posted 02-02-2001 03:15 PM
We currently outsource our merchant services program to a 3rd party credit card services company. The bank handles the merchant application, underwriting, approval, set-up, and on-going monitoring. The credit card servicer handles all the rest - including chargeback settlements and dispute processing.
Upon receipt of a chargeback via our settlement process, we immediately pass on the chargeback by debiting the merchant's account and mailing them an advice of debit and the reason for the chargeback. Depending on the timing from the Cardholder's issuer bank, the letter and dispute documentation may or may not have preceeded the chargeback.
I have a merchant who claims that we are violating Visa/Mastercard rules by not allowing her to dispute the chargeback before we debit her account for the chargeback and is threatening to sue the bank. My credit card services told me it was a bank procedural issue as to when we pass the chargback to the customer. Is anyone familiar with this process enough to know if the bank or the merchant is correct? Thanks.
posted 12-18-2001 11:54 AM
We had a similiar relationship with a 3rd party processor for our merchant bankcard processing. The customer's dispute in your case is with the Merchant Processor, not with the bank. The merchant agreement should spell out the chargeback procedures. There is a time period where merchants can dispute a chargeback before it is actually debited to their account. For this to happen, the processor will send out a pending chargeback notification that requires a response....usually within 15 days. If the processing center does not receive a response, they will initiate the chargeback. I would request documentation from the processing center on their chargeback procedures.
I know this puts the bank in an awkward position. I've been your situation many times before, and the merchant almost never recovers funds from the customer who initiated the chargeback.
posted 02-02-2001 03:15 PM
