Do You Need A Chargeback Clause For Your Online Store?

Mia runs a small online skincare store in Auckland. A customer orders $280 worth of products, the parcel is marked as delivered, and two weeks later Mia receives a chargeback notice saying the customer doesn't recognise the transaction.

Now Mia is out of pocket for the products, shipping, a payment dispute fee, and the time it takes to pull together evidence for her payment provider. It feels frustrating, especially when she thinks she did everything right.

Chargebacks are part of trading online, but your terms and internal process can make a big difference. A well-written chargeback clause helps customers understand what happens if they dispute a card payment, while also tying neatly into your refund policy, delivery evidence and Consumer Guarantees Act obligations.

What Is A Chargeback Clause?

A chargeback clause is a section in your online shop terms and conditions that explains how your business handles disputed card payments.

A chargeback usually happens when a customer asks their bank or card provider to reverse a transaction. Common reasons include:

• The customer says they didn't authorise the payment.
• The customer says the goods weren't delivered.
• The customer says the goods were faulty, damaged or not as described.
• The customer doesn't recognise your billing name on their bank statement.
• The customer says they were charged twice or charged the wrong amount.

Your payment provider will usually ask you to respond through its merchant portal with evidence. If you don't respond properly or on time, you may lose the chargeback even where the sale was genuine.

Your clause shouldn't be aggressive or one-sided. It should give customers a clear pathway to contact you first, explain what information you may use to respond to a chargeback, and make it clear that your refund policy still sits alongside your obligations under New Zealand consumer law.

Can A Chargeback Clause Stop Customers From Disputing Payments?

No, a chargeback clause can't stop a customer from using their bank's payment dispute process.

Chargeback rights usually come from card scheme rules and the customer's arrangement with their bank. Your store terms can't override those rules. If your clause says something like all chargebacks are prohibited or customers waive all chargeback rights, it's unlikely to help you and may create issues under the Fair Trading Act 1986.

What your clause can do is set sensible expectations. For example, it can say that customers should contact you promptly if there's an issue with an order, and that if they lodge a chargeback, you may provide the payment provider with records such as:

• order confirmation details
• payment authorisation records
• customer communications
• shipping and tracking information
• proof of delivery
• refund or replacement records
• fraud screening information, where relevant

This helps you show the customer, your team and your payment provider that there's a clear process.

You should also avoid wording that makes customers feel they will be punished for raising a genuine issue. For example, a blanket fee for every chargeback can be risky if the customer had a valid reason to dispute the payment. If you want to recover fees in some situations, the clause drafting needs to be carefully tailored and consistent with consumer law.

How Should Your Chargeback Clause Work With Your Refund Policy?

Your chargeback clause should work hand in hand with your refund policy because many payment disputes start as refund issues.

If a customer receives the wrong item or a product arrives damaged, they may contact you first. If your refund process is confusing, slow or inconsistent, they may go straight to their bank instead. Clear refund terms can reduce chargebacks and make genuine customer issues easier to resolve.

What Your Refund Policy Should Cover

For an online retailer, your refund policy should explain:

• how customers can request a refund, replacement or repair
• what information they need to provide, such as photos or order numbers
• how you handle change of mind returns, if you offer them
• who pays return shipping in different situations
• how long refunds usually take to process once approved
• what happens if goods are faulty, damaged, unsafe or not as described

The Consumer Guarantees Act 1993 gives consumers guarantees that goods will be of acceptable quality, fit for their purpose, match their description and arrive within any agreed delivery timeframe. If you supply services, those services must also be carried out with reasonable care and skill.

You can't use your refund policy or chargeback clause to remove these rights for consumer purchases. For example, a term saying no refunds under any circumstances is risky because it may mislead customers about their rights.

Example: Faulty Goods Versus A Change Of Mind

Say Mia sells a moisturiser online. If a customer simply changes their mind because they don't like the scent, Mia doesn't have to offer a refund unless her store policy says she will.

But if the moisturiser is contaminated, not as described, or unsafe, the customer may have rights under the Consumer Guarantees Act. In that case, Mia's terms shouldn't push the customer into a chargeback battle. They should guide the customer through a proper refund, replacement or remedy process.

This is where tailored terms matter. Templates often miss the connection between refunds, chargebacks and proof of delivery, which can leave gaps when a real dispute lands.

What Evidence Helps You Respond To Online Store Chargebacks In New Zealand?

The best evidence depends on the reason for the chargeback, but you should usually keep clear records from the moment the order is placed.

For online retailers, useful evidence often includes:

• the customer's name, email address, billing address and delivery address
• order confirmation and tax invoice details
• the product page or description that applied when the order was placed
• IP address, device or fraud screening information, if collected lawfully
• tracking numbers and courier updates
• signature on delivery, photo proof or GPS delivery evidence, where available
• messages with the customer about delivery, faults, refunds or returns
• records showing you offered a refund, replacement or other remedy

If the dispute is about non-delivery, proof of delivery will usually matter most. If the dispute is about the product being faulty or not as described, product descriptions, photos, customer messages and refund records may be more useful.

Your internal process should be practical. For example:

1. Check the chargeback reason code or payment provider summary.
2. Match the disputed transaction to the order.
3. Collect the relevant evidence.
4. Check whether the customer has already contacted you.
5. Confirm whether a Consumer Guarantees Act remedy may be owed.
6. Respond through the payment provider's system before the deadline shown in the portal.
7. Record the outcome and update your customer notes.

Payment provider and card scheme deadlines can be tight. They aren't the same as a court deadline or a statutory notice period, so you should check the exact date in your merchant dashboard and act quickly.

Can You Run Fraud Checks Before Shipping An Order?

