by Amy Porter
A chargeback occurs when your client or the cardholder disputes a specific credit card transaction. A chargeback is initiated by the cardholder through their card-issuing bank. This action allows a cardholder to temporarily not pay for a specific transaction while the charge is investigated.
In the event of a client chargeback or charge dispute, the best defense is a good offense. The card issuing bank is looking to see if you, the merchant, had permission to charge the credit card, and did you perform the work charged for. A few simple steps on the front end can help ensure your firm has the best opportunity of win a chargeback case, and avoid potential loss of income.
Most Common Chargeback Reasons Include:
1. The firm does not have permission from the card holder to charge the card.
2. The firm did not provide the service or work agreed to by the cardholder.
3. The dollar amount charged was different than what was agreed to.
Tips to Avoid Potential Client Chargebacks:
- Obtain authorization from the cardholder for the specific dollar amount being charged.
2. Confirm the name on the card. If the name is different from your actual client, obtain additional approval from the actual cardholder. This is common in certain practice areas such as family law.
3. When accepting credit card information over the phone or through your website, ensure you have a charge authorization or previous client agreement to charge payments on file.
4. Have clients specifically initial the firm’s payment and credit card policies in their client agreements. This specifically shows the client was notified of the firm’s payment policies and agreed to them.
5. Payments from relatives or other third parties. Make sure to include the specific client name, invoice number and matter number if possible. Obtain signature from the third party to confirm they are accepting responsibility for payment of another party.
6. Obtain client initials next to any specific cancellation policies included in your client agreements.
What Happens When You Receive a Chargeback Notice?
- Your client has filed a formal dispute on a specific charge amount.
- Notice is generally sent by the mail from the Card-issuing Bank.
- As a courtesy, LawPay will attempt to notify you via email or phone to expedite the process.
- Time is critical. Your firm will be asked to respond within a 7-10 day time period. (The exact date will be set by the card-issuing bank). It is important to respond promptly.
- Your firm will need to provide documentation to support the transaction in question. This should include any payment authorization or payment communication from the client. You may also be asked to show proof of work or services performed by your firm. Please note, you will not be asked to disclose sensitive client information or details on a particular matter. Keep in mind your client is declining payment to your firm, so the bank is already aware you are working with that particular cardholder.
As part of our service, LawPay is available to support your firm in your efforts to win a chargeback dispute. We are also happy to review your chargeback process and make recommendations to avoid potential client dispute situations. Our goal is to help you and your clients have a positive payment experience.
Amy Porter is CEO of LawPay, a full-service bankcard processing company specializing in the legal industry.