The Dispute Process
Disputes can be overwhelming and time-consuming, but this section will help lay a foundational understanding of the dispute process. Learn more about retrievals (inquiry on a transaction), disputes (consumer complaint), authorizations, the dispute life cycle, what it means to accept a dispute, and the dispute decision to help you protect your shop. Know where to find details of common dispute reason codes, what is required to overturn them, how to respond, and what compelling evidence to supply.
What is a Retrieval?
A retrieval is an inquiry on a transaction from the cardholder or the cardholder's issuing bank. A retrieval request is an opportunity to stop a dispute before it's filed, either by issuing a refund or by providing enough information to satisfy the inquiry.
A retrieval has no financial impact, as it is an inquiry for further information. If the retrieval is not satisfied, it can result in a dispute, where there is a financial impact.
Failure to respond to a retrieval by the deadline will likely result in an unwinnable dispute.
Why do retrievals occur?
Retrievals may occur when:
The cardholder does not remember making the purchase
The cardholder does not recognize the business name appearing on their statement
The amount the cardholder sees does not match the agreed-upon amount
What is a Dispute?
A dispute is a consumer complaint related to a credit or debit card purchase. Disputes are a service provided by the cardholder's bank. A cardholder can initiate a dispute under various reason codes within the bank's allotted time frame (up to 180 days after services are rendered). In some cases, the bank itself may initiate. Common dispute reasons are unauthorized purchase, merchandise/services not rendered, credit not processed, merchandise/service not as described, etc.
All card transactions can be disputed, including EMV, card-present, card-not-present, etc. There is no guaranteed method to avoid disputes completely, but there are ways to mitigate your risk exposure.
When responding to a dispute, the business that charged the card (you), must provide compelling evidence to the cardholder's bank, showing that the agreed-upon service/product was provided and/or that the agreed-upon parameters for requesting a refund were not followed. The stronger your evidence, the better the odds that the dispute will be reversed.
If you do not submit evidence by the deadline, the cardholder will win the dispute and keep the funds. The cardholder’s banks will take the no response as an indication that you agree funds are due back to the cardholder and do not wish to challenge the dispute.
Debit card vs. Credit card Disputes
Many consumers use credit and debit cards interchangeably. There are a lot of similarities between the two but they each offer different levels of fraud liability.
For credit cards, the funds technically belong to the bank, not to the cardholder. Whereas with a debit card, the funds exist in the cardholder’s account, rather than in a line of credit issued by the bank.
Where do disputes stem from?
Disputes stem from merchant errors, fraud, and friendly fraud.
Merchant Errors
These are missteps at the shop level, meaning you have the ability to implement changes to lower the risk of preventable disputes. Some of the most common merchant errors are:
Failing to clarify return/refund policy
Lack of customer service and/or customer communication
Not follow up on customer inquiries + complaints
Not shipping item(s) within the agreed-upon time frame
Listing inaccurate product description
Unclear prices or charging more than the agreed-upon amount
Inaccurate billing descriptor
Not adhering to card network regulations
Duplicate charges in error
Fraud
Fraud occurs when a fraudster obtains the cardholder's information to complete fraudulent transactions.
Friendly Fraud
Friendly fraud is when a legitimate cardholder uses their card to make purchases with the intention to later dispute the charge. This type of fraud is also known as chargeback fraud which is an industry-wide nuisance. The disputes can stem from:
Buyer's remorse (the customer changes their mind about a purchase and decides it's easier to call their bank than to call you to work out the details)
The cardholder disputes a purchase from an authorized user on the card account
Customers attempting to extend a refund policy that they don't agree with
Intentionally abusing the dispute system (trying to get something for free)
Friendly fraud is very costly to businesses, which is why it is imperative that you implement best practices when accepting card payments to protect yourself upfront. Obtain proper documentation and adequately vet your customers.
Cardholders who commit friendly fraud will likely initiate a dispute within 30 days of receiving the goods/services.
The two main categories of friendly fraud are accidental dispute abuse and intentional dispute abuse.
Accidental dispute abuse occurs when the cardholder does not recognize the charge on their statement. Family charges fall under this type when a relative of the cardholder has access to the cardholder's payment information and makes a purchase without their knowledge.
Intentional dispute abuse occurs when the cardholder intentionally abuses the dispute system as a way for personal gain. This may be due to buyer's remorse, waiting too long for an item, or the cardholder disputes as many transactions as they can as a way to lower their debt.
Friendly Fraud is extremely difficult to identify and prevent as it is a post-transactional threat, meaning there is no way of knowing if a transaction will result in a dispute. No one can predict a cardholder's intention.
