Chargebacks What Agencies Need to Know 2025 Update

Chargebacks: What Agencies Need to Know (2025 Update)

Executive Summary

Chargebacks are card payment reversals initiated by constituents and processed by their bank or card issuer. While government agencies see fewer chargebacks than private merchants, understanding how chargebacks work—and how to respond—is critical for compliance, fiscal integrity, and positive constituent relations. This guide breaks down what agencies need to know, how the funds move, and what steps to take if a chargeback occurs.

How Chargebacks Work for Government Agencies

• Constituent Initiates: Constituents can dispute charges for up to 120 days after payment, often due to unrecognized transactions, fee confusion, or fraud concerns. This triggers the bank or issuer to process a chargeback.

• Dual Transactions: Most agencies use a two-transaction service/convenience fee model. The actual payment and the convenience/service fee show as separate card charges—constituents may challenge one or both.

• Funds Movement: Upon chargeback, the bank issues a provisional credit to the constituent and debits the payment processor’s account. The processor coordinates with the government agency for the reimbursement, ensuring both parties’ accounts are balanced.

• Agency Steps: Agencies must reverse the original payment in their records and address any outstanding amount owed by the constituent. Proper documentation is essential.

What Happens Next—and What Agencies Should Do

• Notification and Documentation
  Agencies are notified by the processor’s chargeback center and asked for supporting documentation. Accepting the chargeback and reversing the transaction is often simpler and less time-consuming than fighting it.

• Contesting a Chargeback
  If valid, agencies can contest chargebacks by sending evidence showing the constituent authorized the payment and received terms/conditions (such as digital consent, opt-in boxes, or signage/screenshots). Reason codes dictate documentation needs—identity mismatches, non-recognized charges, or fee disputes each require tailored responses.

• Service Fees and Retrievals
  Retrieval requests sometimes precede chargebacks and incur separate fees. Chargeback and retrieval fees can often be passed on like an NSF fee on a paper check, so agencies aren’t left covering the cost.

Minimizing Chargeback Risk

• Clearly disclose service/convenience fees at every step, using opt-in procedures so constituents acknowledge the charges before payment.

• Use clear merchant descriptors for both payments and fees to reduce confusion when statements arrive.

• Train staff and update records promptly to support any dispute response with accurate, time-stamped documentation.

• Work closely with your payment processor to implement fraud-reduction measures, such as EMV chip card acceptance and secure online payment standards.

EEAT: Why Agencies Trust IntelliPay

IntelliPay has served government agencies since 2004, offering secure, compliant payment gateways and fee-based models tailored to public-sector needs. Our guidance and platform are built on deep expertise, ongoing regulatory monitoring, and practical experience helping agencies handle payment reversals honestly and efficiently. Chargebacks are rare but important—IntelliPay helps you address them with clarity, transparency, and prompt support.

Frequently Asked Questions

How long can a constituent dispute a payment?
Up to 120 days from the payment date.

Can constituents dispute convenience/service fees?
Yes, especially if the descriptors are unclear or the opt-in process wasn’t followed.

Should agencies fight every chargeback?
Not always. Accepting and reversing a clearly justified chargeback is usually the fastest and most effective. Contest only when the documentation is strong.

How are chargeback or retrieval fees handled?
Most agencies can pass these fees to the constituent, just like an NSF check fee, so the agency isn’t out of pocket.

What’s different about chargebacks for government agencies?
Chargebacks are less frequent than in the private sector, but when they occur, clear fee practices and communication are critical.

About IntelliPay

We, treasurers and finance directors, optimize our payment processing through transparent interchange-plus pricing, no junk fees, expert guidance, and reliable technology solutions. Our team combines deep industry knowledge with personalized service to ensure every client gets the best possible payment processing solution for their business.

Disclaimer

This guide reflects best practices and payment processing rules as of October 2025. Agencies should consult with their payment processor and compliance advisors to ensure specific procedures meet current regulatory requirements.

[Last updated: October 27, 2025]