Credit card chargebacks are a confusing and stressful experience for both consumers and merchants. And there are hidden rules that can give you an advantage depending on your case. Chargeback law and the rules that govern it is not well known by the general public and even to many attorneys.

Here, we will provide you a helpful guide to understanding the laws and procedures in this highly misunderstood world. We will discuss the legal framework governing chargebacks, including the roles and responsibilities of parties involved. Then we delve into key chargeback law frameworks such as The Fair Credit Billing Act (FCBA), and The Truth in Lending Act (TILA).

Finally, we will cover important topics such as time limits, associated rules, merchant vs consumer rights, navigating fees and fines, and how these laws are typically enforced. By the end of this post, you will have a clear understanding of your rights as a consumer when it comes to chargeback law–and a way to get more information to help with your specific scenario. Let’s get started.

Understanding Credit Card Chargeback Law

Consumers have the option to use chargebacks in order to challenge either (a) unauthorized charges or (b) unsatisfactory merchant transactions where a credit cared was used. So what does that mean? That means we are talking about disputing a credit card charge based on some underlying reason.

These dispute laws provide important protections against fraudulent charges and billing errors. So in cases where consumers are unable to resolve disputes directly with the merchant, chargebacks are sometimes the last resort.

Card Issuer’s Internal Review (Investigation)

The chargeback process is governed first and foremost by the card issuer’s internal policy. These investigations serve as quick investigations into whether the consumer or the merchant were in the right.

The guidelines that are followed by the card issuer are often hidden from public view because these are corporate policies designed to balance the needs of businesses and individuals. Invariably, these policies are created based on historical data of that particular issuer, trends, flagged merchants, evidence of fraud, as well as understood industry practices.

Legal Framework Governing Chargebacks

Beyond issuer guidelines, the legal framework governing chargebacks is defined by two important federal sources: the Truth in Lending Act (TILA), and the Fair Credit Billing Act (FCBA).

TILA was designed to disclose credit card terms in a meaningful way so consumers can compare credit card. The Act also protects consumers against unfair credit billing practices, rate caps, and other unlawful practices. It’s important to note that credit used for consumer purposes is generally required to fall under the protections of TILA.

The FCBA amended TILA a year later to provide consumer protections and dispute resolution procedures for credit card chargebacks and other reporting practices.

These laws establish time limits, dispute processes, and fees, ensuring a fair resolution process for all parties involved.

Roles and Responsibilities of Parties Involved

In chargeback disputes, various parties have specific roles and responsibilities. The issuing bank is responsible for investigating unauthorized or disputed charges and, if necessary, issuing chargebacks. The merchant must respond to chargeback requests and provide evidence of a legitimate transaction and the terms that governed it.

In some ways, the card networks act as intermediaries, facilitating communication and resolution between cardholders, issuing banks, and merchants. By knowing the steps involved and the obligations of the card issuer, acquiring bank, card network, merchant, and consumers specific facts, we can effectively advocate for your interests and seek a fair resolution.

A Deeper Look into Chargeback Related Laws

Given the complexity of a credit card dispute and the evidentiary roles that come into play, it helps to go a bit deeper into the governing legal background that supports what are fair and unfair transactions.

The Truth in Lending Act (TILA)

Passed in 1968 Truth in Lending Act (TILA) plays a crucial role in ensuring transparency and fairness in credit card related transactions. Under TILA, credit card issuers are required to disclose important information about terms, interest rates, fees, and billing practices to consumers. This empowers consumers to make informed decisions and compare different credit card offers. TILA also gives consumers the ability to dispute unauthorized charges and protects their rights under federal law. By understanding TILA provisions, consumers can identify deceptive practices, dispute fraudulent charges, and avoid financial pitfalls while choosing credit card accounts wisely.

The Fair Credit Billing Act (FCBA)

Amending TILA in 1974, the Fair Credit Billing Act (FCBA) expanded the vital role in protecting consumers against billing errors, unauthorized charges, and disputed merchant activities. It sets up a fair dispute resolution process and regulates creditors in offering open-end credit to consumers. Card issuers are obligated to investigate disputes, refund disputed amounts, and provide a written explanation of their findings. More importantly, the FCBA established rules for card transactions, treatment of payments, resolving billing errors, and gave claims and defenses to consumers for nonconforming or unsatisfactory goods/services.

“Not as Described or Defective Merchandise”

Often too much attention is given to “billing errors” such as unauthorized transactions. But a far more common dispute involves consumers being unsatisfied with something they bought because it did not live up to the advertisement or specifications claimed by the seller. In today’s frequent online marketplaces, these disputes get overlooked and many consumers are not aware they have options through disputing the transaction.

Chargeback Time Limits and Associated Rules

Different credit card companies have specific time limit requirements for chargebacks, and meeting these requirements is crucial for a successful chargeback dispute resolution. Failure to meet the time limit deadlines may result in the consumer losing the right to dispute a chargeback or a merchant from defending their sale. Not meeting chargeback time limit deadlines can limit a consumer’s ability to effectively dispute their transaction.

