How Return Policies Can Prevent Disputes

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How Return Policies Can Prevent Disputes
By creating a customer-centric, easy to work with, and well-researched return policy, it can prevent disputes and gain customer loyalty.

Merchants are facing challenges and overcoming problems that they have never experienced before COVID-19. The combination of unique shopping circumstances, dangerous cardholder behavior (such as panic buying), and the cancelation of events put merchants at risk to receive an increase in disputes. Merchants are already seeing close to a 200% increase in payment disputes and chargeback rates due to COVID-19. And this trend may continue in the coming months.

This increase in disputes is why merchants should take preventative measures to stop disputes from ever happening and maintain customer relationships. One way merchants can do that is through their return policy. By having a flexible and customer-centric return policy, your company will prevent unnecessary disputes and bad customer experiences.

Return Policies are Even More Important During COVID-19

Now more than ever, cardholders are looking to the merchant to make things right when it comes to refunds, canceled events, and other unique situations caused by the virus. Recently companies have started to come under fire over refund policies. One ticketing company that is dealing with a mass amount of rescheduled events is undergoing complaints and accusations of “deceptively changing the language of refund policies.” In the situation, not only is their return policy causing poor customer experiences and bad press, it will most likely increase their chargeback rate as customers turn to alternative routes to get their money back.

So, how can you create a return policy that will help prevent disputes?

Using Your Return Policy to Prevent Chargeback

Your return policy, in combination with your customer service, can prevent unnecessary disputes from ever happening. When a customer has a problem with your product or service, and they cannot reach customer service or are unable to return the product because of a strict return policy, they may turn to the dispute process to get their money back.

By having a customer-centric return policy and easy to reach customer service, you can prevent disputes from ever happening. A recent Javelin study found that if the merchant was contacted before the cardholder attempted a dispute, a chargeback was prevented in 8 out of 10 cases.

This means by promoting an easy return policy and helpful customer service that encourages cardholders to work through the merchant is a very effective tool to prevent disputes. During the time of COVID-19, is it even more vital to work with customers and be available for questions and concerns surrounding refunds or return policies when physical locations are closed, events are canceled, among other situations.

Make Sure Your Return Policy Matches Cardholder Rights

When creating a return policy, it must match the cardholder rights given by card networks. For example, if a merchant chooses to reschedule an event (not because of a government law or regulations), the cardholder has the right not to accept the new date and can dispute the charge. The merchant is responsible for providing the service on the date that was agreed upon. When the merchant postpones the event, they are changing what the cardholder agreed to. By knowing the customers’ rights, merchants can set up a return policy that will not put them at risk for receiving disputes.

You can read more about cardholder rights and COVID-19 dispute situations here.

Returns and Refunds Are Better Than Disputes

While returns can still be a pain to deal with, especially for ecommerce merchants, returns are better in the long run than disputes. When a merchant receives a dispute, they will automatically have the transaction amount taken from their merchant account. The only way to regain the transaction amount is by responding to the chargeback with a dispute response document. Response document creation takes time, resources, and in some cases, a lot of research to create. On top of the cost of the dispute response document, merchants will also receive a dispute fee whether they win the dispute or not.

If the cardholder can get a refund through the return process, merchants avoid the dispute response creation and the dispute fee. For physical goods merchants, they are able to resell the product again. Where if the customer disputes the purchase, the merchant does not regain the physical product.

On the customer experience side, it is always better for the customer to work through the merchants than having to deal with the dispute process.

Creating a Return Policy That Prevents Disputes

Merchants should always be looking for ways to prevent disputes and create a great customer experience. During this pandemic, merchants are under even more pressure than usual to retain cash flow and customers. An easy way merchants can do this is through their return policy and customer service efforts. By creating a customer-centric, easy to work with, and well-researched return policy, it can prevent disputes and gain customer loyalty.