The best practice is to collect as much information as possible at the time of creating the invoice/estimate, clearly communicate shipping times and/or billing terms, require the cardholder to agree to the terms of service, ship only to verified billing addresses, and require a signature upon delivery of goods.
Dispute Life Cycle
There is a cardholder inquiry. The cardholder identifies a transaction that is either suspicious/not recognized or if a product/service is not rendered or yet received. The cardholder then contacts their issuing bank to file a claim.
The issuing bank reviews the claim of the cardholder. the issuer reviews the details surrounding the transaction.
The issuing bank files a dispute. The money has been moved and the cardholder is given a provisional credit paid by the business (you). The bank sets the date when compelling evidence is due.
The business (you) makes the decision to either accept or fight the dispute.
Reasons to accept the dispute:
You agree funds are due to the cardholder
True duplicate
A refund was due but not given
etc.
Services/products not rendered
If fighting the dispute, now is the time to gather all compelling evidence and submit it to Shopmonkey by the deadline.
This deadline given cannot be moved/adjusted.
Shopmonkey responds to the dispute. We will package the documents and details you provide and respond to the issuing bank on your behalf.
The issuing bank reviews the case. The issuer reviews all of the evidence and renders a decision. The estimated time frame a customer’s bank can take is 45-60 workdays to review the submitted evidence to render a decision on the case. We will provide you with an update as soon as we receive one.
The transaction was authorized. How could this be disputed?
An authorization on a transaction/sale means that the cardholder's bank verified the funds you are requesting are available on the card at that moment in time. The cardholder's bank is authorizing the removal of the requested funds. An authorization is valid for 7 days on a debit card and up to 30 days on a credit card.
An authorization does not mean that the transaction/sale will not be disputed at a later time OR that the individual placing the order is the actual cardholder.
DO NOT SOLELY RELY ON AUTHORIZATION AS A FORM OF VETTING YOUR CUSTOMER.
Receiving a Dispute Notification
Disputes are generated 24/7, 365 and the notifications you receive are directly from Shopmonkey. We receive notifications, review them, and send out notifications individually. The withdrawal of disputed funds, along with a $15.00 dispute fee, is automatic. The removal of funds is step 3 in the dispute cycle, which is when the cardholder receives a provisional credit while the disputed transaction completes the dispute cycle.
Key information:
Ensure Shopmonkey has the correct POC for dispute email notifications
Dispute window is up to 180 days after services are rendered. The cardholder's bank dictates if a dispute can be filed, not Shopmonkey.
Dispute responses (compelling evidence) max out at 5MB - no exceptions.
Dispute deadline is set by the cardholder’s bank - it will not get extended.
Cardholder’s bank can take 45-60 days to render a decision on the case.
Send a response to: disputes@shopmonkey.io
What do I do after I receive a dispute notification?
You will receive an email dispute notification on every charge that is being disputed. The notification will be sent to the admin on the account. If you require that dispute notifications go to a specific individual or email distribution list, please let us know and we will note the account so that all future dispute notifications go to the correct email address.
A dispute can come in for the total amount of the charge or a partial amount. The email notification will have the next steps to follow and will be specific to the dispute reason code (not received, fraud, credit not processed, etc.). The email will disclose what is considered compelling evidence for the dispute reason. Please remember that the stronger your compelling evidence is, the better the odds are that the dispute will be reversed in your favor.
Do not issue a refund. The cardholder has already received a provisional credit with the dispute.
Gather all compelling evidence pertaining to the transaction and the recommended compelling evidence for the dispute reason code and send it to disputes@shopmonkey.io.
Provide clear and legible documentation
Keep evidence relevant and to the point. A long introduction about your product or company, complaint about the customer, or the unfairness of the dispute isn’t going to make your responses more compelling. Instead, provide only the facts surrounding the original purchase, using a neutral and professional tone.
You will only receive one opportunity to submit a rebuttal. Once a response is submitted, it is submitted to the cardholder's issuing bank for review and no additional documents can be provided.
The evidence you submit to Shopmonkey should be appropriate to the specific dispute. For example a response to a dispute with the reason “product not received” should have evidence supplied that includes shipping//tracking information or evidence that customer pick-up occurred.
Compelling Evidence Examples
Explanation of the charge and any relevant details to support that the cardholder authorized the charge
Signed invoices/receipts. This provides evidence (customer signature on the pickup form, copy of identification presented by the cardholder, or details of the identification presented by the cardholder) that the person who signed for the product is the cardholder.
