What are bank chargebacks and how do they work?
What is a bank chargeback ? Paypal Chargeback? a transaction dispute? Read this guide to find out!
What is a chargeback?
A chargeback is the means by which a credit card company returns money to a client, if a charge is in dispute. In other words, if you make a purchase using your credit card and the item is not delivered, or is not as promised, the credit card company can take the money back from the retailer and return it to your account. A retailer may wish to dispute the chargeback if it is thought to be invalid.
Section 75 vs a bank chargeback?
Section 75 of the Consumer Credit Act protects credit card purchases of £100 or more, but does not protect buyers for purchases using debit cards.
Chargeback, on the other hand, protects purchases using both credit and debit cards, though exact rules may vary between networks. It is not enshrined in law, but is part of Scheme Rules subscribed to by participating banks.
When can a chargeback be used?
If an item you purchase does not arrive, is different than described, is broken, or the company from which you purchased it goes out of business before you receive the product, you can use chargeback to recoup your money.
If you order two items, and only one arrives, you can chargeback for only one of the items, unless a valid argument can be made that second item is needed for the first to function, or when they have been sold or presented as a set or bundle.
There are no guarantees that your card provider will be able to recoup your money and there is no real or implied joint liability on the part of the card provider as a result of this service. The trader may also dispute a chargeback, claiming that you are in breach of contract for non-payment.
What are the conditions of a chargeback?
You will usually need to provide evidence that there has been a breach of contract on the part of the seller, and to do so within a reasonable period of time, usually within 120 days (4 months) of when you become aware of the breach of contract. Visa chargebacks are limited to 540 days from the date of transaction.
An exception to this time limit is air travel. The time limit is measured from the date the flight was to have occurred, or an earlier date if the airline informed you beforehand of the cancellation.
Problems with a bank chargeback
When you contact a card company to instigate a chargeback, the first person you speak to may not be experienced enough to assist you. If you run into any resistance, lack of familiarity, or hesitation, ask to speak to a supervisor.
There is no deadline for the card provider to resolve a chargeback, so don’t count on repayment right away. Complaining about a timeline takes 8 weeks itself, but if no movement has occurred, this may be a useful step.
If your credit card provider doesn’t agree that you have a valid claim, but you still think you do, you can ask for a Letter of Deadlock, which states that the two parties have reached an impasse. That letter allows you to refer the case to the Financial Ombudsman Service (FOS). If more than 8 weeks pass and you still have no agreeable response from your card provider, you can go straight to the FOS without a letter of deadlock.
About Paypal chargebacks
Paypal use presents a complication to this process. If you upload money to your Paypal account, then purchase using Paypal, the actual purchase is not covered. The transaction is the uploading of the money itself, not what you later purchased with it.
One way around this is to run a zero balance in Paypal. If you purchase something through Paypal and the same amount leaves your card and is used for a purchase, it is easier for your provider to match the two, and you may be able to trigger chargeback if you need it.
FAQ on Bank Chargebacks
What transactions does a chargeback cover?
Almost any kind of transaction is covered. If the item does not arrive, is damaged, in unsatisfactory condition, is not as described, or you are charged more than agreed upon, you have a valid claim. It can also be used to recoup money if your card was used fraudulently.
How much money can I get back ?
You can claim back the full amount for a product that was not delivered, was damaged or otherwise not as described. If you are overcharged for an item that does arrive in good condition, then you can claim the difference between the agreed price and the one actually charged.
Is a section 75 different?
Yes. Section 75 only covers transaction of over £100 in value (and up to £30,000), and only for credit card purchases, not debit or prepaid cards.
What transactions are not covered by a chargeback?
If you upload money to Paypal or a similar service, subsequent purchases are not usually covered (the upload itself is considered the purchase). You are not covered if you withdraw cash from the card and purchase using that cash. You cannot claim if too much time has passed, usually 540 days from initial purchase, or 120 days from the point you became aware of the problem, whichever is shortest.
How can I make a chargeback claim?
The first step is to try to resolve the problem with the seller. Many sellers are very good about backing up their products and providing refunds of billing corrections.
If you have not been able to resolve the issue with the seller, or the company has ceased doing business, contact your provider in person or via telephone. Let them know that you would like to make a chargeback claim (you may need to speak to a supervisor, as a clerk may not be familiar with the service of process).
Give the details of the transaction you want refunded, and provide them with the receipt(s), as well as any correspondence you have had with the seller (both your side and theirs).
You may need to complete a claim form, but this is not always the case.
How long do chargebacks take?
The whole process should typically take less than 8 weeks.
What if I don’t win the chargeback claim?
If you receive word from your provider that they do not think your claim is valid, you can ask for a letter of deadlock. This letter allows you to contact your Financial Ombudsman Service (FOS). If you have heard nothing from your provider in response to either your claim or letter request, and more than 8 weeks have passed, you can go directly to FOS for assistance – there is no need for a letter in this case.