Econtracts Are a Tool for Mitigating Disputes

Sydney VaccaroFraud PreventionLeave a Comment

Econtracts Are a Tool for Mitigating Disputes
Econtacts are equivalent to paper contracts. The difference is that the contract is sent electronically instead of paper. Econtacts are used to outline terms and services among other information. Once it is signed through a econtract service or email, the contract is legally bidding just like a paper contract.

As cardholders can sign up for services and buy more items online than ever before, econtracts have become a necessity for some business. We will go over what “econtracts” are, what businesses they can benefit, and how they can help merchants win disputes.

What are Econtracts?

Econtacts are equivalent to paper contracts. The difference is that the contract is sent electronically instead of paper. Econtacts are used to outline terms and services among other information. Once it is signed through a econtract service or email, the contract is legally bidding just like a paper contract.

What Should be In Econtracts

Econtracts are a form of both communication and protections for merchants. When it comes to responding to disputes merchants must provide specific compelling information based on the reason code. Not every reason code will require evidence from econtract but it is good to have specific elements simply to communication to the customer.

Here are the elements that should be included in econtracts:

Transaction Details

Give an itemized list of the product or services purchases and the cost of each. This section should include if there are any future recurring charges or fees. For the customer, this communicates exactly what is being charged, the payment method, and what to expect in the future.

Return and Refund Policies

Clearly explain the return and refund policies for the product or service. The clear communication of the return policies is not only important for customer service but it important to win disputes. Reason codes such as “American Express C04 - goods or services returned or refused” it is important to prove that the customer did not comply with the return policy and how was the policy communicated to the cardholder.

Require the Contract to be Signed

For the econtract to be effective it must first be signed as proof that the cardholder read and agreed to the contract. Make sure before the purchase can be completed that the contract must be signed. Once signed keep proof of the contract.

Cancellation Policy

Recurring billing merchants should clearly state their cancelation policy and how the customer can cancel the subscription if needed.

Anything Else Needed to Protect Your Company

Your company's product, service, or billing type may have specific aspects that need to be added into the contract. Take the time to see if there is any other information that needs to be clearly communicated to the customers to protect your company.

Econtracts are Important for Recurring Billing

Econtracts can be a great tool for merchants that have recurring billing. Because of the frictionless nature of recurring billing, it can create situations that cause disputes. For example, a cardholder has been meaning to cancel the subscription but forgot to cancel it in time. Instead of accepting that mistake and paying for another month of the service, they dispute the charge instead. Another example could be that the charge only happens once a month and the cardholder forgot about the subscription. When they see the charge on their statement they panic thinking it is fraud and dispute the charge.

By having a very clear econtract for the recurring billing can be the exact evidence needed to win disputes and regain revenue. It allows merchants to prove that the customer was aware of the cancelation policy, when the billing would happen, for what amount, and more. Even though having the right evidence to win a dispute is important, it is better to prevent the dispute from ever happening. For recurring billing merchants, it is possible to prevent dispute by sending reminder emails or texts a few days before the transaction would occur. This gives customers the opportunity to cancel or pause the subscription if needed.

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