Chargeback Management Services - Dispute Response Jan/ 13/ 2026 | 0
Introduction
Few things are more damaging to a business than frozen merchant funds. Payroll stops, vendors go unpaid, and growth halts overnight.
In 2026, banks are freezing funds more aggressively than ever due to KYB failures, dispute risk, and compliance flags. This guide explains why it happens—and how to fix it.
Top Reasons Banks Freeze Merchant Funds
- KYB Verification Failures
The most common trigger includes:
- EIN mismatches
- Invalid business addresses
- Missing or outdated ownership documents
Even small inconsistencies can trigger automatic holds.
- Sudden Volume or Velocity Spikes
Banks monitor:
- Rapid increases in transaction volume
- High-ticket transactions
- New product launches
Unexpected spikes signal potential fraud or laundering risk.
- High Chargeback or Refund Ratios
Exceeding thresholds can lead to:
- Temporary holds
- Increased reserves
- Account termination
Friendly fraud is a major contributor here.
- Delayed Fulfillment Businesses
Industries like travel or subscriptions are flagged because:
- Services are delivered later
- Risk of non-fulfillment exists
Banks protect themselves by holding funds.
How Long Can Banks Hold Funds?
Typically:
- 90 to 180 days
- Until risk is resolved
- Or until disputes settle
Funds are rarely “lost” but access is restricted.
How to Release Frozen Funds Faster
Step 1: Respond to KYB Requests Immediately
Provide:
- Updated EIN letter
- Utility bills or lease agreements
- Ownership confirmation
Delays extend holds.
Step 2: Submit a Risk Explanation Letter
Include:
- Business model clarity
- Fulfillment timelines
- Refund policy details
Clear communication builds confidence.
Step 3: Reduce Ongoing Risk Signals
- Pause marketing spikes
- Improve customer support
- Issue refunds proactively
When Professional Help Is Required
If banks stop responding or escalate reviews, a dispute & compliance specialist can:
- Communicate directly with acquirers
- Prepare compliant appeal documentation
- Speed up fund release
Final Thoughts
Frozen funds are rarely random—they’re triggered by preventable risk signals. The faster you respond with the right documentation, the faster funds are released.
👉 Dispute Response helps US merchants unlock frozen funds and stabilize processing.
