How Long Does a Merchant Have to Respond to a Dispute?
Understand the essential deadlines and requirements for merchants responding to consumer disputes, guiding you through the resolution process.
When an unrecognized or incorrect charge appears on your bank statement, initiating a dispute can resolve the issue. This process, often called a chargeback, allows consumers to challenge transactions through their bank. Understanding the timelines for merchant responses is important, as it impacts how quickly financial discrepancies can be addressed. The merchant response period is a key factor in the overall resolution timeline.
Understanding the Dispute Process
A consumer dispute, or chargeback, begins when a cardholder questions a transaction with their issuing bank. This action reverses a charge on a debit or credit card, returning funds to the cardholder’s account. Key parties involved include the consumer, merchant, issuing bank, acquiring bank, and card networks like Visa, Mastercard, American Express, and Discover.
Once a consumer initiates a dispute, the issuing bank reviews the claim. If valid, it notifies the acquiring bank, which forwards this notification to the merchant. This notification includes a reason code, explaining why the charge is disputed. The merchant then responds with evidence.
Merchant Response Requirements and Deadlines
Merchants have specific timeframes to respond to a chargeback, varying by card network. For Visa and Discover cards, merchants generally have 30 business days. Mastercard typically provides 45 days, while American Express usually gives merchants 20 days for an inquiry.
A merchant’s response must include compelling evidence to counter the consumer’s claim and justify the original transaction. This evidence can include transaction receipts, proof of delivery, signed agreements, communication logs, IP addresses, and records of terms of service acceptance. The merchant’s acquiring bank facilitates this process by transmitting the merchant’s compiled evidence to the issuing bank.
The merchant’s defense depends on providing documentation that directly addresses the chargeback’s reason code. Failure to provide relevant evidence within the specified deadline can significantly impact the dispute’s outcome.
Outcomes Based on Merchant Response
The merchant’s response, or lack thereof, directly influences the resolution of a chargeback. If a merchant responds within the designated timeframe with sufficient evidence, the issuing bank reviews all submitted information. The bank evaluates this evidence to determine the original transaction’s validity.
If the merchant fails to respond or provides an inadequate response, the chargeback typically defaults in the consumer’s favor. The disputed amount is returned to the consumer, and the merchant may incur additional fees. If the merchant accepts the dispute, the chargeback finalizes in the consumer’s favor.
When a consumer initiates a dispute, the issuing bank may provide a provisional credit for the disputed amount. This credit allows the consumer access to funds while the investigation proceeds. If the final decision favors the consumer, this provisional credit becomes permanent. However, if the merchant successfully disputes the charge, the provisional credit can be reversed, and funds returned to the merchant.
Next Steps for the Consumer
After the dispute resolution concludes, the consumer should monitor bank statements for the final outcome. If the dispute favors the consumer, any provisional credit becomes permanent, and an official notification is provided by the issuing bank.
If the dispute is ruled against the consumer, options may still be available. Consumers might submit new evidence or appeal through the card network. In some situations, consumers might contact consumer protection agencies or pursue the matter through small claims court.