4 Steps to Prevent Double Refunds

Online merchants often pay a steep price when it comes to chargebacks, which occur when a consumer disputes a charge made on their debit or credit card. Recipients of chargebacks often lose the sale, associated product, valuable time and the fees from card issuers.

But those are not the only losses for merchants, as “double refund” scenarios have been discovered—these mishaps originate when consumers receive a refund from both the merchant and their bank for a single transaction. Double refunds can be prevented by being proactive business owners and implementing simple measures.

Acquiring excessive chargebacks puts online retailers in jeopardy of having their accounts closed, paying unnecessary fees and, in some extreme cases, losing their business. Chargebacks alone are detrimental to any e-commerce business—but coupled with double refunds, merchants are essentially thrusting themselves into an unbeatable situation.

How Double Refunds Happen
According to Chargebacks 911 founder Monica Eaton-Cardone, approximately 12% of all chargebacks have been refunded by the merchant. The refunds are sometimes issued from the merchant prior to initiation of the chargeback, but are often—unbeknownst to the merchant—also issued after a chargeback has already been initiated. As a result, the loss for merchants is increased—they lose the money that they refunded to the consumer, as well as the fees resulting from the chargeback.

In similar cases, the consumer will contact both the merchant to demand a refund, and their bank to initiate a chargeback. The customer not only receives a refund from the merchant, but also from their bank following completion of the chargeback.

Providing a refund does not always dissuade consumers from initiating a chargeback; and just because a customer filed a chargeback and was promised a refund by their bank doesn’t guarantee that they won’t contact you and demand a refund from you, as well.

How to Prevent Double Refunds
Eaton-Cardone says that the best way to prevent double refunds is for merchants to train their customer service representatives to know what to listen for before issuing refunds to customers. She suggests taking the following four steps:

1) Pay close attention if a customer calls and states that they just spoke to their bank. This information is the largest clue that a chargeback may already exist for the transaction.

2) If a case number has been issued by the cardholder’s bank, the dispute has graduated the status of a chargeback. In this case, DO NOT issue a refund—you are already going to be charged the associated fees, and the funds will be levied against your merchant account.

3) In the event you suspect a chargeback, offer to connect the call with the customer and their bank. This will enable you to verify that a chargeback does not yet exist before attempting to provide them with a refund.

4) Be wary if a bank representative offers to “resolve or close the case if you issue a refund now.” Bear in mind that a case number usually means there is already a chargeback—you have already been charged for this transaction, and a forced refund was subsequently provided to the customer. Eaton-Cardone says your best options are to either fight the chargeback in order to win back your money (because the customer did not legitimately deserve a refund in the first place), or to consider the customer to be in the right, and allow them to obtain a refund through this method.

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