He would receive the money, your merchant services provider would take the money out of the settlement or the account that it was deposited to. He wouldn’t need to return the item, just call his CC company to get a chargeback.

There is an okay chance that you win the contest if he isn’t claiming fraud, if he is there is little chance that the issuer will give the money back in my experience.

I once won a chargeback from my payment processor just for MasterCard to take the money back. My processor then told me it would be a $100 USD fee to escalate the contest to MasterCard. I ended up resolving it with the customer who paid as soon as I called. Turns out their card was compromised and my transaction was in the window of it.

Alternatively to contesting a chargeback, you can send the account to collections since it effectively becomes an unpaid receivable. This is a nuclear option and you should try to resolve the situation before sending it off. Additionally, I would check if your collection company does cross-border collections since companies are structured differently between Canada and the US.

You could go one step further with a recommendation too.

" I don’t think I can take this on at the moment, however this guy at that place might be able to help you out though."