Payment disputes

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Overview

A payment dispute, also known as a chargeback, is a mechanism that allows customers to dispute a charge on their statement directly with their bank or other payment provider. Disputes can arise for a variety of reasons, including but not limited to unauthorized charges, billing errors, or charges for goods or services that were not fulfilled to a customer’s satisfaction. Respond to a dispute with Kajabi Payments.

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Dispute types

There are several types of payment disputes that you may encounter. Below are the various types of payment disputes.

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Fraudulent disputes

These disputes occur when a transaction is made on a credit card or payment method and the buyer claims that it was made without their authorization or knowledge. Fraudulent disputes fall into three main categories:

• Legitimate Fraud: This can happen if the payment information is compromised through means such as theft or a data breach, and a fraudster uses a payment method to obtain services without the true cardholder’s knowledge or authorization.
• Friendly Fraud: There are also cases of friendly fraud where multiple users share a single payment method (such as spouses) and one user does not recognize charges. These are not legitimate fraud, and you may want to counter this dispute by submitting evidence.
• Bad Actors: Rightful cardholders who knowingly make purchases but then claim fraud in order to obtain goods or services for free.

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Quality of goods or services

These disputes occur when the cardholder is not satisfied with the quality of goods or services purchased. This can include issues such as non-delivery or incomplete services, unsatisfactory services, or poor customer service.

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Refund not processed

If a customer is expecting a refund based on a refund request raised directly with you and does not receive it in a timely manner, they may seek reimbursement via a dispute. If you are able to show that the customer has already been reimbursed, you can provide evidence to have the dispute reversed in your favor.

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Canceled transactions

Most common on subscription purchases, these disputes occur when a buyer claims to have canceled a transaction within the scope of the Terms of Service, but you have charged them anyway. This can happen if the cancellation is not properly processed or if there is a miscommunication between the buyer and seller.

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Duplicate transactions

These disputes occur when a buyer believes they have been mistakenly charged multiple times for a good or service. While there are legitimate occurrences of this via billing errors, it is also not uncommon for the concept of upsells or multiple product purchases in quick succession to cause confusion on the cardholder’s behalf.

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Pre-dispute notifications

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What is an inquiry?

Some card networks and payment facilitators initiate a preliminary phase before creating a formal dispute. This preliminary phase is called an Inquiry, though these are sometimes also called a retrieval or a request for information. During the inquiry phase, funds are not pulled from the account and no dispute fee is charged. However, note that if a dispute is issued following the inquiry, the dispute amount and any applicable dispute fees will be debited from the balance. The inquiry phase requirements differ according to the card network or payment facilitator, but generally, these are either a request for transaction clarification, an opportunity to resolve the complaint directly with the cardholder, or an opportunity to refund the payment without incurring a dispute fee. We recommend responding to this inquiry with one of the below actions:

• Providing evidence that answers the dispute type for the inquiry, if applicable
• Reaching out to the customer to confirm this is a legitimate transaction
• Issuing a full refund, if appropriate

Check the dashboard after the inquiry due date to confirm if the inquiry has escalated to a dispute. If a dispute is issued, you will be able to upload documentation to counter the dispute.

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What is an Early Fraud Warning?

An Early Fraud Warning is a notification from Visa or Mastercard that a card issuer generates when it suspects a payment may be fraudulent. These messages are purely informational and are meant to give you the opportunity to take a closer look at the flagged transaction and issue a refund if you determine it contains fraudulent characteristics. When we receive an Early Fraud Warning for one of your transactions, we will send an email alert to account owners and admins who have notifications enabled in their Notification and Privacy settings. No action is required on your end, and no funds will move as a result of these notifications. However, we encourage you to investigate the transaction further to determine whether it is legitimate. If the transaction does not appear to be legitimate, we recommend revoking access to the content that was purchased. This not only prevents bad actors from accessing your content, but also helps prevent the transaction from having a dispute issued against it, which would incur a dispute fee.

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Avoid and prevent disputes

A dispute occurs when a buyer requests a refund directly from their bank instead of contacting you. Disputes are an inherent part of doing business and cannot be completely avoided. However, there are best practices you can implement to reduce their frequency. However, there are a few best practices you can implement to strengthen your business:

• Keep accurate records: Keep detailed records of all transactions, including receipts, invoices, and any communications with the customer. This can serve as compelling evidence when countering a dispute.
• Provide clear and accurate descriptions: Provide clear and accurate descriptions of products or services, including any features, benefits, and limitations. Setting clear expectations with customers reduces the risk of disputes from arising misunderstandings. Being able to show that appropriate expectations were set prior to purchase can also serve as good evidence if a dispute arises.
• Respond promptly: Responding promptly to customer complaints can prevent issues from escalating into disputes.
• Offer refunds and exchanges: Be willing to offer refunds or exchanges to customers who are not satisfied with their purchase. Make sure your refund and exchange policy is clearly disclosed to customers prior to purchase.