What Is a Disputed Transaction and How Do You File One?

A disputed transaction occurs when an account holder questions a charge on their financial statement. This consumer protection measure allows individuals to challenge transactions they believe are incorrect, unauthorized, or for services not properly rendered.

Defining a Disputed Transaction

A disputed transaction is a formal challenge to a charge on a credit card, debit card, or bank account statement. The account holder initiates this challenge through their financial institution.

Disputes can arise from situations like unauthorized charges, often due to fraud, or legitimate charges with errors, such as duplicate charges or overcharges.

This process applies to credit card, debit card, and direct bank account transactions. While the core concept is consistent, specific rules and protections vary by account type, governed by different legal frameworks.

Common Scenarios Leading to Disputes

Several common situations lead consumers to dispute a transaction. These include unauthorized charges, often indicative of fraud where a card or account information is used without the owner’s consent, such as stolen card details or identity theft.

Other common scenarios involve incorrect amounts, like being charged more than the agreed price or encountering duplicate charges. Consumers may also dispute transactions if goods or services purchased were never delivered or provided.

Disputes also arise when received goods are defective, damaged, or not as described, or if services provided are unsatisfactory. Furthermore, continued billing after a subscription or membership cancellation, or a return made without a corresponding credit on the statement, can prompt a dispute.

Initiating a Transaction Dispute

Before initiating a transaction dispute, gather all relevant information. This includes the date and exact amount of the transaction, the merchant’s name, and any pertinent receipts or order confirmations. Details of any attempts made to resolve the issue directly with the merchant, including dates and outcomes of communication, should also be collected.

Understanding the applicable timelines is important, as there are specific deadlines for disputing transactions. For credit card billing errors, federal law generally provides a 60-day window from the statement date. Many major credit card networks and issuers offer a more extended period, often allowing up to 120 days from the transaction date.

To initiate a dispute, contact your financial institution through their online banking portal, a direct phone call to customer service, or by sending a written letter. Clearly state the reason for the dispute and provide all the gathered information. The financial institution may require specific forms or written statements, which they will provide along with instructions for submission.

It is recommended to attempt to resolve the issue directly with the merchant first, as this can often lead to a faster resolution. If direct resolution is unsuccessful or impossible, proceeding with a formal dispute through your financial institution is the next step. For most card transactions, the charge must be posted, not pending, before a dispute can be formally opened.

The Chargeback Process and Resolution

Once a dispute is initiated, the financial institution begins the chargeback process, which is the mechanism used to reverse a transaction and reclaim funds from the merchant’s account. This is the common term for the formal dispute process. The financial institution will investigate the claim, which involves contacting the merchant to obtain their version of events and any supporting evidence. Both the cardholder’s and the merchant’s evidence are reviewed to determine the dispute’s validity.

During this investigation, especially for credit and debit card disputes, the financial institution may issue a provisional credit to the cardholder’s account. This temporary credit provides access to the disputed funds while the investigation is ongoing, ensuring the account holder is not unduly impacted. If the investigation concludes that the dispute is valid, this provisional credit becomes permanent.

The timeline for resolving a chargeback can vary, typically ranging from several weeks to a few months. While some disputes might be resolved within 3 business days, others, particularly for card transactions, can take up to 90 days or even 120 days. Debit card disputes and direct debit issues might resolve within 10 to 45 days.

Regarding resolution, if the dispute is successful, the funds are permanently returned to the cardholder’s account. If the dispute is unsuccessful, the financial institution sides with the merchant, and the original charge remains on the account, or any provisional credit issued is reversed. Common reasons for an unsuccessful dispute include insufficient evidence from the cardholder or the dispute being filed outside the allowable timeframe.

Chargebacks can significantly impact merchants, resulting in financial losses from the reversed transaction and potential fees levied by payment processors or banks. They also incur administrative costs as merchants allocate resources to manage and respond to disputes. A high volume of chargebacks can affect a merchant’s reputation and potentially their ability to process payments.