What Are Product Unacceptable Chargeback & How to Prevent Them
As a former seller of easily misinterpreted items, I carefully presented my products. Without this caution, I would have faced similar chargebacks.
In this guide, I’ll cover what these chargebacks are, why they happen, how to prevent them, and how to fight back.
Let’s begin with what they are.
Key Takeaways
- Product unacceptable chargebacks stem from product misrepresentation or damage.
- Merchant errors are the main cause.
- This is when a mistake occurs at any point in the sales process.
- Customers sometimes file these disputes as “friendly fraud.”
- It happens when a customer disputes a legitimate transaction.
- Convince customers to withdraw disputes if they aren't first-party fraud.
- If it’s friendly fraud, fight the chargeback; you have a 40% chance of winning.
Chargeback alerts can prevent these types of chargebacks. They help merchants address disputes early, avoiding increased chargeback rates or fees.
We offer easy access to these alerts. Learn how they work.
What Are Product Unacceptable Chargebacks?
Product unacceptable chargebacks occur when customers receive defective, damaged, or misrepresented items. These disputes are filed with credit card issuers when products don't meet expectations.
A chargeback occurs when a shopper disputes a transaction with their bank, leading to a reversal. The merchant must then accept or challenge the dispute. This process is time-consuming, requiring the seller to gather evidence within strict deadlines.
Product unacceptable chargebacks fall under reason codes related to product misrepresentation. For example, Visa reason code 13.3 covers “Not as Described or Defective Merchandise/Services.”
I list all reason codes in a separate guide, which also includes response times and suggested evidence.
What’s an example of this type of chargeback?
Imagine you order a Mandalorian Star Wars t-shirt.
The website claims the color will last through 10 washes, but it fades after one wash despite following care instructions. The product wasn’t accurately represented.
You contact the merchant, but they won’t refund or exchange the shirt. Even though their policy allows exchanges or store credit for misrepresented products.
In this case, you might seek a chargeback to recover your money.
Some customers, however, would exploit this process through friendly fraud. Friendly fraud accounts for 75 – 86% of all chargebacks.
From there, the merchant goes through the chargeback process, pays a chargeback fee, and loses a lot of money.
Is there any other scenario that could lead to these chargebacks?
Summary: A chargeback that comes from a misrepresented, damaged, or defective product.
What Causes Product Unacceptable Chargebacks?
Product unacceptable chargebacks typically result from the following:
- Shipping damage: Poor packaging leads to damaged products on arrival.
- Delivery failure: Customers don’t receive their order.
- Quality issues: Items fall short of advertised standards.
- Wrong item: Incorrect size, color, or product variant is sent.
- Product description errors: Website descriptions don’t match the delivered product.
- False advertising: Misleading photos or exaggerated claims set unrealistic expectations.
- Complex return policies: Complicated return processes push customers toward chargebacks.
Most of these issues trace back to merchant errors, one of the main unofficial chargeback categories.
Learn more about the types of chargeback here.
Let’s dive into each of these.
1. Shipping Damage
Shipping damage happens when products are damaged during transit. This often results from insufficient packaging or carrier mishandling.
For instance, if your packers didn’t use the right materials to pack fragile items, they’ll likely break during shipping (duh). From there, the customer’s disappointed when they open a package to see a broken item.
2. Delivery Failure
Delivery failure means the customer doesn’t receive the item. Common causes include incorrect addresses, missed deliveries, or lost packages.
This typically comes from miscommunication or a failure on your part to input the right information when shipping.
3. Quality Issues
Quality issues arise when products don’t meet standards, break quickly, or show defects. Frequently as a result from poor quality control like production errors or poor materials.
For example, if you sell consumer electronics, and it breaks down after minimal use. The customer is technically not getting an item that performs as advertised.
If you used an SaaS tool from a vendor, wouldn’t you expect it to not have any bugs?
4. Wrong Item
Errors can happen due to SKU mix-ups, warehouse mistakes, or system issues. When customers receive the wrong item, trust erodes, and they’re likely to file chargebacks.
I shouldn’t need to provide an example, but here we are. A shopper orders insulin, but instead they receive a bag of cat food. That’s worthy of a dispute.
Prevent this with accurate inventory management, order verification, and barcode scanning.
5. Product Descriptions
Missing details, incorrect measurements, or outdated descriptions mislead customers.
The description is setting expectations on what the customer will receive. If the product doesn’t function as specified, that’s technically false advertising. You’re also breaking your own terms of service, which guarantees a chargeback.
Ensure product pages reflect exact specifications, materials, and dimensions to prevent misunderstandings and disputes.
6. False Advertising
Exaggerated claims, enhanced images, or inflated product benefits set unrealistic expectations. Disputes arise when items don’t meet advertised features.
This is almost the same as product descriptions. But “advertising” expands to ad campaigns (e.g., on social media). Ensure your ad accurately represents your product.
7. Return Policies
Over 70% of customers find chargebacks easier than navigating complicated return policies.
Use these tips to simplify your policy:
- Avoid legal jargon; aim for middle-school reading level.
- State timeframes upfront, using exact days.
- Use clear headers to organize sections.
- Include numbered steps for returns.
- List excluded items in bullet points.
Consider writing in B2-level English, which is clear for both native and non-native speakers. Costco, for example, has an accessible yet comprehensive return policy.
Now we know the causes. How do we prevent product unacceptable chargebacks?
How to Prevent Product Unacceptable Chargebacks
Here are strategies for preventing product unacceptable chargebacks:
- Present products accurately: Include complete specifications, multiple product images, and precise descriptions.
- Keep inventory updated: Track stock in real-time across all sales channels.