All customer communication. This provides evidence of a link between the person receiving the products and the cardholder, proving that the cardholder disputing the transaction is in possession of the product or benefited from the charge.
This could be screenshots of text conversations or email exchange
Customer details including first and last name of cardholder, email address, and phone number
Shipping information (if applicable)
Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Copy of your terms of service and refund policy
It's critical to provide proof that your customer agreed to and understood your terms of service at the time of sale
Any additional relevant information or documentation. Provide any useful information that shows that you rendered services or product(s) as described and that the customer benefited from the charge or is in possession of the product.
Dispute withdrawal letter (if applicable)
Supplying Dispute Evidence
Only PDF, JPEG, or PNG file types are accepted
Do not send audio or video files because the card issuer evaluating the dispute won’t take action on these.
The combined file size cannot be more than 5MB, with no exceptions.
If you are able to make contact with the customer and come to an agreement that the dispute is to be dropped (this is the best way to resolve the dispute), you must obtain written communication from the customer or the customer's issuing bank stating they have dropped the dispute and send it to us by the deadline.
Once you supply us with compelling evidence, we will package and respond to the dispute on your behalf. Shopmonkey can only respond to disputes with the information and documentation you supply. Please note that the estimated time frame a customer’s bank can take is 45-60 workdays to review the submitted evidence to render a decision on the case. We will provide you with an update as soon as we receive one.
What is considered compelling evidence?
Compelling evidence is the documentation and information that you provide when you challenge the dispute. When a customer initiates a dispute on a charge that you initiated, the burden of proof falls on you (the business that charges the customer card for a service or product).
You must provide information/documentation (compelling evidence) in response to the dispute reason codes to respond specifically to the cardholder's claims. The cardholder’s bank requires that you demonstrate that the dispute is invalid and that the original transaction was legitimate. You must prove that you rendered services as described, had your customer acknowledge and confirm that they agreed to your terms of service, etc. The compelling evidence that you submit is reviewed by the cardholder’s bank. They will review what is submitted and render a decision. The stronger the evidence, the better.
Failure to respond to a dispute means that the bank will side with the customer because they will take your no response as an indicator that you agree that funds are due back to the customer. Essentially, this means the case is closed and you lose the dispute.
Compelling evidence depends on the dispute reason code. Please review the dispute notification as it will have what is considered compelling evidence.
The most common types of compelling evidence are:
delivery confirmation receipts
signed contracts with your terms
before and after photos
proof of communication with the cardholder
any kind of signed receipts, invoices, acknowledgments that services were authorized and that the cardholder was satisfied with the services rendered or acknowledges receipt of services/product(s)
The goal is to provide documentation that helps establish the legitimacy of the original transaction and prove that the claims of the cardholder are false. The stronger the evidence, the stronger the odds are that the dispute will be ruled in your favor.
We package and respond to the dispute on your behalf with the compelling evidence you provide. Please note that the estimated time frame a cardholder's bank can take to review the submitted evidence to render a decision on the case is 45-60 workdays. We will provide you with an update as soon as we receive one.
Dispute Withdrawal Letter
Dispute withdrawal letter
Reach out to your customer to better understand their complaint (reason for disputing the transaction) and try to work through the problem with them. If your customer does agree to withdraw the dispute, ask them to reach out to their bank and withdraw the dispute. This is the best remedy for a dispute. Ask them to provide confirmation of the withdrawal, such as a withdrawal confirmation email from their bank or a screenshot of the withdrawal. An email or written letter is sufficient.
Send that dispute withdrawal letter to Shopmonkey by the deadline so that we can respond to the dispute.
Accepting a dispute
You can choose to accept a dispute. Accepting a dispute is not an admission of wrongdoing, it is stating that you agree with the cardholder that a refund is due.
If you decide to accept the dispute, please let us know, so we can gather details and close the case.
Dispute Decision
Disputes are decided by the cardholder's bank, according to the bank’s process. Shopmonkey, unfortunately, does not have any insight into how the decision was reached. Shopmonkey and our processor have no way to affect the decision beyond submitting the compelling evidence you provide.
Starting June 1, 2023 Stripe will no longer return the $15.00 dispute fee if a dispute is resolved in your favor. All accounts will incur a $15.00 dispute fee regardless of the outcome of the dispute.
Win: The dispute was resolved in your favor by the cardholder's bank or credit card company, meaning the disputed amount and dispute fee will be returned to you. After June 1, 2023 the dispute fee will not be returned to you, only the disputed amount will be returned.
