The effects of COVID-19 are being felt by businesses and consumers alike.
Trips are being canceled, events are being postponed, and supply chain disruptions are causing shipping delays. This has resulted in business owners looking for alternative ways to deliver products and services to customers who may be grappling with changes to their own incomes. These disruptions also result in purchases that need to be canceled, refunded, or re-booked.
The card brands, including Visa and Mastercard, recognize that these unprecedented times will most likely result in an increase in customer disputes. If a dispute occurs, your business may receive a chargeback when the customer challenges a charge on their credit card. In light of this, Visa is instituting a penalty to card issuers whose cardholders too frequently file chargebacks without first communicating with the business. However, it is important to note that Visa is not changing its dispute rules and the card brands expect that cardholders continue to work directly with businesses should they have a dispute or concern, before they file a chargeback. Whenever possible, it is best to take the opportunity to prevent or resolve disputes before they turn into chargebacks.
Best Practices for Preventing Disputes
Adapting flexible cancellation or return policies when possible and clearly communicating with your customers can go a long way in helping mitigate the number of disputes you may need to deal with. Whether you need to cancel previous purchases, rebook events for future dates, or temporarily modify your return and exchange policies you should follow these recommendations:
- Adjust your return and exchange policies temporarily to be more flexible than you may usually need to be
- Clearly communicate any changes to your products, services, delivery dates, or business policies
- Share changes to your business operations on multiple channels including your company website, social media, by phone, or by email
- Consider offering credits or vouchers for future use if your customers are open to that option and it makes sense for your business
- Remember that you, the merchant, are ultimately responsible for issuing a refund to a customer if you cannot fulfill the product or service they paid for
Potential Cancellation Scenarios
Here are some potential cancellation and business disruption scenarios that you may encounter as a result of COVID-19 and recommendations on the best way to come to a resolution.
Your business decides to cancel the goods or services the customer purchased.
In this scenario, the customer has a right to file a chargeback or issue a dispute if they are not issued a refund. Dispute rights exist when goods or services are not provided for any reason, including bankruptcy or other circumstances.
Your business cancels the goods or services the customer purchased due to a government rule or prohibition.
In this case, if your business has not provided the service due to a government-imposed restriction or prohibition, the customer is unable to file a chargeback. Government regulation and/or law supersedes the card brand rules for dispute rights. This does not mean that your business does not have to issue the customer a refund – it does mean that the customer needs to work directly with your business to find a resolution.
Your business is unable to offer a service (for example, an in-person event that now exceeds the allowed attendance numbers for groups) on the original date it was intended. You decide to cancel the service and reschedule it for a later date.
Your business is required to provide the service on the agreed-upon date at the time of purchase and the customer is not required to accept the new date if it does not work for them. However, if the event was canceled due to a government-imposed restriction the customer is not able to file a chargeback and should work directly with your business to resolve the issue. In this case, the best course of action for your business would be to offer some flexibility by also offering refunds if requested. Another option is to allow customers to transfer tickets to other customers if they are unable to attend the new date.
A customer purchased a service from your business but decided not to use it because they were concerned about COVID-19.
In this case, the customer has chosen not to use services that your business was still offering, so they would not be able to file a chargeback. If the customer would like to change their plans due to COVID-19 they should contact your business to find a solution. An example of this is customers choosing not to fly or visit hotels due to travel concerns related to COVID-19, even when there are no government restrictions that currently impact their travel plans.
A customer has ordered a product from your business, but due to supply chain disruptions you will not be able to fulfill the order within the timeframe promised when the purchase was made.
The customer is able to file a chargeback if they do not receive a product they purchased by the expected date. In this case, we would recommend openly communicating the delay to the customer and providing regular updates if you can. Letting a customer know why there is a delay and that you are actively working on resolving it can reassure your customers, and they are more likely to be understanding of the situation.
A customer wants to return a purchase they made, but your business location is closed due to COVID-19.
In this case, it is best to communicate with customers if you are extending your regular return policy or are able to make alternate arrangements. Ensure customers know how to get in touch with you if your business is not open in its regular location or during its regular hours. Once again, being open and communicative with your customers can help avoid potential chargebacks.
These are just a few examples of what might prompt a customer to file a chargeback at this time. If your business is experiencing disruptions or has changed how it operates, the best course of action is to communicate the changes with customers, let them know how to reach you, and work together to find a solution. It is through collaboration and compassion that we will get through this. Businesses and consumers are both facing challenges right now, and by working together we can find solutions that will maintain our relationships.
If you would like more information on chargebacks or the payments industry, we have additional resources on the Helcim Blog including what is a chargeback, what is the difference between an issuing bank and an acquiring bank.