant Can Provide:
The merchant should not process a transaction without the cardholder's approval, should ensure the transaction is completed with a PIN or signature, and should keep the sales documents legibly along with supporting documents. A photocopy of the credit card or receipts containing handwritten card information are not considered valid documents.
Financial liability for non-face-to-face transactions completed without the cardholder's approval — mail order transactions, e-commerce transactions (except 3D Secure, GO, and BKM Express transactions), and periodically recurring transactions (subscription payments, insurance payments, etc.) — rests with the merchant. For disputes regarding such transactions, the merchant must present documents showing that service was provided to the cardholder, such as a cardholder-signed document, a receipt, a mail order form, and, where the cardholder purchased an electronic product or service, the cardholder's written registration approval and any fax, e-mail, or letter documents showing the cardholder's involvement in the transaction. However, presenting these documents does not remove the merchant's financial liability.
Cardholder Does Not Recall the Transaction
This is a dispute raised when the merchant name or location shown on the cardholder's statement is unclear or cannot be recalled by the cardholder.
To remind the cardholder of the transaction, the merchant is required to provide all information and documents containing detailed descriptions of the ordered or sold product/service.
Sample Documents the Merchant Can Provide:
Signed sales receipt, PIN-verified sales receipt, invoice, reservation form, product order form, product delivery form, mail order form, sales/rental agreement, etc.
Process Error Disputes
The following refer to transactions handled outside the standard process:
Duplicate Collection:
When a transaction is collected more than once, the merchant is responsible for the duplicate amounts collected. If the merchant states that there was no duplication, it must prove that each transaction was made for a different product/service by presenting documents such as a description, invoice, or receipt for each transaction.
Payment of the Amount by a Different Method:
If the cardholder pays the same amount more than once using a different method, liability for the amount charged to the card rests with the merchant. Where the merchant works with an agency or intermediary firm, if there is a document showing that the amount collected for the service was paid to the merchant that will provide the service, or that the reservation was accepted by the merchant that will provide the service, financial liability for the transaction passes to the merchant that will provide the service.
Late Presentment of the Transaction:
For a transaction to be reflected in the cardholder's statement activity for the period, the merchant must run the POS end-of-day (batch close), and if the issuer and the acquirer/POS bank are not the same, the relevant transaction must be sent to clearing. For disputes over exchange-rate differences that may arise between the original transaction amount and the refund amount in refunds carried out by the merchant, liability for the exchange-rate difference rests with the merchant.
Incorrect Card Number Entry:
The issuer may raise a chargeback when it cannot match the card number arriving in the clearing record with the card numbers it has itself generated (invalid). Transactions that arrive via clearing but do not match an authorization expire after 1 week and do not appear in the card's transaction history.
Difference in Transaction Amount:
The cardholder may file a spending dispute with a copy of the receipt showing the transaction amount is different, along with a cardholder statement. The issuer should only charge back the disputed amount. If the cardholder does not have the receipt, a document request can be made. If the resulting receipt confirms the cardholder's dispute, it can be sent among the chargeback documents.
Cancellation/Refund Transaction Disputes
This is used when the merchant continues to charge for recurring transactions (periodic payments, insurance payments, etc.) despite the cardholder having submitted a cancellation request, or when the merchant does not refund the amount to the card even though the cardholder has returned the product.
Cancellation/Refund disputes may arise in the following situations.
- The merchant fails to process the cardholder's cancellation request and continues charging for recurring transactions (periodic payments, insurance payments, etc.)
- The merchant rejects the cardholder's refund request based on the cancellation/refund and withdrawal procedures contained in the distance sales agreement.
- The product sent and/or service provided by the merchant does not have the conditions and features stated, in writing or verbally, at the time of sale.
Sample Documents the Merchant Can Provide:
Financial liability for subscription transactions in which the cardholder continues to be charged despite cancellation rests with the merchant. Cancellation can be carried out by the customer applying to the merchant or to the issuer. A dispute received on this matter stands in place of a subscription cancellation request and constitutes evidence.
When the merchant agrees to refund the amount to the cardholder, it must carry out the transaction at the latest within 1 day of the date stated on the refund document, or immediately if no date is stated. Financial liability for disputes that may arise from changing the stated refund date or abandoning the refund rests with the merchant.
For reservation transactions, in reservations made within 72 hours before the service time, a "no-show" fee should not be charged for cancellations made by 18:00 on the day the service is to be received.
If the cardholder cancels their reservation on time and in accordance with the refund/cancellation conditions, the deposit collected must be refunded.
In timeshare and similar transactions, the cardholder has the right to cancel within 14 days of the date the contract was executed or sent to them. If cancellation is not made within this period, financial liability for the dispute process no longer falls on the merchant.
Product/Service Delivery Disputes
This is the type of dispute used when the cardholder is unable to receive the product they ordered, or the service is not provided.
These types of disputes arise in the following situations:
- For products to be delivered on a date after the transaction date, the merchant does not draw up an agreement with the customer specifying the delivery date and conditions.
- The merchant fails to deliver the product or service for which it has collected payment, to the requested person, on the date and/or at the location stated in the agreement.
- The merchant delivers the product later than the time stated at the time of sale.
- The cardholder cancels the order before the product/service delivery date
- The merchant delivers the product package empty.
Sample Documents the Merchant Can Provide:
To reject the dispute, the merchant must prove delivery of the product with a signed delivery report.
For products to be delivered on a future date, the merchant must present a signed document proving that delivery took place on the date and at the address agreed with the cardholder.
For products received by the cardholder at the time of the transaction, the merchant must present the signed/PIN-verified receipt and invoice. Documents proving that the service was provided must be submitted together with the merchant's explanation.