Lose: The dispute was NOT resolved in your business’s favor, meaning the dispute amount and dispute fee will not be returned to you. If you want to challenge or contest this dispute, you may, but it must be done outside of Shopmonkey, as we are unable to do that on your behalf. You may inquire with your legal representation for guidance on your options or, depending on the dollar amount, you may want to pursue this case in a small claims court.
Please note that we cannot provide any legal advice on this matter.
Excessive Disputes
As part of your agreement with card networks, you must keep dispute ratios at acceptable levels. If the thresholds are exceeded (dictated by each network <Visa, Mastercard, Discover, AMEX>) they will place you into one of their monitoring programs. These programs can lead to fines and fees until you reduce your dispute levels.
Dispute activity is calculated by the number of disputes received, the final outcome of the dispute has no impact on your final numbers. The networks are ultimately looking to see what you’re doing to prevent disputes in the first place, so dispute prevention is critical. Anything over 1% is considered excessive and will be visible to card networks.
Common Dispute Reason Codes
Dispute reason codes describe the account owner's reason for filing a dispute. There are various reason codes in which a cardholder can file a dispute claim. For updated, current information on dispute reason codes, check out Stripe's Dispute Categories Page.
Select each dispute category type to learn more category details, how to respond, and evidence that can be submitted. After selecting a dispute category type, use the "Evidence you can submit for" drop-down menu to view appropriate evidence that can be submitted for a physical product, digital product or service, and offline service.
The customer claims that the purchased product was returned or the transaction was otherwise canceled, but you haven’t yet provided a refund/credit.
Prevention tips:
Process qualified refunds as soon as possible and notify the cardholder
Share the refund policy with the cardholder before completing the transaction
Compelling evidence:
Explanation of the charge: Demonstrate you already issued the refund that your customer is entitled to OR provide an explanation as to why the customer is not entitled to a refund
Cancellation policy/disclosure provided: The applicable cancellation or refund policy was provided to and acknowledged by the customer. Provide an explanation of how and where you provided the policy to your customer prior to the purchase.
This could be text copied from your policy page, a screenshot of the policy on a receipt, or the applicable part of your business's terms and conditions that were acknowledged by the customer.
Communication: If you communicated with the customer prior to the dispute, or if later conversation sheds light on the facts of the case, submit it with the other evidence
This could be screenshots of text conversations, email exchanges, or your written account of the conversations including dates of contact information.
Clearly state if the customer did not reach out to you before the dispute.
Shipping Information (if applicable): Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Any additional relevant information or documentation: Provide any useful information that shows that you rendered services or products as described and that the customer benefited from the charge
Dispute withdrawal letter (if applicable)
The customer claims they were charged multiple times for the same product or service.
Prevention tips:
Refund any duplicate charges immediately and notify the cardholder
Review and balance end-of-day sales
Compelling evidence:
Explanation of the difference between the disputed charge and the one the customer believes is a duplicate
If you have issued a refund prior to this dispute, please provide details and documentation
Communication: If you communicated with the customer prior to the dispute, or if later conversation sheds light on the facts of the case, submit it with the other evidence
This could be screenshots of text conversations, email exchanges, or your written account of the conversations including dates of contact information.
Clearly state if the customer did not reach out to you before the dispute.
Shipping Information (if applicable): Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Dispute withdrawal letter (if applicable)
This is the most common reason for a dispute and happens when a cardholder claims that they didn’t authorize the transaction. This reason code is typically used when a card was lost or stolen and used to make a fraudulent purchase. It can also happen if the cardholder doesn’t recognize the payment as it appears on the billing statement from their card issuer.
Prevention tips:
Obtain the cardholder's signature on the pickup
A copy of identification presented by the cardholder
Details of identification presented by the cardholder
Compelling evidence:
Explanation of the charge: Any relevant details to support that the cardholder authorized the charge
Customer details: First and last name of cardholder, email address, and phone number
Communication: Evidence to prove a link between the person receiving the products and the cardholder, proving that the cardholder disputing the transaction is in possession of the product or benefited from the charge
This could be screenshots of text conversations or email exchange
Customer signature: If a physical item, show evidence that the person who signed for the product is the cardholder (customer signature on the pickup form, copy of identification present presented by the cardholder, or details of the identification presented by the cardholder)
Shipping Information (if applicable): Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Dispute withdrawal letter (if applicable)
The customer claims they did not receive the product(s) or services purchased.
Prevention tips:
Adhere to the promised delivery date and work completion date.
Immediately advise customers of unforeseen delays (out of stock, shipping delays, etc.) and offer a refund if they do not want to wait.
Accurately describe the services that will be performed, including the availability window.