- Choose reliable shippers: Partner with trustworthy carriers and provide accurate delivery tracking.
- Respond quickly: Answer customer inquiries promptly through multiple channels.
- Clarify policies: Establish clear, accessible refund policies, and process returns promptly.
- Send replacements: Replace faulty products immediately.
- Enhance security: Process orders through secure payment gateways with multi-factor authentication.
While improved security won’t prevent these chargebacks directly, it can reduce fraud.
The best prevention strategy is taking high-quality product photos and writing clear, precise descriptions. Here’s a useful resource for creating compelling product descriptions.
Don’t rely on AI for product descriptions.
AI tools like ChatGPT lack product-specific insights and can unintentionally create inaccuracies. Inaccuracies leave you open to chargeback claims.
If you’re dropshipping or white-labeling from suppliers like AliExpress, verify that their product quality aligns with your descriptions. Reassess suppliers if products don’t meet standards.
Additional tips for assurance include:
- Test order: Purchase the product under an alias to ensure it matches the listing.
- Take photos: Confirm the product’s appearance and use these photos in listings.
- Test product durability: Check functionality and ensure it meets advertised performance.
For print-on-demand products, order samples to confirm accurate sizing and quality. For example, wash test a shirt to verify colorfastness and durability.
Make sure there's no color fading, shrinkage, or logo peeling.
If a shirt were to shred or fade after a wash or 2, then the customer has a justified reason to file a chargeback.
I know dropshippers who didn’t test anything or do mock orders for their products because they wanted to save money. This might work for short-term gains, but it’ll haunt you in the long term.
Chargebacks aren’t something to scoff at.
I found a funny comment in a Reddit thread where a shop owner wrote they posted a picture with a chargeback abuser’s face on it that read, “do not sell to this person due to theft by chargebacks [1].”
You could try that. But I don’t think it would be effective.
While not a prevention tactic, here’s a tip for managing chargeback risk:
Adjust your receipts’ language to emphasize that the product is “sold as-is” and has been inspected. This detail shows vigilance in product quality. Helping banks see that the customer knowingly accepted any associated risks.
If you’re an online retailer, require customers to accept your purchase terms before checkout. Include verbiage about product inspection in the terms, then capture a screenshot of this clause if a dispute arises.
From there, you’d put the example sentence above in the terms.
Here’s a more in-depth guide on preventing chargebacks in general.
What should you do if a chargeback happens?
How to Respond to & Win a Product Unacceptable Chargeback?
The best approach to resolving product unacceptable chargebacks is direct communication with the customer. Aim to resolve the issue so the customer withdraws the dispute during the Early Fraud Warning — pre-disute phase or inquiry stages.
This pre-dispute phase is when a customer files a complaint, but the issuer hasn’t reversed the charge yet. Chargeback alerts notify you when this phase begins.
Without alerts, you might not know about the dispute until it’s too late.
Withdrawing the dispute in this phase keeps it from affecting your chargeback rate.
What happens if they withdraw after those stages?
If the customer withdraws the dispute later in the process, the chargeback may still count toward your rate. And you might need to pay a fee.
If you suspect friendly fraud, skip negotiating in the later stages and move forward with challenging the chargeback.
Merchants win over 40% of friendly fraud disputes. Winning prevents the chargeback from counting against your rate. And in rare cases, processors will return the chargeback fee.
For example, Shopify Payments reimburses merchants the chargeback fee if they win.
How do you win, then?
To win, submit strong evidence proving the customer’s claim is false. This is chargeback representment.
Relevant evidence might include:
- Billing information: Confirms the customer’s purchase.
- Signed shipping slips: Verifies the product’s delivery to the customer.
- Product copy and photos: Demonstrates accurate advertising.
- Refund policy: Confirms the customer accepted the terms.
Let’s say a customer claims a product didn’t meet expectations, but you provided a replacement. If you can prove the replacement was sent, the bank is more likely to rule in your favor.
The chargeback process step known as “representment” allows merchants to submit evidence to dispute the chargeback. After you submit evidence to your acquirer, they pass it to the cardholder’s issuer for review.
The issuer then decides if the chargeback will stand.
You’ll also need to draft a rebuttal letter summarizing your case and evidence. Here’s a template.
If your chargeback rate is approaching 0.65%, consider using tools that generate dispute representment packages. Some providers claim win rates as high as 80%.
Also, submit your evidence on time. Otherwise, you’ll automatically lose the dispute.
Deadlines vary by issuer.
Check brand-specific guides to understand each issuer’s requirements:
For additional tips, see this guide on winning chargebacks as a merchant.
You’ll likely want to know what friendly fraud is before attempting to fight it.
Summary: Fight chargebacks if you suspect friendly fraud. Otherwise, convince cardholders to withdraw disputes before a chargeback happens.
Are Product Unacceptable Chargebacks Friendly Fraud?
Product unacceptable chargebacks differ from friendly fraud. In product unacceptable cases, the customer claims the item arrived damaged, defective, or different from the description. This is a valid reason for a dispute.
Friendly fraud occurs when customers lie about a product’s condition to get a refund while keeping the item. They might falsely claim they didn’t receive the item or that it was defective.
There isn’t much else to cover under this chargeback type.
Conclusion
Product unacceptable chargebacks often result from merchant errors, typically due to misrepresented or damaged items. Effective prevention includes better quality control and transparent product listings.
Chargeback alerts can help intercept disputes before they count against your rate. Working with certified resellers like us provides easier access to alerts without managing multiple accounts.
Learn whether alerts suit your business to mitigate these chargebacks.
Sources
- [1] Product not as expected. Reddit.