What is a chargeback scheme?

A chargeback scheme refers to the organized set of rules and procedures that allow consumers to dispute credit or debit card transactions and request a refund through their issuing bank. The term is used more commonly in the UK, while in the US, it is often called the “chargeback process” or “chargeback system.” The scheme is designed to protect cardholders from fraud, merchant abuse, or issues like product defects and service problems by enabling them to challenge transactions and recover lost funds.

The chargeback scheme is a product of both government regulations and policies set by card networks and financial institutions. It establishes the framework for how disputes are handled, how evidence is collected, and how funds are reversed if the dispute is found to be valid. While the scheme is intended as a consumer protection mechanism, it can sometimes be abused, leading to unfair losses for merchants.

In summary:
A chargeback scheme is the formal, regulated process that governs how cardholders can dispute transactions and obtain refunds through their bank, balancing consumer protection with merchant rights.