Do not charge the cardholder's card until after the product has been shipped
Provide the cardholder with the tracking number of shipped items and retain the delivery confirmation. Consider requiring a signature for high-priced items.
If the item is picked up in-store, verify the cardholder identification card or driver's license and obtain a signature to verify the pickup.
Compelling evidence:
Explanation of the charge: Demonstrate you already rendered services or product has been delivered (cardholder is in possession of item(s)).
Explanation can include details that the agreed upon render date or delivery date has not yet arrived
Customer details: First and last name of cardholder, email address, and phone number
Communication: If you communicated with the customer prior to the dispute, or if later conversation sheds light on the facts of the case, submit it with the other evidence
This could be screenshots of text conversations, email exchanges, or your written account of the conversations including dates of contact information.
Clearly state if the customer did not reach out to you before the dispute.
Customer signature: If a physical item, show evidence that the person who signed for the product is the cardholder (customer signature on the pickup form, copy of identification present presented by the cardholder, or details of the identification presented by the cardholder)
Shipping Information (if applicable): Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Dispute withdrawal letter (if applicable)
The customer claims that the product or service was received but was defective, damaged, or not as described.
Prevention tips:
Immediately fulfill all valid requests for replacements or refunds
Double-check orders to ensure the correct item is shipped
Package item(s) carefully to avoid damage during shipment
Accurately describe items being sold and display accurate images
Never sell counterfeit products
Accept returns and issue refunds when applicable
Compelling evidence:
Explanation of the charge: Demonstrate that the product or service was accurately represented prior to purchase, that the product wasn’t damaged or defective, or that the customer received the product or service as advertised
Communication: If you communicated with the customer prior to the dispute, or if later conversation sheds light on the facts of the case, submit it with the other evidence
This could be screenshots of text conversations, email exchanges, or your written account of the conversations including dates of contact information.
Clearly state if the customer did not reach out to you before the dispute.
Refund policy/disclosure provided: The language of your refund policy and how you disclosed it to the customer prior to the purchase
This could be the text copied from your policy page, a screenshot of the policy on a receipt, or the applicable part of your business's terms and conditions that were acknowledged by the customer.
Customer signature: If a physical item, show evidence that the person who signed for the product is the cardholder (customer signature on the pickup form, copy of identification present presented by the cardholder, or details of the identification presented by the cardholder)
Shipping Information (if applicable): Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Any additional relevant information or documentation: Provide any useful information that shows that you rendered services or products as described and that the customer benefited from the charge
This could be before and after photos of work completed
Dispute withdrawal letter (if applicable)
The customer doesn't recognize the payment appearing on their card statement.
Prevention tips:
Obtain authorization on the day of the transaction
Ensure accurate business name in statement descriptor
Obtain secondary validation (cardholder signature, card imprint, etc.)
Do not override declined transactions
Do not split transactions
Do not excessively run card
Obtain a different form of payment after 2 declines within a 24-hour period
Compelling evidence:
Timeline of events: Provide date services rendered and dates of updates provided to the cardholder
Customer signature: If a physical item, show evidence that the person who signed for the product is the cardholder (customer signature on the pickup form, copy of identification present presented by the cardholder, or details of the identification presented by the cardholder)
Communication: If you communicated with the customer prior to the dispute, or if later conversation sheds light on the facts of the case, submit it with the other evidence
This could be screenshots of text conversations, email exchanges, or your written account of the conversations including dates of contact information.
Clearly state if the customer did not reach out to you before the dispute.
Shipping Information (if applicable): Provide shipping address, shipping date, shipping carrier, proof of delivery, and tracking number
Any additional relevant information or documentation: Provide any useful information that shows that you rendered services or products as described and that the customer benefited from the charge
This could be before and after photos of work completed
Policies/disclosures provided: The language of your policies and how you disclosed it to the customer prior to the purchase
This could be the text copied from your policy page, a screenshot of the policy on a receipt, or the applicable part of your business's terms and conditions that were acknowledged by the customer.
Documentation to establish the legitimacy of the transaction and show that the claims of the cardholder are false.
Do not send full card numbers. If any of your documents contain a full card number, please truncate. Block out the middle part of the card number so the first and last four of the card are visible.
Head back to Best Practices for Accepting Card Payments for more information.
We recommend that you read through all three linked articles as they will help you better understand card payments through Shopmonkey Payments.
We are here to help! Feel free to reach out to the Risk Department at risk@shopmonkey.io and the Dispute Team at disputes@shopmonkey.io.
*We provide integrated payments - we do not provide business advice or legal advice.