A Factoring Chargeback After the Broker Short-Pays

Short-pay, offset, and a real claim

Three different broker behaviors arrive as one short check. A short-pay is the broker paying less than the invoice and, if they are organized, saying why. An offset is the broker subtracting a different debt: an old claim, a lumper, an advance, a fee. A real cargo claim is a demand about loss or damage, which may or may not be the same document as the deduction. The factor sees only the difference between the invoice and the cash. You have to see which of the three it was, because the cure is different.

Ask the broker for the remittance advice in writing. "Paid short" is not a reason. A reason names the load, the amount, and the document they say supports it. If they will not give a reason, say that in your dispute. An unexplained deduction is still a short check, and the factor will still reverse the advance. Your fight is about the reason. The factor's fight is about the cash, and they already resolved theirs by taking the cash back from you.

What the factor does the day the check is short

The factor applied the broker's payment to the invoice, saw a balance, and reversed the advance on that balance. That can happen the day the payment posts. It does not wait for you to agree. You will get a chargeback notice, or you will see a line on the next settlement. Match it to the invoice number. If the notice does not name the invoice, ask for the name before you accept the line.

The factor is not deciding the cargo claim. The factor is deciding that it will not stay out of pocket for money the broker did not send. Non-recourse coverage, if you have it, might keep a true credit loss. A short-pay for a dispute is the exclusion on the non-recourse page. Do not send the factor a speech about non-recourse until you have the broker's reason. If the reason is a POD, the speech will not fit.

The reserve and the next settlement

The reserve is the first pocket the chargeback reaches. If the reserve balance covers the reversal, the next funding may look normal and the reserve statement will not. If the reserve is thin, the factor takes the rest from the next advance. That is why a clean load pays a strange net. It is still your invoice money moving to cover the short invoice. It is not, by itself, a new fee. The reserve page separates those lines. Read the settlement until every dollar of the reversal is either in the reserve or in the next wire.

Ask for a reserve balance after the chargeback. You should be able to reconcile: balance yesterday, reversal today, balance today. A factor who cannot show that math is not administering a reserve. They are adjusting wires. Make them show the invoice.

You still have to fight the deduction

The carrier contests the deduction. The factor has already been paid back by you. If you do nothing, the broker keeps the difference and you keep the loss. Write the broker. Identify the invoice, the amount short, and why the deduction is wrong, or ask for the documents if you do not yet know. Give a deadline for a response that is inside your claim deadlines, not a casual "let me know." Keep the sent copy.

If the deduction is a cargo claim, the claims guide is the file: the bill, the POD, the amount, the photographs. This page will not rebuild that file. If the deduction is a missing document, send the document. If the deduction is an offset the rate confirmation allowed, read the setoff clause before you call it theft. If the offset was not in any contract, say that. The factor will not write this letter unless the contract hired them to collect disputes. Assume it is your letter.

Documents that win the difference back

The useful stack is short. The rate confirmation with the agreed rate. The bill of lading. The POD, with or without a specific exception. The broker's remittance that shows the deduction. The original invoice. Photos and temperatures if those are the stated reason. A revised rate confirmation if they added a charge you never signed. Send the stack to the broker with the dispute. If they pay the difference later, send the factor the proof if the contract requires the recovery to pass through the factor, and watch that the recovery is not eaten by a second fee the contract does not allow.

A chargeback notice is not one of the documents that wins the dispute. It proves the factor reversed the advance. It does not prove the broker was right. Do not attach only the chargeback and expect the broker to fold.

Fee on the funded amount versus the collected amount

Read whether the factoring fee is calculated on the face of the invoice or on the amount collected. If it is on the face, a short-pay does not shrink the fee. The chargeback returns the advance net of a fee the factor already kept, or the factor bills the fee separately. If the contract refunds the fee on the uncollected portion, the chargeback should be smaller by that refund. Many contracts do not refund it. The sentence is one line. Find it before you tell a driver the fee "comes back with the chargeback."

Here is the arithmetic as an example, not as a rate. Invoice $2,200. Suppose the contract fee is 3 percent of the face, which is $66, and the factor advanced $2,134. The broker pays $1,800. The unpaid piece is $400. The factor chargebacks the advance that corresponded to that unpaid piece. If the fee is not refunded, you do not get $12 of the $66 back (3 percent of $400). If the fee is refunded on the uncollected part, the chargeback is figured after that $12 credit. Your contract picks one of those two. The $2,200, the $1,800, and the 3 percent are this example so the boxes are visible. Replace every number with the settlement in your hand.

The Carmack clock sits beside this math and does not move when the math posts. The 9-month deadline still runs from delivery. A chargeback in week three does not give you a new nine months, and a chargeback in month ten does not excuse a claim you never filed. If the short-pay is a cargo deduction, open the claim file the same week you open the chargeback. They are parallel. They are not the same form.

The claims process fills the cargo file. The row is how you keep the factor's reversal from becoming the only record of the loss.

If the broker later pays the $400 difference, the money should be traceable to this invoice. A recovery that lands in a general reserve with no invoice number is how the short-pay gets paid twice, once by you through the chargeback and again by disappearing into the factor's account. Ask where the recovery was applied. The answer belongs on the same row as the reversal.

Do not net the short-pay against a different load in your own books just to make the week look even. The broker's offset and your bookkeeping offset are two more ways to lose the invoice number. Keep the $400 attached to the load that was short until it is paid, written off under the contract, or won back.

Frequently Asked Questions