Double Refund Chargebacks
What Is a Double Refund?
“A double refund chargeback occurs when a cardholder requests a refund for a transaction, then files a chargeback for the same purchase. The merchant dutifully refunds the charge, unaware that the cardholder plans to dispute the charge and get their money back twice.”
How to Prevent Double Refund Chargebacks？
Both Visa and Mastercard implemented new procedures to avoid chargebacks for refunded purchases. For example, both brands now mandate a return authorization for all return transactions. To process a return, you must first obtain authorization. In other words, it’s the same procedure as seeking authorization for an initial purchase, but in reverse.Cardholders can see the authorization immediately on their online statement. They can track the funds until the money gets deposited in their account.
Return authorizations are a step in the right direction, but they aren’t a guarantee against a double refund after disputes. Mitigating double refund risk calls for a diversified approach. The mix of different tools and tactics you need depends on whether you’re being wholly proactive, or trying to stop double refunds after disputes have been filed.
1) Preventing Double Refund Chargebacks: Before a Dispute
Preventing chargebacks—and the subsequent double refunds—is a straightforward process. You provide prompt responses to valid refund requests, and communicate with customers as the refund progresses:
Alert customers when you begin processing their refund request.
Send an email when you issue the refund.
Provide an estimate as to when the funds will be available.
Follow up to ensure the customer received the refund.
2)Preventing Double Refund Chargebacks: After a Dispute
If a customer dispute already exists, preventing double refund chargebacks can get trickier. Still, many issuers allow a small window to resolve issues before disputes escalate to chargebacks. The size of this window varies by issuer. It does give you an opportunity to assess the situation and take preventative steps, though.
When a cardholder calls to request a refund, they may mention that they just spoke to their bank. That’s a red flag indicating a chargeback may already be underway. Check to see if the cardholder’s bank assigned the transaction a case number. This is a clear sign that the dispute already graduated to a chargeback. That’s not ideal, but offering a refund on top of it would be worse.
If you learn the customer already contacted the bank, you immediately need to call that issuer to check for a case number:
If a case number is assigned, simply disregard the refund request. The chargeback is already underway.
If a case number is not assigned, inform the bank that a refund has been initiated and the chargeback is not necessary.
Once a claim has a case number, the damage is done. Even if you’re able to reverse the chargeback through representment, your bottom line and chargeback-to-transaction ratio will impacted. No one wants a chargeback, but don’t try to issue a refund beyond this point: doing so will only lead to a double refund chargeback.
