Comment by lxgr | Hacker News Reader

Comment by lxgr | Hacker News Reader

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> Merchant agreements give the banks the power to forcibly remove funds from the merchant account on initiation of a chargeback.

Yes, and the amount will be booked right back if the chargeback is eventually lost by the issuer/won by the merchant acquirer. If that happens, it's up to the issuer to further claw it back from the cardholder (if permitted by rules and regulations) or write off the loss.

> There is zero chance American Express just picked up the six figures of chargebacks for the folks who put them in today.

Receiving an immediate credit is quite typical (and in some cases required by regulations), but receiving the money back is by no means an indication of having won the chargeback case. The keyword here is "provisional credit":

> When a chargeback is filed, the process to reach a final verdict can extend for weeks or even months. During this waiting period, issuing banks typically provide cardholders with a provisional credit covering the amount in question. If the resolution favors the merchant, this provisional credit can be easily reversed. (from [1])

All of this is usually also mentioned in the cardholder agreement and the "boilerplate" text you receive as part of a provisional credit from the issuing bank. Definitely both worth a read, especially when large amounts are involved.

[1] https://chargebacks911.com/provisional-credit/

> the amount will be booked right back if the chargeback is eventually lost by the issuer/won by the merchant acquirer

Not quite.

The funds (and a fee) are confiscated from the merchant the moment the chargeback is initiated. The issuing bank, at that moment, has the option of providing a credit to the consumer. (After 10 days they have to.)

After a week, if the merchant doesn't object, the funds are released to the issuing bank. That either balances the credit or is paid out to the consumer. If the merchant objects, another timeline starts, but it's ultimately the issuing bank (i.e. the customer's) that makes the final call.

> receiving the money back is by no means an indication of having won the chargeback case

Of course. Now look up how often merchants win chargeback disputes. It's about a fifth of the time. For porn and non-profits that drops to almost nothing.

No, on all of timelines, finality, and who makes the final call. You're making very confident statements about a complicated process you don't seem to know all that much of.

> After a week, if the merchant doesn't object, the funds are released to the issuing bank. [...] it's ultimately the issuing bank (i.e. the customer's) that makes the final call

The funds are moved immediately, but within a given timeframe (depending on the network, but usually much more than a single week), the merchant has the option of clawing them back once again. That's called a "second presentment" (see for example [1] or [2]).

The issuer then has the option to submit a second chargeback if they still believe they are in the right, and depending on the type of chargeback, the acquirer (and by extension merchant) might get one more chance to send yet another response. If they are still disagreeing at the end of these steps, the case can be brought to the network, which then makes a final ruling, but that's very expensive (and the losing party pays), so it's usually avoided.

The money moves from issuer to acquirer and back for all of these steps. Only if the issuer makes the last move, and the acquirer does not challenge it, is the chargeback considered "won". All of that is usually hidden from at least cardholders via the provisional credit mechanism mentioned above.

In any case, your assertion that the issuing bank has the last word is simply not true.

[1] https://developer.mastercard.com/mastercom/documentation/get...

[2] https://chargebacks911.com/second-presentment/

> your assertion that the issuing bank has the last word is simply not true.

Fair enough, I was categorising arbitration as legal escalation, given its binding arbitration and precludes the courts. But yes, the final decider is either a court or arbitration (for MasterCard).

Until escalated to arbitration or the courts, the issuing bank has last word. And in no case is the issuer eating the chargeback, the worst they’re eating is a few hundred dollars of arb fees and service costs.

> Until escalated to arbitration or the courts, the issuing bank has last word.

Again, no. It depends on the type of chargeback (in particular, whether that type implies an "allocation" or a "collaboration" flow [1]) which party, i.e. issuer or acquirer, requests arbitration, and by extension who has the last word in case arbitration does not happen.

[1] https://support.kount.com/hc/en-us/articles/21155079759252-T...

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