Disputed charges: Overview, definition, and example
What are disputed charges?
Disputed charges refer to charges or fees on an invoice or bill that a customer or client believes are incorrect or unjustified. These charges can arise from a variety of sources, such as billing errors, misunderstandings about the terms of a contract, or disagreements over the quality or scope of goods or services provided. When a charge is disputed, the customer typically challenges it with the seller or service provider, often leading to a review or investigation to resolve the issue.
Disputed charges are common in business transactions and can occur in various industries, including retail, services, utilities, and banking. Resolving disputes efficiently and fairly is essential for maintaining positive customer relationships and ensuring that both parties feel their concerns have been addressed.
Why are disputed charges important?
Disputed charges are important because they can impact cash flow, customer satisfaction, and business reputation. If a charge is incorrect, failing to address the dispute could lead to customer dissatisfaction, loss of trust, and potential legal issues. On the other hand, a business that resolves disputed charges promptly and fairly is more likely to maintain positive relationships with customers, uphold its reputation, and avoid financial discrepancies.
For SMB owners, managing and addressing disputed charges is crucial for ensuring proper billing, maintaining transparency with customers, and preventing conflicts that could affect business operations or customer retention.
Understanding disputed charges through an example
Imagine you own a subscription-based software company, and a customer contacts you about a charge they believe is incorrect. They were billed for a premium service that they never signed up for. After reviewing their account, you discover that an automatic upgrade was applied when the customer exceeded a certain usage threshold. The customer disputes the charge, claiming they were not aware of the upgrade.
To resolve the issue, you review the terms of the agreement, communicate with the customer, and agree to refund the premium charge, as the upgrade was not clearly communicated. You also update your billing system to ensure clearer communication about upgrades in the future.
In another example, a customer disputes a charge on their credit card statement for a product they purchased from your online store. Upon investigation, you find that the charge was made for an item they returned, and the return was not properly processed in your system. You issue a refund for the return, ensuring the charge is corrected and the customer is satisfied.
Example of a disputed charges clause
Here’s an example of what a disputed charges clause might look like in a contract:
“In the event of a disputed charge, the Customer must notify the Company within [insert number] days of receiving the invoice, providing detailed information about the dispute. Both parties will work in good faith to resolve the dispute promptly. If the dispute is resolved in favor of the Customer, the Company will issue a refund or credit the disputed amount. If the dispute remains unresolved, the Company reserves the right to pursue legal action for the outstanding balance.”
Conclusion
Disputed charges are a common part of business transactions and can arise due to errors, misunderstandings, or disagreements. Effectively managing and resolving disputed charges is important for maintaining customer satisfaction and protecting a business's reputation. For SMB owners, having clear processes and policies in place for handling disputes can ensure fair resolutions, promote transparency, and help preserve long-term customer relationships. Addressing disputed charges promptly and professionally is essential for maintaining financial integrity and business success.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.