What are Chargebacks?
Chargebacks are unauthorized or improperly executed transactions.
For a chargeback to occur, a customer must notify their bank that a debit initiated by another party was not authorized or did not follow the agreed upon terms.
We take steps to reduce your risk for chargebacks, including account & identity checks. However, in some cases they do occur. When they do occur, chargebacks can be very time consuming, costly, and in some cases can even result in the reassessment of support for your platform's current integration.
When can chargebacks occur?
Chargebacks can occur because of:
- Point-of-sale processing errors
- Customer dispute
- Customer confusion
- Fraudulent Activity
- Authorization-related disputes
- Other authorization issues
Typically chargebacks will occur within the following window after a transaction has settled. Please note that in some cases you may still receive a chargeback after the chargeback timeframe.
How do I know a chargeback occurred?
After funds have been settled, you are still at risk of chargebacks. If you receive a chargeback, we will update the transaction code for the transaction and send you a notification via webhook. This is handled in much the same way that returns are handled.
Relevant Transaction Codes:
- R10-Customer Advises Not Authorized (within 60 days). This means the sender has claimed that the transaction was unauthorized or improperly executed.
- R07-Authorization revoked by Customer. This means that the recipient has revoked authorization.
For a full list of transaction Codes, including non-chargeback related returns, cancels & queues, visit our API docs. Please review our FAQ on returns for more details on how our APIs handle chargeback notifications.
Am I responsible for covering a chargeback?
Should a chargeback occur, we will automatically attempt to retrieve the funds from the fund recipient. However, if we are unable to retrieve the funds, your platform is ultimately responsible for covering the full amount of the chargeback. If a node becomes negative due to a chargeback, we will reconcile the negative balance with funds from your reserve account. Please note, Synapse reserves the right to charge a $15 fee for returns/chargebacks.
Here are some standard practices to reduce your risk of chargebacks:
- Make the terms of the transaction clear to your customer. Plus, include a link to our terms of service (Here is some example language).
- Let your customer know how the transaction will appear on their bank statement.
- Send receipts for transactions.
- For recurring payments -- send a pre-transaction notification
- Notify customers of any changes to transactions / recurring billing.
- Remind customers to tell joint-account owners of authorized transactions
- Encourage customers to notify you first if they have concerns about errors in transactions.
- If time is not an issue, hold funds in 'escrow' longer to reduce the window of returns & chargebacks.
Additionally, please review section 7(c) of our Terms of Service for our policy on reversals. An overview of that section is below:
- In cases where you are found liable for reversal, you will be charged the full amount of the reversal plus an additional $15 reversal fee. Generally, the Sender of funds will be liable for the Reversal Liability for returns, unless the reversal is due to a chargeback / lack of authorization by the account owner in which the Receiver will generally be liable for the Reversal Liability.
- SynapsePay has sole discretion to determine who is at fault and liable for the Reversed Payment and Reversal Fee.
- The Reversal Liability is debited from the liable party's SynapsePay account.
- If you do not have a balance in your SynapsePay account that is sufficient to cover your Reversal Liability, the remaining balance in your SynapsePay account will be used to cover the Reversal Liability. To recover the remaining amount, we can do any of the following: (a) Collect the unpaid portion of the Reversal Liability from funds sent to your User Account; (b) Debit your attached bank account in the amount of the unpaid portion of the Reversal Liability; (c) Suspend your User Account and require you to take immediate actions to repay the unpaid portion of the Reversal Liability; (d) Engage in collection efforts to recover the unpaid portion of the Reversal Liability; (e) Take legal action
I got a chargeback. Now what?
Disputing a chargeback is difficult, especially when a chargeback occurs within the chargeback timeframe.
If the chargeback occurs within the allotted timeframe of the REG E guidelines the only option available is to gather proof that the customer authorized the transaction and turn it over to collections. As part of this proof, you will need to create a case file with evidence demonstrating that the transaction was made with the user's credentials & fingerprint, as well as the time stamp, CIP documents, and screenshot of the ACH Authorization language that customers agreed to when they created the transaction. In some cases we are able to help you obtain the WSUD from the customers bank. You can turn all of this over to collections to help reclaim the funds.
If the transaction comes in after the allowed timeframe (Timeframe varies based on what type of transaction PPD, WEB, CCD, CIE) then you are able to submit the documents described above to Synapse and we will try to help you dishonor the return directly with the customer's bank.