Yes, You Can Chargeback an Authorized Transaction


Michael B. Cohen

Vice President of Global Operations


If there’s one thing consumers know about chargebacks, it’s that they are a mystery. So many rumors, so much mythology surrounds them that it can be really hard to pick apart the fact from the fiction, the news from the fake news, the information from the misinformation.

So that’s what MyChargeBack is here for. We are the professionals on the consumer’s side in complex payment dispute resolution. It is a job we take seriously, through a number of initiatives including consultation, education, and advocacy.

It’s Not Just for Fraud

It is a common myth that only unauthorized transactions (i.e., fraud) are eligible for chargebacks. In other words, they say that if your credit card was stolen or your account got hacked or your identity was stolen, and then a purchase was made without your knowledge, then and only then you can get a chargeback, but if you made the purchase on purpose, you are stuck.

Don’t believe it for a minute!

The myth is so persistent that when faced with a chargeback request, many merchants will fight it by simply providing proof that the customer authorized the payment, as though that is enough to end the dispute.

How do we know? Because MyChargeBack sees it all the time as part of our consultation services. We’ll be helping a client formulate a complex and challenging strategy, constructing a dispute based on our own thorough understanding of all the relevant laws, regulations, and card network rules. Our client’s card issuing bank will raise the dispute, informing the merchant and their receiving bank. And then the merchant responds with documentation “proving” that the charge was authorized, when that was never the point of the dispute in the first place!

What can be even more frustrating is when the issuing bank accepts the merchant’s argument as dispositive, thereby canceling the chargeback. This typically happens because the banker is overworked, undertrained, or simply not paying attention. Getting them to listen to reason and reopen the dispute requires all of MyChargeBack‘s knowledge, experience, and negotiation skills. An individual or organization with less of those assets would either give up or fail.

Why Authorized Transactions?

But wait a minute. Why exactly can authorized transactions be charged back? Isn’t the merchant right? If you agreed to the purchase, shouldn’t you bear the consequences? Caveat emptor as they say. Buyer beware.

Not at all.

It is not nearly enough to simply agree to pay for something before the purchase is irreversible. You also have to get what you paid for. And in an authorized payment dispute, that is what the merchant needs to prove. That you got what you paid for.

One example of not getting what you paid for is not receiving anything at all. Failure to provide contracted goods or services is in fact a classic case of an authorized payment dispute.

Another example is when you received something you paid for, but it was damaged or of poor quality. This is true regardless of whether it was damaged in shipping, or its status or quality was misrepresented by the merchant. This is even true of services (such as home repair, investment, or travel) which were of notably poorer quality than advertised.

Even if the product was of high quality, you are eligible for a chargeback if you received the wrong amount, or it was the wrong color, for example. Inadvertently receiving counterfeit goods is a similar case. You could also file for a chargeback in the event that a membership, subscription, or other recurring charge continues to be deducted after you cancel it or it expires.

And still, in cases like these, we see the merchant appealing the chargeback on the basis of the customer having approved the transaction. That’s why MyChargeBack never tolerates obfuscation and is always on the lookout for it when we take on a case. If we weren’t so diligent, our clients would never stand a chance.

The Pros On the Merchant’s Side

Merchants often fight payment disputes mercilessly, because too many chargebacks not only directly impact their revenue, but also lead to severe penalties from their bank and/or credit card network. This is a big incentive to aggressively challenge every possible dispute.

This leads to an even bigger problem for many consumers. Many merchants, faced with numerous chargebacks that they can’t afford to lose, hire professional third party companies to manage that entire part of their business. There are numerous companies out there whose whole job is to represent merchants in any conceivable payment dispute.

What’s more is that the merchant’s bank will often dedicate considerable resources to fighting these disputes as well. Compared to consumers, merchants are fewer in number and higher in value, so it is simply worth more of the bank’s time to develop and maintain a happy working relationship with a merchant. After all, too many chargebacks will hurt the bank’s bottom line.

Against all that, what do the consumers have going for them? Individually, very few of them are important enough for the bank to dedicate sufficient resources to defend their interests. Far too often, MyChargeBack has seen bankers working in dispute departments whose training is insufficient, and the departments themselves are grossly understaffed to adequately deal with the quantity of disputes that they face every day.

The result is an asymmetrical situation in which the merchant has all the professionals on their side, and vastly more resources and experience. So what is to be done?

The Pros On the Consumer’s Side

MyChargeBack was founded to level the playing field for the consumer faced with an unfair — and sometimes impossible — dispute situation. We have the tools to provide our clients with the best possible chance to meet even the biggest of banks as equals — and come out on top.

Our expertise covers every conceivable dispute scenario, and we have developed best practices for implementation with each of hundreds of banks around the world. MyChargeBack is the only financial services firm with a  playbook that works every possible angle to maximize the possibility of recovering the consumer’s funds.