What Rights Do Merchants Have When Dealing With Chargebacks?

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In the virtual and cashless eCommerce environment, credit card transactions require blind and mutual trust between the buyer and seller. Unfortunately, things don’t always go smoothly, leading to transaction disputes and chargebacks.

The prevalence of friendly fraud and first-party misuse keeps gathering momentum, with credit card issuers and government regulators tending to yield to the consumer without question, costing merchants billions of dollars every year. Monica Eaton, Founder of Chargebacks911, regards the rights of consumers and merchants as proportionate, with one not outweighing the other.

(Tampa Bay, FL) June 13, 2023 — The Consumer Credit Card Protection Act of 1968 (CCPA) instituted government regulations that oversee the credit card and lending industries to protect consumers against unscrupulous lending practices.1

The Fair Credit Billing Act of 1974 took those regulations a step further, granting consumers the right to dispute billing errors, such as unauthorized purchases, charges for products or services that were not delivered as promised, or other questionable transactions, to garner a refund through their credit card issuer, known as a chargeback.2

Chargeback Volume To Grow In 2023

However, as with many good-faith regulations with noble intentions, fraudsters always find a way to circumvent the system. First-party fraud, aka friendly fraud, unlike outright criminal fraud, is a dispute a customer brings against a merchant through the customer’s financial institution. On the surface, the claim seems innocent; sometimes, it is, and sometimes, it isn’t.

Monica Eaton, founder of Chargebacks911, points out, “Merchants are at a distinct disadvantage in the chargeback dispute process, assumed guilty until proven innocent, leading to billions of dollars in losses for online retailers each year, which means merchants need protection from fraud as much as consumers do.”

Instances of friendly fraud are increasing year over year. Mastercard estimates that global chargeback volume will reach $117.47 billion in 2023, with most of those losses unrelated to the original sale. Calculating chargeback fees, lost merchandise, and other drains on revenue, the average chargeback will cost merchants $3.60 for every $1 in sales.3 By 2023, each chargeback case will cost merchants an average of $191 based on a $90 dispute.4 The entire process of resolving a chargeback dispute can take several months.

The top reasons consumers seek a chargeback include when they are the victim of a fraudulent transaction or assume fraud by mistake because they don’t recognize the retailer on their bank’s transaction report.5 In cases of first-party misuse, a transaction is legitimate and filed by mistake; however, the customer either doesn’t recognize the charge, forgot about the purchase, or doesn’t recognize the business name because it may be a parent company or clearinghouse.

Financial institutions have made the chargeback process so easy for their customers to quickly receive a refund with little to no pushback that an increasing number of consumers bypass merchants to resolve their disputes and go directly to their bank. In fact, according to Chargebacks911’s 2023 Chargeback Field Report, nearly three-quarters of surveyed consumers thought filing a chargeback with their bank was equivalent to requesting a refund from the retailer.

A report commissioned by Verifi found that 80% of chargebacks could have been prevented if customers had simply contacted the retailer first.6

Eaton notes, “Consumer protection laws have clearly defined regulations that protect the interests of cardholders when disputes occur. But merchants also have rights that protect their interests when it comes to the rampant abuse of friendly fraud and misuse.”

The Rights Merchants Have In Chargeback Case

When a chargeback is filed, the card issuer assigns each chargeback incident a reason code, which varies depending on the nature of the dispute. Eaton explains the nine fundamental rights merchants always have in every chargeback case:

