Chargeback Process: Card Issuance

A chargeback is a tool that allows consumers to dispute a transaction. It can be used to protect consumers from unauthorized transactions. Additionally, consumers can also dispute transactions when they are dissatisfied with the quality of the goods/services they purchased and the merchant refuses to make things right. When a dispute is initiated, the disputed funds are held from the merchant until the card issuer resolves the dispute. 

Below is the process Synapse follows when a dispute is made:

Step 1: User submits a claim

When a user notices a charge they didn't authorize, they will report the claim to the platform that onboarded them. The platform is responsible for sending the claim to [email protected]. The following details must be included:

  1. Transaction ID
  2. Date the cardholder contacted the Platform
  3. Transaction Date & Amount
  4. Merchant Name
  5. Reason for Dispute
    1. Unauthorized; card remained in the User’s possession
    2. Unauthorized; card was lost or stolen
      1. Date it was lost or stolen
    3. Incorrect amount charged
    4. Transaction charged twice
    5. Received incorrect amount from ATM

Step 2: Claim submitted to Issuing Bank

Synapse will pass the claim to the issuing bank (our partner bank) for investigation. During this time, the issuing bank will reach out to the merchant's bank for proof that the customer authorized the transaction. Proof may include things like receipts, invoices, etc.

Step 3: Investigation

After proof has been gathered, the issuing bank must investigate whether the disputed transaction is valid. Investigations are typically completed within ten (10) business days. However, there are exceptions to this time frame, which are detailed in the cardholder agreement (new account, foreign transaction, etc.). In some cases, the investigation can take up to 90 days to complete.

If completed within 10 business days
(or 5 business days for transactions processed through VISA)

  1. When the user's claim is valid: The error will be corrected within 1 business day of its discovery and the User will receive a credit. The platform must notify their user that the investigation has been completed within 3 business days.
  2. When the user's claim is invalid: The platform will receive notice that the claim was invalid. The platform must notify their user that the investigation has been completed within 3 business days.

If investigation exceeds 10 business days
(or 5 business days for transactions processed through VISA)

  1. Synapse will apply a credit to the user on behalf of the Platform. This is a provisional credit drawn from the platform's reserve. Funds will be available for use for the remainder of the investigation
  2. Synapse will provide verbiage to the Platform to notify their User that they have received provisional credit. The platform must share this information with the user within 2 business days.

If provisional credit was given:

  1. When the user's claim is valid: Synapse will notify the platform that the investigation has been completed and the credit to their account is final. The platform must share this information with the user within 3 business days.
  2. When the user's claim is invalid: Synapse will notify the platform that the investigation has been completed and the credit to their account has been rescinded (in instances where the merchant has provided sufficient evidence that the user authorized the transaction or that there was no error). The platform must share this information with the user within 3 business days.

Arbitration:

If the issuing bank & merchant bank fail to come to an agreement, both parties enter an arbitration process governed by the issuing card's network (ex: Visa). When this happens, the network will have the final say on who pays for the charges.

 

Common Causes for Chargebacks:

(1) Fraudulent Transactions: The transaction was not, in fact, initiated by the card holder.

(2) Customer dissatisfaction: The user was not happy with the quality of the goods/services

(3) Unrecognizable Business Name: The user did not recognize the merchant's name on their statement.

(4) Duplicate Charges: If there was a mistake, the merchant will need to return the fees.

(5) Recurring payments: The user does not cancel their recurring payments in time.

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