Prevent Credit Card Fraud: Your Refund Policy Matters

One of the easiest ways to limit the impact of credit card fraud and to limit chargeback claims is to have a refund policy. For service businesses, like law firms, usually most work isn't refundable and existing contracts clearly spell that out. Regardless, it's still smart business to have a written refund policy for two reasons:

  1. You are more likely to prevail if a client challenges a payment with Visa, MasterCard or Discover if you do have a written policy.

  2. A concise, well written refund policy can prevent your staff from making mistakes when confronted with a skilled, practiced scammer, who is counting on using confusion and misdirection to get your staff to cave in and issue a refund that should never be made.

At a minimum, your refund policy should contain:

  • A limit on the period of time where refunds can be requested.
  • A list of products and services that cannot be refunded. The more precise the list, the better.
  • A list of items that require special circumstances to be refunded. What must be presented to request a refund (e.g. a receipt).

Here are a few lines you can add to your refund policy to further protect the bottom line from refund fraud and prevent double exposure where you refund a customer and they try to reverse the original transaction:

  • Payments made via credit or debit card can only be refunded to the card originally used to make the payment.

  • Check, Automated Clearing House (ACH), and bank transfer payments cannot be refunded until 10 business days after your payment is accepted.

Finally, your refund policy should be clear about the method to make a refund for check and cash payments. Here are a few examples that you can use:

  • Cash payments are refunded in cash unless over $_____. In the case of a refund over $_____ cash or a company check will be issued at our sole discretion.

  • All payments in cash or check are refunded in cash.

  • All payments made with cash or a check are refunded via check.

Written by Mike Seidle on 16th Feb, 2015