Can You Go to Jail for Chargebacks?

Chargebacks were introduced to protect buyers from shady merchants who would abuse their personal and financial information. Fraudulent chargebacks are seen as a form of fraud and have landed some unethical buyers in jail.

Merchants can take customers who abuse chargebacks to court, and most jurisdictions will pursue criminal charges against those customers.

Flaws of the Chargeback Process

Chargebacks were introduced back in the 1970s to protect the customers from shady merchants.The failure of the chargeback systems is that it did not evolve with the coming of the internet, making the system exploitable.

• It’s subjective — Since the process and the outcome are determined by human beings, chargebacks are prone to judgments that are often subjective
• It’s outdated — Chargebacks were introduced before the internet era and the regulations do not address the possible threats adequately
• It’s easy to abuse it — Due to banks operating under the assumption that the customer is always right, the chargeback process is often misused since it is easier to request a chargeback than to request a refund
• Friendly Fraud — Customers who are looking to keep the item and get their money back opt for chargebacks, stating that the product never arrived or that the product is faulty
• Merchants are the ones who pay the most — Merchants lose money every time they try to fight a chargeback,and that is why they accept the chargebacks as a cost of doing business

Can I Send Demand Letters To For Chargeback Fraud?

Chargeback fraud is often compared to shoplifting. The only difference is that there is a lack of evidence in most cases. People who abuse the chargeback process are usually prosecuted since chargeback fraud is seen as what it is — theft.

The best option for merchants is to file a civil lawsuit that may include causes of action of fraud, conversion, or breach of contract.

The problem with prosecuting someone for abusing chargebacks is that many prosecutors around the country do not have the resources to prioritize chargebacks.

The Chargeback Process Explained — Can It Lead to a Lawsuit?

The chargeback process is complicated, and it may take a while until the case is resolved. Since it is a tiring and time-consuming process, requesting a chargeback with DoNotPay is easier — all you’ll have to do is fill in your information and we’ll help you get it.

Here are the seven steps of the chargeback process:

1. The customer files a chargeback — If a customer is not satisfied with the product, they contact their bank and ask for a chargeback
2. The bank assigns a reason code to the case — The bank adds the reason for the customer’s disputing of the transaction
3. The customer’s bank investigates and takes action — The bank makes sure that all the regulations have been addressed and that the customer’s complaint has merit. In case the customer’s reason has merit, the funds are removed from the merchant’s account and returned to the customer
4. The acquirer reviews the claim — The credit card networks and if there are some inaccuracies, the merchant can dispute the customer’s claim
5. The merchant reviews the chargeback — If the merchant has compelling evidence that the chargeback is invalid, they can present the said evidence to the issuer
6. The acquirer re-presents the chargeback — The merchant’s evidence is reviewed by the acquirer on their behalf
7. The issuer reviews the evidence and decides — The issuer reviews the merchant’s evidence and makes a decision whether the funds will be returned to them

There are consequences for both the customer and the merchant. The customers may end up losing their cards for the misuse of the chargeback process. Merchants are the ones who suffer the losses.

Can You Get in Trouble for Chargeback Fraud?

If we take into consideration the definition of chargebacks and its purpose to protect the buyers from fraud, the consumers who misuse chargebacks could end up with serious chargeback ramifications.

• Requesting a chargeback takes much longer than requesting a refund from the merchant
• If the bank discovers that the customer is attempting friendly fraud, the customer could end up losing their credit card
• If the merchant succeeds in disputing a chargeback claim, the consumer could end up paying the chargeback fee
• In case buyers misuse chargebacks, they could end up not getting help in case of legitimate fraud

Consequences of Chargebacks for Merchants

Some buyers who constantly file chargebacks do not know that the merchant’s business is at stake. Chargebacks could potentially have both short and long-term negative impacts on businesses.

• Chargeback Fees — For every chargeback, the merchant has to pay a fee, which ranges from $20 to $100 per transaction. Even if the buyer cancels the chargeback, the merchant still has to pay the fee because of the administrative costs of the process
• Buyers keeping the merchandise — There are cases where buyers file for a chargeback and get their money back, and keep the item they did not pay for. This has a negative impact on the merchant’s revenue and future profits
• Monthly chargeback threshold — If a merchant exceeds this threshold, they have to pay a fine
• Losing their accounts — If the rates remain above the acceptable threshold, the banks can cancel the merchant’s account
• Landing on the MATCH list — Being blacklisted could seriously hurt a business, and merchants are unable to secure a new account for at least five years

The table below represents how much a chargeback sets the merchant back for an item that costs $100. The merchant ends up losing the original $100 and has to pay $107 over.

Requesting a Chargeback With DoNotPay

DoNotPay can help you request a chargeback, which takes only a couple of minutes. Requesting a chargeback on your own can prove to be quite tiring, and that is why we’re here to help! Here’s how it works:

1. Log in to your DoNotPay account in your web browser
2. Scroll down and click on Get Protected in the File a Chargeback section
3. Provide your bank details and information about the merchant
4. Answer the chatbot’s questions
5. Click on Sign and Send

Once you’ve gone through these five steps, we will automatically send a fax to your bank, requesting a cashback. You will receive a letter with the details on Visa and MasterCard codes, which will prove useful for collecting evidence for your chargeback case. Spare yourself a massive headache and request a refund using DoNotPay.

What Else Can DoNotPay Do for You?

DoNotPay, as the world’s first AI Consumer Champion, can help you overcome obstacles that you encounter in your everyday life. We can assist you in suing big companies, such as AT&T, Uber, and many other big corporations. DoNotPay can also help you with many other issues, or simply make scheduling a DMV appointment. If you want to save money, DoNotPay’s got your back by helping you with unwanted subscriptions.

Do not hesitate, and have a look at what we can help you with from your web browser:

• Dealing with issues with credit cards
• Canceling subscriptions or memberships
• Disputing traffic tickets
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• Getting refunds from other companies