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Dispute / Chargeback FAQs
Dispute / Chargeback FAQs
Ben avatar
Written by Ben
Updated over a week ago

In this article:

What is a dispute / chargeback?

A chargeback is when a customer disputes a card transaction, challenging its validity. The customer's bank will request further information about the transaction and then review the details to determine whether to uphold the chargeback.

If the customer's bank decides to close the chargeback in the favour of the customer, the disputed amount and a dispute fee is passed onto the merchant. However, if the customer's bank decides to close the chargeback in the favour of the merchant, the disputed amount and dispute fee is returned to the merchant.

Why do chargebacks occur?

There are a number of different reasons as to why a chargeback is raised by a cardholder. The most common reasons are listed below:

Unrecognised or unexpected payment

A customer may review their card statement and see a payment that they do not recognise. They will then alert their bank or card issuer, where the transaction will be disputed and a refund requested. The refund requested can either be a partial or the full amount of the transaction. This can happen due to:

  • A customer doesn't recognise a business's statement descriptor

  • A customer is charged multiple times for a transaction

  • A customer is charge the incorrect amount for a transaction

  • A customer didn't authorise their payment using their card

Ensure your Statement Descriptor is clear to help your customer's recognise the transaction on their bank statement. Tap 'More' then 'My Business' to edit yours via your Lopay app.

Unsatisfied with the product or service provided

A customer may recognise the transaction on their card statement but be unsatisfied with the product or service they received. This can happen due to:

  • A customer paying for a product or service that is not as described or faulty

  • A customer not receiving the product or service

  • A customer doesn't receive a refund that was agreed upon

What happens if I get a chargeback?

If your customer raises a chargeback with their bank and disputes a payment, the following steps will occur:

  1. The customer will contact their bank about a specific transaction. They will either dispute a partial or full amount of the transaction and then provide a reason as to why they are disputing the transaction.

  2. The cardholder's bank will then contact Lopay's payment processor Stripe, who then passes this information onto Lopay.

  3. Lopay then notifies the merchant via email that a payment has been disputed by their customer. At the same time, the disputed amount and the £20.00 dispute management fee is deducted from the merchant's Lopay balance and held by the cardholder's bank. If the dispute is overturned, the disputed amount and the dispute management fee are returned to the merchant.

  4. The dispute notification email from Lopay will contain all the payment information including the amount, the time and date it was taken and any relevant information that has been provided by the cardholder's bank as to why a dispute was raised.

  5. The merchant will be asked how they want to respond to the chargeback. The merchant can contest or accept the chargeback. If the merchant wishes to contest the dispute, they are required to provide any relevant information and evidence to counter the argument the cardholder has made.

  6. Depending on the merchant's decision, there will be a number of outcomes:

    • If the deadline to provide a response is missed or if the merchant accepts the dispute, then the cardholder wins the dispute by default.

    • If the merchant has provided all the relevant information, Lopay will then compile the evidence for a counter dispute submission. Once the cardholder's bank receives this submission, it can take up to 90 days for them to review the information:

      • If the cardholder's bank closes the dispute in the favour of the cardholder, the previously deducted funds will be returned to the customer.

      • If the cardholder's bank closes the dispute in the favour of the merchant, the disputed funds and £20.00 dispute review fee will be returned to the merchant's Lopay balance.

Please note Lopay cannot guarantee that a dispute will be overturned by the cardholder's bank. However if a merchant provides sufficient compelling evidence, it increases the probability of a positive outcome.

In addition, once a decision has been made by the cardholder's bank, the decision is final for all parties: You can’t overturn a lost dispute, but your customer also can’t overturn a dispute decided in your favour.

How can I increase my chances of winning a chargeback?

Depending on the type of chargeback raised by the customer, there are a number of different ways to contest them.

Product unacceptable

This is when a customer claims that the quality of the product they had received wasn't as described or advertised

  • Evidence that the product sold matched the description or how it was advertised

  • Evidence that the product sold wasn't damaged or defective

  • Proof that the product was not returned by the customer and they did not contact you notifying of any issues

  • Communication or signed documentation showing that customer had received the product and was satisfied with it

Service unacceptable

This is when a customer claims the quality of the service they had received was not as described or advertised

  • Evidence the service provided was as described or advertised

  • Proof that the customer had not contacted you about the issue

  • Communication with the customer regarding the service provided, showing that they were satisfied

  • Communication or signed documentation showing that customer had received the service and was satisfied with it

Product or service not received

This is when a customer claims that they had never received the product or service that they paid for

  • Evidence that the product or service was provided to the customer e.g. sales invoice

  • Communication or signed documentation showing that customer had received the product or service

Credit not processed

This is when a customer claims that a refund was not processed by the merchant

  • Evidence to show the total amount of the product or service e.g. sales invoice

  • If refund was offered, evidence to show that it was provided to the customer

  • If refund was not agreed, a written return or cancellation policy

  • Proof that the customer hadn't returned the product

For any further questions or help, please email us at [email protected].

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