Time Limitations for Major Credit Card Companies

Visa, Mastercard, American Express, and Discover each have specific time limit requirements for chargebacks.

Some card companies provide special programs to merchants based on the particular goods or services they are involved in. For example, some merchants make hundred or thousands of small transactions that involve consumer-based goods of little consequence such as disposable products. While other merchants deal with complex and important matters like medical, legal, and financial services. There can be some programs where disputes allow for short period time limitations to investigate the disputed transaction while others have different evidentiary standards. Each provide different windows of opportunity to either the consumer or the merchant.

Card companies must adhere to these time limit rules when investigating charges and try to apply their rules consistently. Sometimes called “parity”, card issuers often sit in the middle of a well-intentioned merchant and a well-intentioned consumer.

If the time period expires and the issuer provides a decision that the consumer is not happy with, the only other option is typically arbitration or taking legal action against the merchant directly.

Merchant vs Consumer Rights in Chargebacks

Both merchants and consumers have rights and protections when it comes to chargebacks. When it comes to chargeback law, these rights sit within contract law and interpretation.

It’s important to understand the differences between these respective rights. Merchants have safeguards in place to dispute chargebacks, giving them a chance to present evidence and defend against unjustified claims (usually through an online portal that allows them to communicate directly with the card company assigned to the dispute. On the other hand, consumers are often unprepared for the fast-paced window to present compelling evidence to support their position that there was either an unauthorized or unsatisfactory transactions. If the dispute ends in favor of the merchant unfairly, chargeback law like the Fair Credit Billing Act provides consumer protections if TILA or similar regulations were not respected.

But there is great disagreement between consumer advocates and creditor lawyers as to whether issuers should interpret transaction laws or simply mediate basic understandings. Where terms and conditions are used to made decisions of commercial and consumer consequence, it can be argued that chargeback law provides for real legal standards being placed on credit card companies to make determinations of contract law, agency law, misrepresentation, fraud, and promissory estoppel.

Rights and Protections for Merchants

Merchants have the right to dispute chargebacks and present evidence of a legitimate transaction. The card scheme chargeback rules specify the process and time limit for merchants to respond. Understanding “reason codes” can assist merchants in identifying the cause of a chargeback and effectively disputing it. Merchants are safeguarded against fraudulent chargebacks, friendly fraud, and deceptive merchant practices. Familiarizing oneself with the chargeback policy and collaborating with the investigation in an orderly and prepared manner can help navigate chargeback disputes better. When operating in good faith and providing clear evidence to the disputes investigator, merchants can ensure a fair resolution to chargeback issues.

Rights and Protections for Consumers

Consumers have the right to dispute unauthorized charges (“errors”) as well as unfair dealings on their credit card account. The chargeback law process begins with the interpretations of the contact between consumer and merchant, as well as the contract obligations between the card issuer and disputed parties. A time period is set to provide compelling evidence, and the issuer may make a determination based off of what was submitted by both. If the issuer provided a substandard investigation, then protections under TILA and FCBA may come into play. Eventually, if a dispute does not result in favor of the consumer, either arbitration or courts will be the final determination of the claims.

Fees Associated with Chargebacks

Merchants should be aware that chargeback fees can vary greatly, ranging from a few dollars to hundreds (per dispute). Merchants may also incur additional expenses such as representment fees, card network fines, and merchant account fees. These costs often add up quickly and could impact a merchant’s bottom line.

For consumers, the fees for arbitration are not typically cost prohibitive. In the US, arbitration fees for consumers are the first step and how a clients chooses to fund their legal battle varies depending on the complexity of the transaction or the legal issues involved. An evaluation by an experienced attorney is highly advised.

How is Chargeback Law Enforced?

Chargeback laws are enforced first and foremost by card issuer policy, then federal consumer protection laws. The vast majority of card transaction disputes are resolved at the internal investigative level. If the dispute is not resolved, the matter will either go to consumer arbitration or a court of law.


Understanding credit card dispute laws is crucial for both merchants and consumers–but consumers are often left in the margins to scramble when learning the steps for the first time. Chargeback law provides both parties with rights and responsibilities in the event of a card related dispute. The legal framework governing chargebacks, such as the Fair Credit Billing Act and Truth in Lending Act, provides consumer protection and establishes guidelines for resolving differences. It is important for merchants to familiarize themselves with these laws to protect their businesses from fraudulent chargebacks. Similarly, consumers should be aware of their rights to dispute unauthorized charges or receive refunds for faulty products or services. By understanding chargeback law and following the appropriate procedures, both merchants and consumers can navigate chargeback disputes effectively.

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About the Author: Bart Kaspero

Bart Kaspero is an experienced criminal defense and regulatory attorney who has focused on using technology and the law in bringing privacy to criminal records. His research has been published in several legal journals and his unique background has helped a broad spectrum of clients. He has provided legal training to lawyers across the US on how to navigate complex criminal record legislation and how to effectively provide privacy to those with past arrests, charges, and convictions. His innovative methods have earned him a top position of authority on the subject of criminal record privacy as well as trust within the criminal data supply chain.