Disputes overview

There are many challenges encountered when working to resolve disputes. These challenges include balancing the needs for a high level of customer satisfaction, increasing operational efficiency, and maintaining regulatory compliance. When customers dispute a transaction, they expect a quick and fair resolution from their bank. However, the bank must also verify the validity of the dispute, communicate with the merchant and other parties involved, and follow the rules and procedures set by the card networks, other payment processors, and regulators. As a result, the dispute resolution process can be complex, time-consuming, and costly for the bank.

Banks never gain anything from processing a dispute. Despite investing valuable time and resources to resolve a dispute, banks do not receive any benefit in return. In the worst case, banks bear the losses when they write off the amount as dispute resolution.

Some of the challenges that banks face in processing disputed transactions are:

• Complex operating models. Banks often have multiple functions and locations involved in handling disputes, which can create silos and lack of coordination. These models can lead to inconsistent customer experience, duplication of work, and increased errors and risks.
• Overprocessing of disputes. Banks tend to process all disputes above a certain threshold, regardless of the likelihood of winning or losing the dispute or the value of the customer relationship. As a result, banks might waste resources and miss opportunities to prioritize and optimize disputes.
• Long, complex research process. Banks must rely on multiple IT systems and manual processes to gather and analyze evidence for disputes. This process can cause delays in providing credits or refunds to customers, as well as resolving disputes with merchants. It can also increase the risk of non-compliance with card network rules and regulatory requirements.
• Customer dissatisfaction. Customers who dispute a transaction might feel frustrated and inconvenienced by the lack of transparency and communication from their bank. They might also perceive the dispute process as unfair or biased against them. This dissatisfaction can erode their trust and loyalty to their bank and increase the likelihood of attrition or negative reputation.

Several regulations are in place in the US and across the world for consumers to safeguard themselves from credit damage, monetary loss, and other kinds of financial fraud. For example, the United States, Canada, and the United Kingdom enforce the following regulations:

• United States
  • Regulation Z: Regulation Z is a federal regulation that implements the Truth in Lending Act (TILA), which is a law that protects consumers from unfair or deceptive practices and disclosures in credit transactions.
  • Regulation E: Regulation E is a federal regulation that implements the Electronic Fund Transfer Act (EFTA), which is a law that protects consumers from unauthorized or fraudulent electronic transfers of funds from their bank accounts.
• Canada
  • C-86: C-86 is a federal bill that was introduced in 2018 and received royal assent in 2019. One of the parts of C-86 deals with the financial consumer protection framework for banks and authorized foreign banks in Canada. The financial consumer protection framework also applies to processing disputed transactions by consumers who use credit cards issued by banks or authorized foreign banks.
• United Kingdom
  • Section 75: Section 75 is a UK consumer protection law that applies to credit card purchases of goods or services that cost between £100 and £30,000.