What is Chargeback?

Full Definition

Chargeback is a dispute-resolution process operated by card schemes (principally Visa and Mastercard) rather than a right created by UK legislation, under which a cardholder can ask their card-issuing bank to reverse a payment and claim the money back from the retailer's bank if, for example, goods never arrived, a service was not provided, an item was faulty or significantly not as described, a company went out of business before delivering, or a payment was taken fraudulently or duplicated in error. Unlike Section 75 protection under the Consumer Credit Act 1974, which is a statutory right limited to credit card purchases between £100 and £30,000, chargeback has no minimum or maximum transaction value, applies to both debit and credit cards, but is entirely a matter of the card scheme's own rules rather than a legal entitlement, meaning a bank can decline a chargeback claim and the cardholder has no automatic right to escalate to the Financial Ombudsman Service in the same way as a Section 75 refusal (though many banks will still consider an FOS complaint about how a chargeback request was handled). Chargeback claims are also subject to shorter time limits than Section 75 -- typically 120 days from the transaction or from when a service should have been provided, though rules vary by scheme and dispute type -- and the card scheme requires the retailer's bank to provide supporting evidence, so a chargeback can be successfully defended by the retailer if it can show the goods or services were properly supplied. Because Section 75 and chargeback overlap for card purchases between £100 and £30,000, consumers with a valid Section 75 claim are usually better protected pursuing that route first, reserving chargeback mainly for debit card payments, or credit card purchases below £100 or above £30,000, where Section 75 does not apply.

See Also