What Happens if You Falsely Dispute a Credit Card Charge? (2023)

FAQs

Can you get in trouble for falsely disputing credit? ›

Can you Get in Trouble for Disputing a Charge? Yes. Cardholders can face consequences for abusing the chargeback process.

As for how credit card companies investigate fraud, the issuer's internal investigation team will begin by gathering evidence about any disputed transactions. It may check for things like transaction timestamps, the IP address of the person who made the disputed purchase, and the purchaser's geographic location.

We can divide all valid disputes into one of five basic categories: criminal fraud, authorization errors, processing errors, fulfillment errors, or merchant abuse.

If you dispute a credit card charge by mistake, contact your card issuer and explain the situation. You could also follow up with the merchant if required. Before you initiate a dispute, be sure that it is indeed an unauthorized charge.

If you falsely dispute a credit card charge, you may be subject to penalties from your credit card issuer. In some cases, you may even be reported to the credit bureau for fraud. If you're unsure whether a charge is legitimate, it's best to contact your credit card issuer directly to ask about it.

You might not always get a fair outcome when you dispute a chargeback, but you can increase your chances of winning by providing the right documents. Per our experience, if you do everything right, you can expect a 65% to 75% success rate.

In an effort to provide better service to customers, though, banks will generally move quickly on disputes. The bank initiates a payment fraud investigation, gathering information about the transaction from the cardholder.

The credit bureau must review all of the information and documents received from you and then investigate your dispute within 30 days of receiving it. The credit bureau has to notify the business who provided the information—the "furnisher"—of the dispute within five business days of receiving it.

Both parties can still file a lawsuit over the matter, and merchants have been successful at winning back high-value chargebacks by taking the cardholder to civil court. However, some chargeback fraudsters can and do end up facing serious legal consequences.

If asking the merchant for a refund didn't work, request a chargeback with your credit card issuer. Many card issuers let you dispute transactions by phone, mail or online. You may also be able to submit a dispute directly through your card issuer's mobile app.

How many chargebacks is too many? ›

Standard: Merchant has at least 100 chargebacks and a chargeback ratio of at least 0.9%. High risk/excessive: Merchant has at least 1,000 chargebacks and a chargeback ratio of at least 1.8%.

To dispute a credit card charge, you may need to provide copies of receipts and any other supporting documents you have. If the bank agrees with your dispute, it will issue a reversal of the transaction.

File your dispute in a timely manner: You can do this online with some credit card issuers, or you can send a letter by mail. Be sure to put your story in writing and upload/provide copies of any supporting documentation.

According to statistics, less than 1% of credit card thefts are solved yearly. So, if you are a credit card theft victim, your chances of getting your money back are almost negligible.

Chargeback fraud, often called friendly fraud, is when consumers fraudulently attempt to secure a refund using the chargeback process. Instead of contacting the merchant directly for a refund, consumers dispute the transaction with their bank, thus initiating the chargeback process.

Filing a dispute has no impact on credit scores. But if certain information on your credit report changes as a result of your dispute, your credit score can change.

If your dispute is denied, then the charge will go back on your credit card. You're legally entitled to an explanation about why your dispute was denied and how you can appeal the decision. Your credit card company will likely send you both the explanation and instructions on how to appeal in writing.

Banks require merchants to refund disputed payments, such as unauthorized charges, undelivered goods or services, or charges due to errors. Then the bank charges a fee or chargeback to the merchant. Diligently investigating unauthorized transactions reduces these losses and supports solid business relationships.

The card-issuing bank or credit union is responsible for reviewing the transaction data and evaluating whether a customer's claim of fraud has any validity to it. The bank or credit union may contact the merchant and ask for proof that the debit card customer permitted the charge.

The card issuer must send you a letter stating that it has received your billing dispute within 30 days of receiving it and complete its investigation within two complete billing cycles which generally means it cannot take longer than 90 days.

Do creditors usually respond to disputes? ›

Credit disputes with creditors

Once you submit a dispute, the creditor has a duty to investigate your claim, according to the Fair Credit Reporting Act. In most cases, the creditor is expected to respond to your claim within 30 to 45 days and to inform you of the results of its investigation within five business days.

Merchants should always respond to these inquiries promptly. Failing to do so will cause the issuing bank to escalate the dispute to a chargeback, resulting in fees and other consequences that the merchant could have avoided.

If the merchant fails to submit a response by the deadline, the merchant will accept the chargeback by default. Merchants may decide to accept chargebacks for several reasons. Sometimes the chargeback is based on true fraud or some other valid and inarguable reason, and there is no point in trying to fight it.

How often do customers win chargeback disputes? Your odds of successfully disputing a transaction are pretty decent. Businesses don't even bother fighting most chargebacks, contesting only 43 percent of disputes filed against them. Just 12 percent of chargebacks go their way.

The merchant can either accept the chargeback or fight it by resubmitting the charge along with a rebuttal letter and the necessary evidence to disprove the claim. This process is called representment. The issuing bank will review the new evidence and make a decision.

Is “Return Fraud” a Crime in California? Return fraud can lead to theft charges. Return fraud is activity which can lead to the filing of theft or shoplifting charges in California. The most common return fraud schemes involve the return of stolen or altered merchandise for cash or store credit.

The average merchant in 2021 had a chargeback win rate of 42%. However, they had a net recovery rate of just 12%, meaning they only recovered revenue from 1 in 8 disputes issued against them.

Chargebacks are considered a Cost of Doing Business

After all, if a buyer claims to be a victim of fraud, calling that individual a liar seems like a bad idea. Based on that, plenty of merchants view chargebacks as they would a tax or a churn rate, writing off disputes and filing it under cost of goods sold (COGS).

Your odds of successfully disputing a transaction are pretty decent. Businesses don't even bother fighting most chargebacks, contesting only 43 percent of disputes filed against them. Just 12 percent of chargebacks go their way.

Falsely disputing credit card charges is a crime. If you commit this type of fraud, you'll likely face consequences such as blacklisting, loss of banking privileges, damage to your credit score, and fees.

Is dispute Hard inquiries illegal? ›

If you find an unauthorized or inaccurate hard inquiry, you can file a dispute letter and request that the bureau remove it from your report. The consumer credit bureaus must investigate dispute requests unless they determine your dispute is frivolous.

You can submit a dispute to the credit reporting company by phone, by mail, or online. Explain the error and what you want changed. Clearly identify each mistake separately, state the facts, explain why you are disputing the information, and request that it be removed or corrected.

Statutory Damages

If a credit bureau's violations of the Fair Credit Reporting Act are deemed “willful” (knowing or reckless) by a Court, consumers can recover damages ranging from $100 – $1,000 for each violation of the FCRA.