How the GDPR Impacts Chargeback Handling in The EU

If you’ve sold products in the EU, you might wonder how GDPR affects chargebacks. Since GDPR requires deleting customer data in some cases, this could impact the evidence you need during disputes.

This guide will clear things up.

We’re not legal experts. For specific advice, talk to a GDPR lawyer. Our goal here is to explain how GDPR relates to chargebacks.

Let’s start by defining GDPR.

Key Takeaways

• GDPR requires businesses to have a legal reason to process and store payment data.
• Businesses should collect and keep only essential data, like transaction records.
• Sellers can keep payment data to handle chargebacks under GDPR’s “performance of a contract.”
• Customers can request data deletion, but businesses can legally retain chargeback-related records.

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What is GDPR?

The General Data Protection Regulation (GDPR) sets rules for handling personal data of people in the EU and EEA. It applies to any organization that processes this data, regardless of location.

You don't want to ignore these rules.

Fines can reach up to €20 million or 4% of global revenue — whichever is higher. Regulators have already issued major penalties. In 2023, Meta Platforms (formerly Facebook) faced a €1.2 billion fine for transferring European user data to the States.

GDPR requires businesses to:

• Collect only necessary data
• Process it legally
• Keep it secure
• Ensure accuracy
• Limit how long they store it
• Stay accountable for compliance

What are the rules, though?

I’d have to write a novel to tell you that. It’s better that you check GDPR’s website for more information. As they’ll ensure it’s up-to-date.

And how does all of this tie in with chargebacks?

Glossary:

• EU (European Union): A political and economic union of 27 European countries.
• EEA (European Economic Area): EU member states plus Iceland, Liechtenstein, and Norway.

Summary: GDPR regulates how businesses handle EU and EEA citizens' personal data globally.

How Does GDPR Affect Payment Disputes?

Businesses can legally store transaction data under these conditions:

• Fulfilling a contract: Payment data used to complete a purchase, process refunds, or handle chargebacks.
  
  • This falls under the “performance of a contract” rule, so they won't need repeated consent.
• Legal requirements: Financial laws require businesses to retain payment records for several years.
• Ongoing services: Subscriptions or warranties may require sellers to keep data for support.
  
  • They can store data, so long as the agreement remains active.

However:

While businesses can store data for these reasons, customers have rights too.

They can:

• Request access: Ask for their payment details at any time.
• Request deletion: Request data removal, but businesses don't always have to comply.

Businesses should explain what data they must retain and what they can delete.

When responding to data access requests, businesses should verify the requester’s identity. Doing so prevents unauthorized access and potential misuse of financial records.

Merchants can also keep customer service conversation logs if needed for legal reasons. For instance, with handling disputes.

Will other data privacy laws affect chargeback handling?

Summary: Businesses can retain payment data to handle disputes but must respect GDPR privacy rights.

Do Other Data Privacy Laws Affect Chargebacks?

Let’s see whether popular data privacy laws affect payment information handling:

1. California Consumer Privacy Act — CCPA (California, USA):

• Who it applies to: For-profit businesses handling California residents' data. They also have annual revenue over $25 million.
• Rights: Consumers can request to know, delete, or opt out of data sales. Businesses must disclose data collection practices.
• Impact on chargebacks: Businesses can keep payment data if it's needed to complete transactions or detect fraud.

2. Lei Geral de Proteção de Dados — LGPD (Brazil):

• Who it applies to: Any organization processing personal data in Brazil, regardless of location.
• Rights: Individuals can access, correct, and delete their data. Businesses must have a legal reason to process data, such as consent or legitimate interest.
• Impact on chargebacks: Businesses can store and process payment data to comply with legal requirements.

3. Personal Information Protection and Electronic Documents Act — PIPEDA (Canada):

• Who it applies to: Private-sector businesses collecting personal data in activities within Canada.
• Rights: Individuals have the right to access and correct their data. Organizations must obtain consent for data collection.
• Impact on chargebacks: Businesses can retain payment data if it serves a valid purpose, such as chargeback management.

All of these privacy laws also allow you to keep data that’s meant to fulfill contractual and legal obligations.

Now. How do you stay compliant under GDPR?

How Do I Stay Compliant Under GDPR?

Here are some tips on how to stay compliant under GDPR as a seller:

1. Establish Data Processing Agreements (DPAs)

A Data Processing Agreement (DPA) is a contract between your business and any third-party service provider. It outlines how businesses collect, store, and protect data to ensure GDPR compliance.

And here’s how to set up a DPA:

• Identify your data processors: These include payment processors, cloud storage providers, marketing platforms, and fraud prevention services.
• Request a standard DPA: Many providers — such as Stripe, PayPal, and Shopify — offer ready-to-sign GDPR-compliant DPAs.
• Review key elements: Ensure the agreement covers:

• Data security measures
• Breach notification procedures
• Responsibilities for handling data subject requests

Keep signed copies for audits. Regulators may request proof that businesses have DPAs in place during compliance checks.

