One of the most dreaded things a repair shop can face is a chargeback. The prospect of losing your hard-earned money is a real hassle for some. In most cases, shop owners don’t even know why the chargeback happened and are unable to fight the claim to reverse it. This makes doing business risky and a lot of repair shop owners become apprehensive of the entire payment process.
What is a chargeback?
Let’s start off by breaking down what exactly a chargeback is. A chargeback is a reverse transaction made by a customer through their banking service.
When a chargeback occurs, the customer you’re dealing with gets in touch with their bank and demands a reverse transaction. The bank then looks into the transaction and returns the customer their money at the expense of you, the merchant. This is where the problem lies for most repair business owners – settling a dispute on chargebacks to get your hard-earned money.
The chargeback system favors the consumer, and as a business owner, you’re given the short end of the stick. When a bank files a chargeback claim on your business account, you are automatically assumed to be guilty and the consumer is given instant gratification as a means of appeasement. In short, the banks take the customer’s word for it and you have to prove otherwise.
The finer details
To get back their rightfully-earned money, business owners need to successfully defend a chargeback claim. This means that you’ll have to consult with the bank or a third-party and prepare a case that shows that the chargeback was unwarranted. We’ll be talking about how to do that, but first, let’s talk a bit about the kinds of chargebacks that you can face.
The first common type of chargeback for a repair shop is a fraud claim. Generally, this is done when a customer calls up a bank and tells them their credit card or debit card has been stolen or used without authorization and they need the money back. For a while, these sorts of complaints were common until a new set of policies and standards were put in place. Banks today now recommend in-person transactions and mandate the use of EMV chips for authorized commercial transactions. Along with it are other authorization processes such as PIN entry and two-factor authentication. Since the introduction of these policies, fraud claims have gone significantly down in number, but they do exist in some cases.
The second type of chargeback is on not receiving service or improper service. These have become more common and are especially egregious in the repair industry. When an improper service chargeback happens, the customer claims that they either didn’t receive any service or that they want a refund for not getting what was advertised. In these cases, the bank refunds them almost immediately and charges the merchant (i.e. you, the repair shop owner) for the amount.
The actual problem with fighting a chargeback
Following a chargeback claim, repair shop owners can appeal the case to have the dispute cleared in their favor. The problem here is that in order for them to make their case, they need to know what is required of them.
Most owners consider service chargebacks as a form of fraud chargeback and appeal them as such. However, the way to appeal that is by showing proof of purchase, which doesn’t work in a service chargeback case. This confusion between the two will cause most repair shop owners to lose their case and not recover the money taken.
Another issue with fighting chargeback claims is that you need proper documentation as a repair shop owner. This means that some form of authorization needs to be recorded, along with a list of terms and conditions related to the repair. Unfortunately, since most repair shop owners don’t have the necessary framework pre-installed, it’s often hard for them to get authorization and use it as proof in a chargeback case. So, they end up losing their claim.
How to successfully avoid a chargeback
All hope is not lost, however. Solutions to the problem of chargebacks might actually be a lot simpler than you think.
Jon Decker, CEO of Blockchyp, states that merchants should be more aware of how to fight chargebacks. His solution states the following.
Have a solid ‘terms of service’
The Terms of Service is a legally-binding agreement that a business has with its customer. This legal document states clearly the terms under which the service is being provided and outlines the responsibilities and liabilities of the service provider (i.e. the repair shop owner).
Having a Terms of Service for your customers and making sure that they agree to it is key. It helps you in chargeback cases by showing the terms of your business agreement under which the customer co-opted your service. To put it simply, the TOS tells the customer and anyone else what you will do and what you won’t do, and if the customer does business with you, they have to agree to your TOS first.
Collect signatures before and after repairs
This may seem like a no-brainer, but collecting signatures is absolutely crucial to winning a chargeback case. To prove that your customer has agreed to your Terms of Service, you need to collect their signatures as a form of authorization.
Additionally, after your repair has been completed, collecting a signature at the time of collection also proves that the customer is satisfied with the job done. This signature will ensure that you’ve provided the service agreed upon and that the customer was made aware of its completion.
These signatures help in disputing the claim of “Misrepresentation of Services” or “Defective Merchandise” which are both common reasons for chargebacks in the repair industry.
Provide as much information as you can
Often when merchants receive a chargeback, there is a process that they must undergo to dispute the claim. Blockchyp helps merchants fight their chargeback claims by first sending in a form that the merchant must fill out.
According to Jon, most people who fill out the form, unfortunately, do so incorrectly and don’t provide the necessary information required. Filling out the form correctly and providing as much information as possible makes your case for disputing the chargeback much stronger. In fact, Jon states that with the proper documentation, Blockchyp has a 95% success rate in dispute cases.
Below are examples of filling a dispute form out the correct way versus the incorrect way.
When disputing these claims, have all your documentation ready and provide as much information as possible for the best outcome.
The final word
The issue with chargebacks certainly is troublesome. However, following the right steps can help dispute claims and win back your earnings easily. The key thing to remember is the way your case will be presented and what will be required from you. Always have a clear understanding of what the chargeback is related to and how to go about resolving it.
Having solid documentation and authorization from your customer is going to be important. If your system has a way to record signatures before accepting devices and after completing repairs, then you’re good to go. If not, be sure to create a mechanism for it. Have your customers go over your Terms of Service and make sure they understand what is covered in the repairs. And if you do get a chargeback, provide all the information you’ve collected to prove that you’re in the clear.
By following these simple steps, you’ll save yourself a lot of headaches and can easily settle chargebacks in your favor.