A chargeback generally begins with a customer complaint. When a customer lodges a complaint about a transaction with the card’s issuing bank, the cardholder’s bank will generally send what is called a “retrieval request” to the merchant’s credit card processing service. The retrieval request represents the initiation of a chargeback. The processing company will then forward the request to the seller’s merchant service account provider. When a retrieval request is made, the merchant has the opportunity to prove that the transaction was legitimate and that delivery of goods or services was provided appropriately.
This can be a key moment during the chargeback initiation process. At this point, the merchant can produce whatever documentation they have that demonstrates the propriety of the transaction. In ideal circumstances, one would have a signed sales slip for the transaction or some other written confirmation to which the cardholder’s signature was affixed. Internet merchants, however, are rarely afforded with this luxury and must often rely on other documentation and evidence to make their case.
The burden of proof in a chargeback situation rests entirely with the merchant. The consumer’s statements are assumed to be accurate until such a point that the merchant can clearly prove things otherwise. This puts a substantial burden on merchants to understand how to prevent chargebacks in the first place, as well as how to defend against them once initiated.
If a merchant is unable to evidence the legitimacy of the transaction, a chargeback is effectuated. This entails the card’s issuing bank receiving the amount of the transaction from the merchant’s bank and then crediting the customer.
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