What is a chargeback?

A chargeback is a reversal of funds from a credit card transaction. It occurs when a customer contacts the card issuer and requests a refund after they have made a purchase. In Tennessee, the Federal Trade Commission regulates chargebacks as part of the Fair Credit Billing Act. This act states that the cardholder has the right to dispute a charge on their credit card statement if it has been made through fraud, mistaken identity, or if the item or service they received was not as described. Card issuers have the right to investigate and make a decision on whether or not the charge should be reversed. If the chargeback is approved, the money is returned to the cardholder and removed from the merchant’s account. The merchant may be subject to a fee for the transaction in addition to the loss of the purchase amount, and can also be held liable for any associated legal fees. It is important for consumers to be aware of their rights and the rights of the merchant when a dispute occurs.

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