I'm a small business who used to accept credit card payments via Square but now I'm in dispute with them. Here's the deal....I'm in the wedding industry and I had a client cancel their contract after paying the non-refundable retainer and subsequent payments. After their cancellation, they disputed their payments they made to me on their credit cards via Square. I submitted my contract and services provided to date and the issuing credit card company (the client's) upheld the subsequent payments in my favor, but according only to Square, not the initial retainer and Square is trying to recoup that payment from me saying they have already paid the client's credit card company. Square also maintains that they can not and will not provide me with anything they used to refute the claim on my behalf other than a redacted form from some banking institution. So now, instead of disputing with the client, I'm disputing with Square who is telling me that it doesn't matter that I have a contract with the client.
What should my next steps be?
You can continue to try to get them to reverse their decision, but likely your only option is to sue. Personally, especially if you're discontinuing your relationship with Square, I would sue both the customer and Square.
Unfortunately, the venue your suit will likely occur in (small claims depending on how much money and your state and contract etc) may not help you. Small claims tends to ignore the law and side with what the presiding magistrate decides. I'm sure your contract with Square stipulates that you can't sur them over this or any similar situation and that if you do you will pay whatever legal fees they incur. That being said, in the real world, it may be worth it for them to settle with you.
Also, did they actually claw the money back or they're demanding it from you?