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Visa / MasterCard Industry Terms

Chargeback Issues

Overview
A cardholder or card issuer may chargeback, or reverse, a sales transaction to you, the merchant, under certain conditions. The chargeback "claim" information will be electronically sent to our merchant processing center where it will be reviewed for validity. The chargeback amount will be charged to the same bank deposit account designated for your merchant sales. An advice will be sent to you with complete details of the disputed item being charged back.

Similarly, you may represent this first chargeback back to the issuer. For this to occur, you must respond within five days and provide all of the information necessary to justify the reversal. Below, we have provided summary information on what you will need to re-submit this claim.

The card issuer then has one additional right to process a second chargeback for which there is no re-presentment remedy available to you.

Preventing Chargebacks:

1. Before completing a transaction, make sure the information on the sales draft is accurate, complete, and legible.

2. At the time of the transaction, disclose your refund and return policy. The policy should be pre-printed on sales receipts, web site and catalog material as well as included in your telemarketing scripts.

3. Confirm that transactions are entered for processing only once to avoid duplicate transactions.

4. Advise your customers in writing of any delivery delays and include the new expected delivery date.

5. If an item is out of stock and delivery will be delayed or the item is no longer available, advise the customer in writing with the option to purchase a similar item or cancel the transaction. Do not ship a substitute item without prior customer agreement.

6. When a customer requests cancellation of a recurring transaction, respond immediately or as requested by the customer. Advise the customer of the effective date of cancellation in writing.

7. Confirm that your merchant name and customer service number appear correctly on customer statements. (This may be verified through Atlantic Payment).

8. Process refunds / credits promptly.

9. Respond to retrieval requests within 5 calendar days.

Chargeback Reasons
This table lists some of the most common Visa/MasterCard reason description and codes. Direct Marketers and web merchants...pay particular attention to Visa Reason Codes 461, 485 and 490!

Consumer Dispute Chargebacks: A consumer dispute chargeback (CDC) is one where the cardholder denies participation in the transaction or is dissatisfied with the product or service purchased with the Visa card. The CDC ratio is the percent of consumer dispute chargebacks to all Visa sales.

Visa MC Code	Description	Consumer Dispute Chargeback? (CDC)	Issuer Documentation Requirement	What is Required to re-submit the amount to the card issuer.
430 V 559 M	Services not rendered	YES	Cardholder letter claiming non receipt of product or service.	1. Evidence showing services were received by cardholder or authorized person or 2.) copy of refund issued to cardholder account.
441 V 541 M	Canceled Recurring Transaction	YES	Cardholder letter stating transaction was canceled exceeds maximum authorized amount.	Proof of processed refund or that cardholder notified 10 days prior to transaction date.
453 V 553 M	Goods or services received were not as described	YES	Cardholder letter and copy of material with description of merchandise in question.	Proof of processed refund or that merchandise in question was not received by merchant as returned.
454 V 554 M	Cardholder claim authorized by law and not classified elsewhere	YES	Cardholder letter along with calculation of dispute Issuer certification of violation in question.	Proof of processed refund or that merchandise in question was not received by merchant as returned or that chargeback violation is invalid.
456 V 556 M	Merchandise shipped to cardholder was received damaged, defective or otherwise unsuitable for the purpose sold.	YES	Cardholder letter stating merchandise was received damaged or defective and stating an attempt was made to resolve the mater with merchant.	Proof of processed refund or proof product not defective, or that merchandise in question was not received by merchant as returned
461 V 537 M	Processed mail/phone order or recurring transaction without cardholder permission.	YES	Cardholder letter stating he did not authorize or participate in the transaction.	Proof of address verification response codes "U" or "Y", Card Verification Value of "U" or that chargeback is otherwise invalid.
485 V 560 M	The merchant issued a credit that has not been processed	YES	Copy of credit transaction receipt or acknowledgment	Proof of processed refund or that merchandise in question was not received by merchant as returned or that chargeback is otherwise invalid.
490 V 555 M	Cardholder did not receive merchandise	YES	Cardholder letter stating dispute.	Proof of processed refund or that cardholder or designate received ordered merchandise.
479 V 501 M	A transaction receipt copy was requested but the fulfillment was not received.	NO	NONE	Proof of processed refund or that request in question was received by issuing bank within timeframe or that chargeback is otherwise invalid.

Visa Chargeback Monitoring Program

Visa U.S.A. monitors the sales and chargeback volume for a single merchant account number. Visa will identify a merchant that meets all of the following levels during that month.

50 Visa sales transactions and,
30 chargebacks and,
An overall percentage of chargeback-to-sales level at 2.50% or a consumer dispute chargeback-to-sales level at 1.00%

Months 1 through 3
For the first three months of being "identified", Visa sends the acquirer a Warning Notification for each merchant account.
Within two weeks of receiving the Warning Notification, the acquirer must notify the merchant.

For merchants engaged in outbound telemarketing of products, services or travel (Business Codes 5962, 5966) or selling audiotext/videotext teleservices (5967), Visa USA will assess separate fines and handling fees beginning in Month 1.

Months 4 through 6
After the fourth month of exceeding the 2.50% or 1% chargeback thresholds, the merchant enters the "program review" phase. Visa assesses a review fee and a monthly administrative fee.

Months 7 through 10

If the merchant account continues to exceed the 2.50% overall and 1% CDC chargeback thresholds during month 7, Visa increases the chargeback handling fee.

Months 11 through 13
If the merchant continues to exceed the 2.50% and 1% thresholds during month 11, Visa assesses a fine and further increases the chargeback handling fee.

Month 14
Should the merchant continue to exceed the 2.50% and 1% thresholds in month 14, Visa may permanently prohibit the merchant from participating in the Visa program and adding the terminated merchant's name (including its principals) to the MATCH / Terminated Merchant File.

Address Verification Service

Card Verification Value

Merchant Category Codes

Chargeback issues

US Interchange Schedule

Retrieval Requests

Terminated Merchant File

ECOMMERCE | RETAIL | HIGH-RISK | MC-VISA CARD TERMS

ACH ~ DIRECT DEBIT | BANK TRANSFER

GIFT / LOYALTY CARDS

Chargeback Issues

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P.O. Box 9584, Niskayuna, New York 12309-0584

Telephone: 518-346-2115 Fax: 212-658-9003

Revised: May 15, 2008