Yes, you can run fraud checks before shipping an order, provided your process is fair, transparent and complies with privacy law.

Fraud checks can be very useful for ecommerce stores, especially where you sell higher-value goods, ship internationally or see unusual ordering patterns. You might review:

• billing and shipping address mismatches
• multiple failed payment attempts
• unusually large first-time orders
• orders using different cards from the same device
• requests to change the delivery address after payment
• high-risk delivery locations flagged by your payment provider

Your terms can say that you may delay, cancel or request more information for an order if you reasonably suspect fraud, unauthorised payment or misuse of your website. That wording should be balanced. You don't want to promise that every order will be shipped immediately if, in practice, some orders need manual review.

Privacy Act 2020 Considerations

If you collect or use personal information for fraud checks, the Privacy Act 2020 matters. You should only collect information that's reasonably necessary for your business purpose, tell customers why you collect it, keep it secure and avoid using it for unrelated purposes.

Your payments privacy policy should match your fraud process. For example, if you use a payment provider, fraud detection tool, courier platform or ecommerce marketplace, your privacy policy should explain that customer information may be shared with service providers involved in payment processing, fraud prevention and delivery.

You should be especially careful with card information. Many retailers use third-party payment processors so they don't store full card details themselves. Your payment provider may also require you to follow card security standards as part of your merchant agreement.

What Should Your Ecommerce Terms Say About Payment Disputes?

Your ecommerce terms should explain the payment dispute process in a way that protects your business without misleading customers about their rights.

A strong set of online goods and services terms in New Zealand will usually cover:

• Payment authorisation: the customer confirms they're authorised to use the payment method provided.
• Order acceptance: an order is only accepted when you confirm it or dispatch it, depending on your sales process.
• Pricing and errors: how you deal with obvious pricing mistakes, stock errors or payment processing errors.
• Fraud checks: your right to pause, cancel or request verification for suspicious orders.
• Delivery evidence: how tracking, courier records, signatures or delivery photos may be used.
• Customer contact: customers should contact you promptly if there's a payment, delivery or product issue.
• Chargeback response: you may provide relevant order, payment, communication and delivery records to your payment provider.
• Refunds and remedies: your policy for change of mind returns and your approach to Consumer Guarantees Act remedies.
• Account restrictions: when you may suspend or refuse future orders, for example for suspected fraud or repeated misuse of your website.

Be careful with unfair or misleading terms. Under the Fair Trading Act, you must not mislead customers about their rights, your products, prices or delivery promises. The Act also includes unfair contract term rules for standard form consumer contracts and small trade contracts.

This means a clause that gives you very broad power to keep money, cancel orders or refuse remedies could be challenged if it isn't reasonably necessary to protect your legitimate business interests. The better approach is to use clear, fair wording that explains when you can take action and why.

Can You Recover Chargeback Fees From Customers?

It depends, and you need to be careful because not every chargeback is the customer's fault.

Your payment provider may charge you a fee when a chargeback is raised, even if you later win. It's understandable to want to recover that cost, particularly where the customer made an authorised purchase and then disputed it without contacting you.

However, a blanket term that automatically charges customers a fee for any chargeback can cause problems. For example, it may be unfair if:

• the customer had a genuine Consumer Guarantees Act issue
• the goods weren't delivered
• your website description was misleading or incomplete
• you charged the wrong amount
• the customer's card was genuinely used without authorisation

If you include a cost recovery clause, it should be limited to situations where the chargeback is found to be invalid, dishonest or caused by the customer's breach of your terms. Even then, the amount should reflect your actual reasonable costs, not a penalty.

You should also think about the customer experience. Sometimes the better commercial decision is to fix the underlying issue quickly, even if your terms technically give you options. A fair and responsive process can prevent a payment dispute from becoming a bigger reputational problem.

How Do You Reduce Chargebacks Without Making Checkout Harder?

You reduce chargebacks by combining clear terms with good checkout design, reliable delivery records and a customer service process that's easy to use.

Legal wording helps, but it's only one part of the picture. Practical steps can reduce disputes before they happen:

• Use a billing descriptor customers will recognise on their card statement.
• Send clear order confirmation emails straight after purchase.
• Make product descriptions, sizing, colours and inclusions accurate.
• Display shipping timeframes clearly and update customers about delays.
• Use tracked delivery for higher-value orders.
• Keep customer service contact details easy to find.
• Respond quickly when customers raise delivery or product issues.
• Keep notes of refund decisions and customer communications.
• Review repeat chargeback patterns by product, courier, region or payment method.

If you sell through marketplaces or social media shops as well as your own website, make sure your policies are consistent across channels. A customer shouldn't see one refund rule on your website and a different rule on your Instagram checkout or marketplace listing.

You should also train your team on when to escalate a complaint. If a customer mentions a faulty product, unsafe product, missing parcel or unauthorised payment, it shouldn't sit unanswered in a shared inbox for days. Those are the situations most likely to become chargebacks.

Key Takeaways

• A chargeback clause can't stop customers from using their bank's dispute process, but it can set a clear process and help you respond with evidence.
• Your chargeback terms should connect with your refund policy, delivery process and Consumer Guarantees Act obligations.
• Proof of delivery, order records, customer communications and refund records are often the key evidence in ecommerce payment disputes.
• Fraud checks are allowed, but your process should be fair and consistent with the Privacy Act 2020.
• Be careful with automatic chargeback fees or harsh wording, as unfair or misleading terms can create Fair Trading Act risks.
• Clear terms, accurate product pages and fast customer support can reduce chargebacks before they reach your payment provider.

If you'd like help with your online store terms, refund policy, chargeback process or privacy documents, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.