If a service provider doesn’t offer a DPA, you can use GDPR-compliant templates available online. Though, I recommend consulting a legal expert to draft an agreement.

2. Define Your Legal Basis for Data Processing

Businesses must have a clear legal reason to collect and store customer data under GDPR.

The most common lawful bases for processing payment information include:

• Performance of a contract:
  
  • Used to process payments, fulfill orders, and handle chargebacks.
  • Businesses don't need additional consent if they require data to complete the transaction.
• Legitimate interest:
  
  • Justifies keeping transaction data to prevent fraud and improve customer support.
  • Businesses must balance their interests with customer privacy rights.
• Legal obligation:
  
  • Requires storing payment data for tax reporting and regulatory compliance.
  • Laws often mandate retaining records for a specific period.

Regularly review your privacy policy. Ensure it outlines your legal basis for processing data. Also update it whenever you change business operations.

3. Maintain a Strong Fraud Prevention Strategy

Many payment processors, such as Stripe and PayPal, offer built-in fraud detection. If you use platforms like Shopify, you may need third-party fraud prevention add-ons like Signifyd.

We compared a bunch of Shopify plugins, here.

Otherwise…

To protect your business, consider using these fraud detection methods:

• Address Verification Service: Confirms if the billing address matches the cardholder’s details.
• CVV checks: Ensures the customer has the physical card by requiring the 3-digit security code.
• Geolocation Tools: Tracks the location of the purchase.
• 3D Secure: Acts as two-factor authentication during checkout.

4. Respond to Data Subject Requests Properly

Under GDPR, customers have the right to access, correct, or delete their personal data. Businesses must respond to these requests within 30 days.

Here are examples of what you could do:

• Set up a dedicated email (e.g., privacy@yourcompany.com) or a web form for data requests.
• Use automated systems like Zendesk monitor progress and ensure quick responses.
• Ask for unique identifiers, such as transaction IDs, to prevent fraud.
• Train your staff to recognize and handle data subject requests.

Consider using GDPR compliance tools like OneTrust or TrustArc. These simplify data request handling and maintain records for audits.

5. Limit Data Collection and Retention

Under GDPR, businesses should only collect and store the data they truly need. Keeping unnecessary data increases the risk of breaches and non-compliance.

Keep:

• Transaction records: Required for refunds, audits, and chargebacks.
• Billing addresses: Needed for invoicing and tax compliance.
• Fraud prevention data: Helps detect and prevent fraudulent activities.

Avoid:

• Detailed browsing history: Not essential for processing payments.
• Old support chats: Discard if they have no legal or operational value.
• Expired marketing preferences: Remove once the retention period ends.

Create a data retention policy that outlines what data you keep, how long you keep it, and when to delete it. Businesses should keep most financial data for at least 5 years to comply with tax laws, even after closing accounts.

6. Strengthen Security Measures

Businesses must have "appropriate technical and organizational measures" to protect customer data. These measures help prevent breaches and unauthorized access.

Such ways you could strengthen your security include:

• Encrypt sensitive data: Use SSL/TLS encryption to protect data at rest and in transit.
• Implement role-based access control: Ensure only authorized employees can access customer data.
• Keep systems up to date: Update software, payment systems, and security tools.
• Enable two-factor authentication: Require 2FA for all systems that handle customer data.

Consider hiring a cybersecurity firm to conduct regular security audits and penetration tests. This helps ensure ongoing compliance and strengthens overall data protection.

7. Keep Records & Show Compliance Efforts

Merchants must keep records of data processing activities, security measures, and compliance efforts. Regular audits help identify gaps and provide proof of compliance if regulators investigate.

Here’s how to conduct compliance audits:

• Perform internal audits: Review privacy policies, data storage practices, and processing activities.
• Hire external experts: Work with GDPR consultants to assess your compliance status.
• Keep thorough records: Document all privacy-related actions, including:
  
  • Signed DPA agreements with third-party vendors.
  • Employee training sessions on data protection.
  • Security upgrades and breach response plans.

Schedule annual compliance reviews to stay up to date with new regulations and business changes.

8. Work With GDPR-Compliant Partners

Work with payment processors, marketing platforms, and third-party vendors that follow GDPR standards.

Here’s what to look out for:

• Review their privacy policies: Look for data protection measures and customer rights.
• Request proof of compliance: Ask for certifications such as:
  
  • SOC 2 reports. Demonstrates data security controls.
  • ISO 27001 certifications: Proves robust information security management.
• Evaluate the following:
  
  • Security practices: How do they protect data?
  • Compliance track record: Have they faced any data breaches or violations?
  • Data handling policies: Do they align with your own privacy standards?

Conduct vendor risk assessments before sharing customer data with any new service provider.

Let’s finish this up.

Wrapping Up

GDPR doesn’t directly impact chargebacks, but it’s crucial for data retention. When disputing a chargeback, you need as much data as possible to prove a purchase was valid.

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