What Card Transaction Disputes Might Be Telling You

Is a cardholder hiding something? Commercial Card transactions may be disputed for a variety of reasons, such as the charge represents an unauthorized purchase. While you want cardholders to be diligent in their transaction reviews, the dispute privilege can also be abused. On one end of the spectrum is the serious issue of so-called “friendly fraud” whereby the cardholder disputes a transaction through the card issuer that is actually a prohibited personal purchase they are trying to disguise. On the less serious side, a cardholder might jump the gun and dispute something that could be resolved by working directly with the offending vendor. As a card program manager, there are several things you can do to help combat such problems. See the action items below, as well as tips for what to include within your policies and procedures manual.

Action Items

  1. Verify with your card issuer the legitimate reasons for disputing a transaction, how to do so, and the allowed time frame (e.g., 60 days from the transaction date).
  2. Ensure the policies and procedures (P&P) adequately address this topic. Also cover this within cardholder training.
  3. Regularly review the disputes initiated/in progress to look for anything unusual, such as a high number in a particular month.
  4. Track the dispute history for your program to identify any trends by cardholder and/or by vendor. Names that keep popping up warrant further research and, as needed, appropriate action. “Friendly fraud” should be grounds for termination.

Your Policies & Procedures

Cardholders need to understand the importance of their review process and how to handle a problematic transaction. For example, your P&P could say:

As a cardholder, your transaction review/reconciliation process is critical to identifying possible fraud and vendor errors. Each transaction should accurately represent goods and/or services you have purchased and received, in accordance with the guidelines herein for allowed business purchases. To minimize risk to the organization, swiftly address any problematic transactions, as described below.

[Insert procedures for transaction review/reconciliation] 

The procedures should specify what constitutes a problematic transaction, such as the dispute reasons provided by your issuer, and what they should do about it. Unauthorized transactions typically justify using the card issuer’s dispute process right off the bat, but other issues, like a duplicate charge, can be corrected with a timely credit from the vendor. Help cardholders make the right decisions. Here is a sample decision matrix for the P&P:

Problematic Transaction Decision Matrix.PNG

If you are seeking more insight about how to strengthen your P&P manual, consider purchasing the related guide for $29.99.

July 25 Webinar: P-Card Fraud Prevention and Detection Best Practices

Check out this upcoming webinar, designed to help you maximize your fraud fighting efforts.

Are cardholders disguising personal purchases by disputing the related transactions? Take a closer look at anyone who seems to abuse the dispute process.

Are cardholders disguising personal purchases by disputing the related transactions? Take a closer look at anyone who seems to abuse the dispute process.

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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more