What to do with a chargeback.

May 14 2020 | PayPal editorial staff

Chargebacks can happen when a customer who has made a purchase from you files a complaint with their credit card company. Whether you own a small business or you have an online store, chargebacks can impact your business. While it can seem like a lengthy process, being responsive and providing proper documentation are key in coming to a prompt resolution.
What are some common reasons for chargebacks?
Chargebacks happen for many reasons, but most happen because:
  • The Item Was Not Received. The customer says that they never received the item they paid for.
  • The Item Was Significantly Not As Described (SNAD). The customer reports that the item received is not what was ordered. For example, they ordered a red sweater but received a blue sweater.
  • Unauthorized Transaction/Payment Reversal. The customer claims that an unauthorized person accessed their PayPal account or financial information and sent you a payment without their permission.

What happens when a customer files a complaint against me?
When a complaint has been filed with the credit card company they’ll notify PayPal and request a response. At that point, there are three basic steps in PayPal’s chargeback process:
  1. We’ll email you to let you know that a customer has filed a chargeback with their card company. You’ll also see a notification in your online Resolution Center.
  2. We’ll ask you to provide evidence to help answer the chargeback. The evidence needed varies depending on the reason for the chargeback, but could include proof of shipment or delivery, a transaction receipt, or communication between you and the buyer.
  3. Then, we’ll help submit the evidence to the credit card company, who’ll use it to make a decision.
If you would like to automate your responses to all of your PayPal disputes you can easily set up Chargehound in a matter of two clicks, learn more here.

Will I have to fight the Chargeback myself?
As long as you have a good reason to dispute the chargeback, we can help you build a case to take to the credit card company. Our chargeback specialists can give you relevant transaction details and walk you through the steps, or you can access them directly in the Resolution Center.

Note: Ultimately, it’s the card issuer, not PayPal, who gets to decide the outcome of the dispute over a chargeback.

What should I do if I receive a chargeback?
Here are the steps you want to take as soon as you realize there’s a chargeback on your account:

1. Log in to your PayPal Business account and visit the online Resolution Center. This is where the details of the chargeback, as well as status updates of any chargebacks, will be. This is also where you will upload any documentation requested. Make sure to respond within 10 days. 

Tip: It’s always a good practice to get an online tracking number for all your shipments. For high value items, we also recommend requesting a signed delivery confirmation. You can proactively add the tracking information to your transactions in your PayPal account. Try to always provide all the information you have related to the transaction for a strong case.
 
​2. Once you’ve submitted proof, one of our chargeback specialists will review and take the necessary actions on the claim for you. The goal is to recover funds from the buyer’s credit card company, but it’s still up to the buyer’s credit card company to make the final decision.

3. If the credit card company sides with you, the buyer will be charged for the transaction and the money is returned to your account. If the credit card company sides with buyer, the transaction is cancelled and the buyer receives a full refund.

How long does it take to resolve Chargebacks?
Our goal is to resolve disputes as quickly as possible, but the process can be long—patience is key. Typically, it takes PayPal 30 days to process a chargeback, but the buyer’s credit card company can take up to 75 additional days to resolve the issue and make a final decision. While the dispute is in review, you can still continue selling, as long as your account has not been limited for any reason.

Be aware that you are charged a nonrefundable $20 fee whenever a buyer files a chargeback. If the transaction is protected by
PayPal’s Seller Protection program, this fee is waived.

You can also access additional information by reviewing our FAQs at the bottom of this page. Additional information is also available in the
User Agreement.

 
Chargebacks can happen when a customer who has made a purchase from you files a complaint with their credit card company. Whether you own a small business or you have an online store, chargebacks can impact your business. While it can seem like a lengthy process, being responsive and providing proper documentation are key in coming to a prompt resolution.

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Frequently asked questions.

Unfortunately, chargebacks are a standard part of doing business—especially if you accept payments online. There are a number of things you can do to reduce chargebacks, but first, it’s important to know what happens behind the scenes.
  1. A customer disputes a transaction (issues a chargeback) with their bank or card issuer asking for a full or partial refund.
  2. The transaction amount is debited from the merchant’s bank account and goes back to the customer’s bank account.  The associated fees for processing the chargeback are also debited from the merchant’s bank.
  3. The merchant is notified of the chargeback and can choose to either accept the chargeback or dispute it with documentation showing that the transaction was legitimate.  The time allowed to respond is limited so review the required submission date carefully.  If you do not respond by the deadline, the dispute is expired and the buyer will keeps the funds.
  4. If the merchant wins the case, the transaction amount will be returned to their bank account (the associated processing fee will not be refunded); if the merchant loses or accepts the chargeback, the customer will keep the funds.
Please take a moment to catch up on the new rules that apply to VISA chargebacks.

A customer might file a chargeback because they:

  • Didn’t receive their item.
  • Received a damaged or defective item.
  • Don’t recognize a credit card charge.
  • Were charged more than once for something.
  • Didn’t authorize a payment.
In addition to a chargeback, there are some other types of disputes you may receive:

A retrieval is also issued by the customer, but it is just a request for information about an unidentifiable charge. In the event of a retrieval, funds are not removed from the merchant's bank account. The merchant is notified of the retrieval request and they can then respond with the requested information.

A pre-arbitration, or pre-arb, happens when a chargeback is filed, the merchant wins, and then the customer disputes the charge for a second time. While you can dispute pre-arbs, it's been our experience that merchants rarely win these cases without the introduction of new and compelling evidence.

Responding to all credit card chargebacks are handled through your PayPal powered by Braintree control panel. Within the Control Panel you'll have the option to either Accept or Dispute the chargeback.  If disputing you will have the opportunity to provide additional comments and upload documentation to support the dispute.  Please do not refund your customer outside of the chargeback process.  If you have already refunded your customer, click Dispute and provide the transaction ID of the refund you have issued.

Chargebacks, retrievals, and pre-arbitrations
The bank that manages the chargeback or pre-arbitration will charge a non-refundable $15 fee regardless of whether you win the dispute. This fee only applies to chargebacks and pre-arbs; retrievals do not result in a fee at this time. For more information on chargebacks, look here.

To view your open or closed chargebacks:
  1. Open your control panel.
  2. Click Transactions in the top left corner.
  3. Click Disputes.
  4. Choose what options you want in the drop-downs.
If you need to provide additional information about your chargeback, please contact us at PPpbBTMerchantSupport@paypal.com.
Disputes on Unbranded transactions will not be charged a Dispute Fee, but will continue to be charged the Chargeback fee, according to the existing Chargeback fee policies and Seller Protection eligibility.
 
Fraud Protection is an out-of-the-box tool for PayPal merchants who are using Advanced Card Payments. Fraud Protection can help automatically detect fraudulent transactions and mitigate risk. Intelligence harnessed from the PayPal network combined with robust risk machine learning models, help merchants accurately decision credit and debit card transactions in real time to minimize chargebacks, reduce false positives, and reduce friction.

To launch Fraud Protection, simply go to your App Center, then All Apps on the left.

Fraud Protection has 2 main sections:
  • Dashboard shows your total payment value and chargebacks over time
  • Filters show the rules or conditions that can be used to decline transactions
The dashboard and the filters page display all metrics in your primary currency.
 
 
 
The collateral summary section represents the rolling reserves of a PayPal balance, held in reserve to cover possible disputed charges, chargeback fees, and other expenses.
 

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