What is FreshBooks Payments’ dispute process?

Disputes, also known as chargebacks, occur when a client contacts their bank or credit card company to question a charge on their statement. The card issuer creates a formal dispute which immediately reverses the payment while the issuer investigates the claim. As a FreshBooks Payments powered by Stripe account holder, also known as a merchant, you carry the primary financial responsibility for online payment activity on your account, including disputes.

Once a dispute is filed, the payment amount, along with a separate dispute received fee levied by the card network, is deducted from your FreshBooks Payments account balance. The full lifecycle of a dispute, from initiation to the final decision from the card issuer, can take as long as 2-3 months to complete.

 

 

Dispute Details and Terms

The dispute process involves the following:

  • The Client (Cardholder) - Initiates the dispute through their bank
  • The Issuing Bank - The client’s bank that makes the final decision
  • Stripe - Our payment partner for FreshBooks Payments powered by Stripe, Stripe facilitates the transfer of your evidence to the bank
  • FreshBooks - Provides the platform for your invoicing and notifies you of the dispute status
  • The Merchant (You) - Provides evidence to prove the charge was legitimate

 

As a merchant using FreshBooks Payments, the following financial terms apply:

  • Liability for Disputes - You’re strictly liable for any disputes or chargebacks filed against your account, and if a dispute is lost, the funds are permanently withdrawn from your account
  • Negative Balances - You’re responsible for maintaining a positive balance in your Stripe account
    If a dispute or refund causes your balance to become negative, you’re responsible for covering that deficit
  • Collection - In the event of a sustained negative balance, FreshBooks or Stripe may auto-debit your linked bank account or use other means to recover the owed funds

 

FreshBooks Payments’ Dispute Process

The FreshBooks Payments dispute process is as follows:

  1. The client initiates a chargeback with their bank
  2. A dispute is opened and the issuing bank automatically debits the full amount of the transaction, plus a non-refundable $15 dispute fee
  3. If funds are not available in your FreshBooks Payments account, funds are withdrawn from your connected bank account
  4. The funds are held in suspense during the review
  5. The transaction in your list of online payments updates with a status of Charged Back
  6. A notification of the dispute is sent to your email address, along with a message in your FreshBooks account
  7. You have a limited window of generally 7-21 days to respond to the dispute
  8. To respond, select the Respond to Dispute button in the email, or the Go to Stripe button in the banner inside your FreshBooks account on the Dashboard
    Banner showing dispute with go to Stripe button.
  9. Log into your FreshBooks Payments powered by Stripe account
  10. Select the Disputes section, and then select the payment being disputed
  11. For the disputed payment:  
    1. Select Counter Dispute to provide compelling evidence to prove that your client is the legitimate purchaser, you only have one opportunity to submit evidence
      1. Once evidence is submitted, Stripe processes the evidence and sends it to the card issuer
      2. The card issuer can take between 30-75 days to review the evidence before making a final decision about the dispute
    2. Select Accept Dispute to refund the client and close the dispute
  12. If you win the dispute, the full transaction fee is returned to your account and the non-refundable dispute fee is retained by the card network
    1. A new transaction with a status of Paid will be added to your list of invoice payments, and a new payment entry is added to the invoice
  13. If you lose the dispute, the bank returns the funds to the client and the non-refundable dispute fee is retained by the card network
    1. The transaction in your list of invoice payments remains with the status of Charged back and the invoice’s status is updated to Declined.

 

Dispute Process Notes:

  • Recommended Evidence - To win a dispute, you must provide compelling evidence relevant to the dispute reason including:
    • Signed Contracts/SOWs - Any document where the client agreed to the work and price
      Proof of Delivery - For physical goods, use tracking numbers, or for services, provide a Work Completion form signed by the client
    • Communication Logs - Screenshots of emails or messages where the client approved the work or acknowledges the invoice
    • Terms of Service - A copy of your refund and cancellation policies that the client agreed to at the time of payment
    • Activity Logs - FreshBooks evidence showing that the client viewed and/or paid the invoice
  • Submitting Evidence - You have one opportunity to submit evidence, always double-check all information is correct before submitting
    • Dispute evidence will not be available to update once a dispute’s status is set to Submitted

 

Common Types of Disputes

Credit card disputes include the following types:

  • Credit Not Processed - The cardholder claims they’re entitled to a refund or credit but it was never processed or received
  • Duplicate - The cardholder claims they were charged multiple times for a single transaction
  • Fraudulent - The cardholder claims they didn’t authorize the transaction
  • General - A catch-all for disputes that don’t fit into other specific categories, including when the cardholder claims the incorrect amount was charged for the transaction
  • Product Not Received - The cardholder claims they did not received the purchased goods or services
  • Product Unacceptable - The cardholder claims the the received product or service doesn’t match what was described or expected
  • Subscription Canceled - The cardholder claims they were charged after cancelling their recurring service or subscription
  • Unrecognized - The client doesn’t recognize the business name on their statement
    • To prevent unrecognized disputes, ensure your business statement descriptor matches your brand name so clients recognize the charge on their statements

 

Bank Transfer (ACH) Disputes

Unlike credit card disputes, all bank transfer disputes are final and there is no process to appeal. If a client successfully disputes a payment, you must work with them directly to resolve the situation, including repaying the invoice if the dispute was made in error.

Common types of bank transfer disputes from the National Automated Clearing House Association (NACHA) include the following: 

  • The transaction was never authorized or the authorization was revoked
  • The transaction was processed on a date earlier than authorized (any date after is acceptable)
  • The transaction is for an amount different than was authorized
     
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