  1. The right to the original price: The total amount of the chargeback cannot exceed the original amount.
  2. The right to zero cash-back disputes: Cash-back withdrawals and items already refunded cannot be included in the disputed chargeback amount.
  3. The right to late delivery exemption: If an item arrives late, but the merchant was not at fault, the cardholder must prove they attempted to return the item before filing a chargeback.
  4. Attempt to resolve before chargeback: Many reason codes require cardholders to attempt to resolve a dispute with the merchant before initiating a chargeback, regardless of the issue.
  5. The right to reason codes: When a card issuer files a chargeback, they must attach a reason code that identifies the grounds for the dispute.
  6. The right to 15 days: If a customer returns an item and claims they haven’t received a refund, the card issuer must wait 15 days before initiating a chargeback to avoid issuing duplicate refunds. An exception applies to cases where the waiting period exceeds the chargeback filing deadline. Some card issuers offer a longer dispute window of 120 days, exceeding the 60-day minimum required by law.
  7. The right to product returns: Merchants have the right to have the merchandise in question returned to them. If a consumer did receive the item and claims they did not, it is up to the merchant to prove that the customer received it.
  8. The right to representment: The most important of all the guaranteed merchant credit card chargeback rights is the right to contest illegitimate chargebacks.
  9. The right to arbitration: If a merchant leaves out any pertinent details the bank requires during representment, the claim will be summarily rejected. If the merchant decides to go through the arbitration process, the card issuer will make the final decision. However, there are hefty fees and penalties for the party found to be ultimately responsible.7

Compelling evidence is critical for a merchant to win a chargeback dispute. To verify that a transaction is legitimate, it must include formal or written electronic documentation — delivery confirmation receipts, signed orders, screenshots of conversations with the cardholder, product photos, contracts, and sales receipts. This evidence must be submitted to the card issuer to prove that the merchant followed all established transactional procedures, practices, and policies.8

For merchants to mitigate the financial harm of chargebacks and the possible damage to their brand reputation, chargeback remediation is the most effective solution. Chargeback management solutions provide workflow automation tools to assist merchants and financial institutions in exchanging chargeback data seamlessly.

For over a decade, Chargebacks911 has offered impartial, customizable, and global solutions to streamline and automate manual processes for merchants and financial institutions. To ensure the security of transactions for buyers and sellers, eCommerce retailers and banks must implement advanced technology, data intelligence, and flexible platforms. This helps to minimize the time and resources needed to proactively address chargebacks.

Eaton offers this advice to online retailers, “Prevent disputes before they happen by being customer-friendly. Give consumers easy access to customer assistance services by providing clearly visible contact information. Simplify returns. Keep customers informed. Return policies, shipping costs, fees, and sales tax should be explained upfront. Revisit policies and procedures for opportunities to increase flexibility in business practices. Providing personal and exceptional customer service is essential to establish a mutually rewarding and trusted merchant-customer relationship.” 

About Chargebacks911

Chargebacks911 is a global leader in chargeback management and remediation technology. As a provider or supplier to financial technology companies and financial institutions, Chargebacks911 safeguards more than 2.4 billion transactions per year on behalf of clients in 87 countries around the world.


  1. Hayes, A. (2022, November 21). What is the consumer credit protection act (CCPA)? definition. Investopedia. investopedia.com/terms/c/consumer-credit-protection-act-of-1968.asp
  2. DeNicola, L. (2022, March 21). What is the Fair Credit Billing Act?. Experian. experian.com/blogs/ask-experian/what-is-the-fair-credit-billing-act/
  3. How do chargebacks affect merchants?. Simpl Fulfillment. (n.d.). simplfulfillment.com/blog/chargebacks-affect-merchants
  4. What’s the annual cost of chargebacks? the truth will shock you. Chargebacks911. (2022b, July 12). chargebacks911.com/chargeback-costs/
  5. The merchant’s guide to credit card chargebacks. Shopify. (2022, September 22). shopify.com/blog/credit-card-chargebacks
  6. Katz, M. (2018, September 30). Solving the chargeback triangle. PaymentsJournal. paymentsjournal.com/solving-the-chargeback-triangle/
  7. Do you know your 9 basic chargeback rights?. Chargebacks911. (2022a, December 15). chargebacks911.com/chargeback-rights/
  8. Is “compelling evidence” enough to win a chargeback dispute? Chargebacks911. (2023, March 27). chargebacks911.com/compelling-evidence/