Legal Lingo: What to Do About Those Unfair Credit Card Chargebacks

There’s no question that travel advisors are suffering financially during the pandemic. It’s hard enough to take call after call, talking about trip cancellations and postponements. Our industry is crushed, our friends are furloughed, and, despite this, we continue to do our best to serve our clients.

But sadly, clients have discovered a new weapon, and it’s pointed right at us: credit card chargebacks.

We all know a fraudulent transaction when we see one — a charge on a statement from a store you’ve never shopped at is a great example. But now, clients and their credit card companies have created a new monster: Such companies may claim that the cardholder isn’t getting a product or service at the time they expected it, or that the consumer is trying to get around a no-refund policy.

Let’s look at some facts about credit card chargebacks. Across all industries, the financial impact of these claims will eclipse $30 billion in 2020, according to merchant service provider BankCard Services.
What’s more, chargebacks increase 41% every two years, meaning the issue will only get worse as the practice spreads to other markets, such as the European Union, Japan and China.

Eighty-one percent of clients freely admit to filing a chargeback out of convenience, and most can’t see any difference between a chargeback and a standard return or refund claim.

They either don’t know — or don’t care — how a chargeback impacts the merchant.

Most can’t see any difference between a chargeback and a standard return or refund claim. They either don’t know — or don’t care — how a chargeback negatively impacts the merchant.

Additionally, a customer who successfully files a chargeback is nine times more likely to file another one, and 40% of customers who file a chargeback will file a second within 60 days.

The merchants, on the other hand, rarely hear from these dissatisfied customers; only one in 20 customers will call and complain if there is an issue with their purchase. The remaining 19 are at risk of filing a chargeback.

In the current landscape, advisors may find themselves battling chargebacks and become confused about how to proceed.

For one, it’s important to know that there are two banking companies involved: the customer’s credit card issuer, and your credit card processor. Unfortunately, the ultimate decision on a claim’s validity is essentially made by the customer’s issuer — and that’s bad news for all of us.

Even worse, the credit card company is statistically more inclined to rule in a customer’s favor. So, what’s an advisor to do? First, try and deal with the client directly to reach an agreement that the client will withdraw the chargeback. If that fails, it’s time to piece together a formal response. Typically, you will have about three to five days to put this together.

The response to the dispute should include all of the booking details and invoices; the name of the person who canceled or rescheduled the trip; any pertinent terms and conditions, and the client’s knowledge of said terms; and the signed credit card authorization.

After that, it’s time to sit back and wait (or pace). Anything can happen.

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This may feel like a losing battle, but I encourage you not to give up. Statistically, we will win about 60% of our challenges. Take this opportunity to think about new policies that may be worthy of consideration. For example, I would advise only accepting credit cards for initial deposits, and adding a clause to your terms and conditions that states that the client agrees in advance to not initiate a chargeback (unless it is a case of actual fraud), and that you will be entitled to pursue them for your costs and losses if they use a chargeback as a ruse for getting a refund.

The Details
The Ment Law Group
www.mentlaw.com

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