Stripe

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What controls does Stripe Connect provide for handling refunds and disputes tied to Custom and Express accounts?

If you are using Stripe Connect and Custom or Express accounts, your platform will ultimately be responsible for refunds and chargebacks. This is true whether you charge directly on the connected account or through your platform using the destination parameter.

We provide a number of tools that let you create refunds on behalf of the connected account, as well as retrieve funds back from connected accounts accounts when a refund or chargeback occurs.

Refunds

  • First, when creating the refund you’ll want to set the reverse_transfer parameter to ‘true’. This will then automatically debit the connected account’s balance and add it back to the platform balance.

  • You also have the choice of whether or not to refund application fees, by setting the refund_application_fee parameter to ‘true’. Stripe provides a number of options when you do this, including refunding only a portion of the fee.

  • Finally, you can set the account up so that Stripe automatically attempts to retrieve funds when the connected account balance is negative, by setting debit_negative_balances to ‘true’. Success will depend on the country and bank account in question. If our attempt to debit the account is not successful and the account does not process enough volume to offset the negative balance, we will ultimately apply the debit to the platform’s account.

Disputes and chargebacks

In the event of a chargeback where the charge was made directly on the connected account, the connected account’s balance will be debited. If this fails, the platform is ultimately responsible for the disputed amount and associated fee. Please note that if the connected account turns out to be fraudulent, it is unlikely our attempt to debit the bank account will be successful.

If the disputed charge was created through the platform, the platform account will be automatically debited for the amount of the dispute and the bank’s dispute fee.

When this happens, the platform can attempt to recover funds from the charge by reversing the transfer either through the Stripe dashboard or through the API.

If there is a negative balance on the managed account, Stripe will attempt to debit its bank account if debit_negative_balances is set to true.

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