What Happens When You Dispute a Transaction?

When an unexpected charge appears on a financial statement, understanding how to dispute a transaction is important for consumers. Financial institutions provide mechanisms to challenge charges that may be unauthorized, incorrect, or fraudulent. This protects account holders, allowing them to address discrepancies. Knowing the steps helps individuals navigate potential issues.

Types of Disputable Transactions

Transactions can be disputed for various reasons. Common reasons include unauthorized transactions, such as purchases made without consent due to fraud or a stolen card. Incorrect amounts, where the charged sum is higher than agreed, are also disputable. Duplicate charges also qualify.

Consumers can dispute transactions for goods or services paid for but never received. This includes items not delivered or services not rendered as promised. Defective or misrepresented goods or services also provide grounds for a dispute. If a returned item’s credit or refund was not processed, the original charge can be disputed.

Steps to Initiate a Dispute

Before contacting a financial institution, gather specific information. This includes the transaction date, amount, and merchant name. A clear description of the issue, like an unreceived item or unauthorized charge, is also necessary. Document any attempts to resolve the issue directly with the merchant, including dates, individuals, and outcomes.

Supporting documentation, such as receipts, order confirmations, communication records, and screenshots, strengthens a dispute claim. Preparing these details streamlines the dispute process. Consumers can contact their financial institution by phone, online portal, or written letter. For credit card billing errors, the Fair Credit Billing Act requires disputes in writing within 60 days from the statement date. While some card networks may offer longer timeframes, adhering to the 60-day rule provides maximum protection.

The Financial Institution’s Investigation Process

Once a dispute is submitted, the financial institution begins an investigation. The bank or card issuer acknowledges receipt within a specific timeframe, such as 30 days for credit card billing errors under the FCBA, or 10 business days for electronic fund transfers under Regulation E. During this investigation, a provisional credit may be issued to the account. For debit card transactions, Regulation E requires a provisional credit if the investigation cannot be completed within 10 business days, allowing the consumer access to the disputed funds.

The financial institution contacts the merchant to obtain their side of the story and any supporting evidence. This evidence, along with the information provided by the consumer, is reviewed by the institution’s investigation team. The investigation timeline can vary, but under federal regulations, credit card issuers have two billing cycles, or up to 90 days, to resolve a dispute, while debit card investigations are typically completed within 45 days. The financial institution communicates updates to the consumer throughout this process.

Understanding the Dispute Resolution

The investigation concludes with a formal decision. If the dispute is upheld in the consumer’s favor, the transaction is permanently removed from the account, or any temporary credit previously issued becomes permanent. This outcome is often called a “chargeback,” where funds are debited from the merchant and returned to the cardholder.

Conversely, a dispute may be denied if there is insufficient evidence or if the transaction is deemed valid. Common reasons for denial include a lack of documentation from the consumer, the merchant providing stronger evidence, or the dispute not aligning with valid criteria. If a dispute is denied, any temporary credit provided may be reversed, and the consumer remains responsible for the charge. The financial institution will communicate the final decision in writing, explaining the reasons for the denial. Should a consumer disagree, they may have limited options to request a reconsideration by providing additional evidence or clarifying their original claim.