Holders of credit cards issued in the United States are afforded reversal rights by Regulation Z of the Truth in Lending Act.
United States debit card holders are guaranteed reversal rights by Regulation E of the Electronic Fund Transfer Act.
Similar rights extend globally, pursuant to the rules established by the corresponding card association or bank network.
A consumer may initiate a chargeback by contacting their issuing bank and filing a substantiated complaint regarding one or more debit items on their statement.
Chargebacks provide a means for reversal of unauthorized transfers due to identity theft.
In cases of card not present transactions the merchant is usually responsible for the chargeback and associated fees.
The acquirer and issuer mediate in the dispute process, following rules set forth by the corresponding bank network or card association.
To address these more effectively, technology companies have written code and built algorithms that help merchants determine if chargebacks are legitimate or fraudulent.
[2] In addition, Visa and MasterCard may levy severe penalties against acquiring banks that retain merchants with high chargeback frequency.
This could result due to a counting error or intentional fraud by the account holder, or the envelope or its contents could have been lost or stolen.
If an overdraft results and it cannot be covered in time, the bank could sue or press criminal charges.
Finally, chargebacks occur when an account holder deposits a check or money order and the deposited item is returned due to non-sufficient funds, a closed account, or being discovered to be counterfeit, stolen, altered, or forged.