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Chargeback Compliance | Part 2 of 2

Posted by Alex Neir on Fri, October 21, 2011 @ 08:10 AM

Chargeback Compliance:

If the customer or issuing bank alleges that the merchant has violated Visa and MasterCard Operating Rules then it is considered “Out of Compliance” and the merchant will not be protected by the chargeback process. The issuing bank must certify that a financial loss did or will occur as a result of the rule(s) violation. Each side has an opportunity to present their case to the Visa and MasterCard Analyst assigned to the case. Compliance cases are filed within 90 days (Visa) and 180 days (MasterCard) from the transaction date. The date of a Retrieval Request ( the date of violation) is 90 days for Visa and 45 days for MasterCard from the date the issuing bank received notice from its cardholder of a violation (Date of Discovery)

Examples of Chargeback Compliance violations include:

  • Failing to properly disclose “limited refund” or “return policies” to the cardholder at the time of the transaction.
  • Preparing two or more transaction receipts to avoid authorization for a single transaction.
  • Quality of service received from a travel and entertainment merchant.

Chargeback Compliance Filing Procedures, Fees and Penalties:

If you, the merchant, face a Compliance Violation claim, then you will be required to complete a Visa and MasterCard Compliance form and provide a description of the grievance, and submit copies of all supporting documentation. The issuing bank is required to provide the merchant with a Pre-Compliance letter, 30 days prior to filing, in attempt to settle the matter. As with a standard Arbitration, there is a Filing fee of $150.00, a Review fee of $250.00 paid by the losing party. Further, a $100.00 fine may be assessed for each technical violation found against the opposing party.

Criteria used for Chargeback Compliance Violation Decisions:

The arbitrator will consider the following when determining financial liability ~

  • Was there a rule violation and a resulting financial loss
  • Was the cardholder’s complaint reasonable
  • Should the disputed amount be allocated between the two parties

When facing a Chargeback, Arbitration or Compliance claim keep in mind…

When a merchant is facing a Chargeback claim, Arbitration request or Compliance Violation charge, the most important thing to remember is to respond quickly and accurately with sufficient supporting documentation to defend your business. Failure to respond by the stated deadlines is an automatic forfeiture of the transaction which means you will lose the full transaction amount and could be subject to fines.


For more information on chargeback compliance please call (800)917-8026.

Tags: Chargeback Compliance, Credit Card Fraud, Chargeback Defense, Chargebacks

Chargeback Overview | Part 1 of 2

Posted by Alex Neir on Tue, October 18, 2011 @ 12:40 PM


What is a Chargeback?

A Chargeback is the process whereby a customer disputes a credit card charge. The chargeback usually occurs after the customer receives their billing statement and does not recognize the charge, is dissatisfied with the quality or service, or did not receive what was guaranteed. Generally, the customer will call the credit card company directly to initiate the chargeback without prior notification to the merchant.

What is the Chargeback process?

The bank has a time limit by which to initiate a chargeback. Within 120 days of the transaction date, the merchant will be advised that the cardholder or bank is claiming a mistake has been made and is attempting to have the charges removed from their statement. The merchant’s account is then debited for the amount of the charge and the merchant must provide evidence that the transaction was valid and in compliance with Visa and MasterCard rules and regulations.

Typical Chargeback justifications:

  • Authorization not obtained for transaction
  • Fraudulent or Duplicate charges
  • Dispute over Quality, Service or Delivery
  • Refund credit not received

5 Steps in the Chargeback Cycle:

  1. Presentment: The Presentment is the date at which the sale or transaction occurs.
  2. First Chargeback: When the customer disputes a charge to their Credit Card Company or bank and the bank responds with a retrieval request to dispute the transaction. The First Chargeback is the point at which the merchant and their bank receive notification from the cardholder’s issuing bank. The merchant has 7 days to rebut, however, the merchants account is debited for the disputed amount until the chargeback is resolved.
  3. Second Presentation or Re-presentment:  The Second Presentment occurs when the merchant’s bank receives supporting documents from the merchant to substantiate the charge and, provided the documentation complies with Visa and MasterCard requirements, the chargeback is remedied. In some cases additional documentation may be required. If the chargeback is cleared then the merchant will be credited back the disputed amount and a letter will be sent to that affect. If the documentation does not satisfy their requirements then the merchant will receive a letter from Visa and MasterCard stating their decision and reasoning. This process can take up to 45 days.
  4. Second Chargeback: If the second presentment is rejected by the cardholder, the issuing bank files a second chargeback. At the time of the Second Chargeback the merchant can dispute the cardholders claim and, if necessary, escalate to Arbitration.
  5. Arbitration: Arbitration is the process the merchant and cardholder/issuing bank resort to when they cannot reach agreement through the chargeback process. All parties have an opportunity to present their case to a Visa and MasterCard analyst. Arbitration cases must be filed with Visa and MasterCard within 45 days of the Second Chargeback being issued. A Visa and MasterCard Arbitration form must be completed, along with a description of the grievance, and copies of all documentation submitted during the chargeback process. The losing party could be liable for fines of up to $500.00.  Additionally, there is a Filing fee of $150.00 and a Review fee of $250.00 paid by the losing party (fees subject to verification). Either party can be assessed a $100.00 fine for each technical violation against the opposing party.

Who Wins?

If you end up in Arbitration, there are several criteria the arbitrator will consider. Split decisions happen when one party offers a reasonable compromise or solution to the disputed charges. Merchants usually get an unfavorable ruling if:

  • The merchant fails to address the issues raised by the cardholder
  • The merchant fails to sufficiently prove that the dispute was unreasonable
  • The merchant fails to present sufficient documentation to support their case
Maxx Merchants offers numerous tools to help prevent and manage chargbacks. If you would like more information please don't hessitate to call out friendly staff at (800)917-8026.

Tags: Credit Card Fraud, Chargeback Defense, Chargebacks

How long should a business keep credit card receipts?

Posted by Alex Neir on Tue, April 26, 2011 @ 02:48 PM
Credit Card Receipts

How long should a business keep credit card receipts?

This is a very common question most businesses forget to ask once their credit card processing account has been approved and set up. Retaining credit card receipts for too long can become cumbersome and difficult. Retaining credit card receipts for too short a period can expose the business to liability.

The main reason your business needs to hold onto the transaction receipt signed by the customer is to fight chargebacks. A chargeback is the process of a customer disputing a charge that shows up on their credit card statement. There are many reasons customers chargeback against a business. Some reasons include; incorrect products or service received, fraud, unrecognized charge, etc. When a chargeback is initiated against your business the only defense is a signed copy of the sales receipt which includes the customer’s signature. The bank will use the credit card receipt to match the signature they have on file.  

Another important aspect of retaining credit card receipts is for tax purposes. Only your accountant can advise you on the retention period relative to taxes but typically 7 to 10 years is sufficient.

The statute of limitations pertaining to customer initiated chargebacks is 18 months from the time the transaction appears on the statements. So, for chargeback purposes it is important to keep you business credit card receipts for 18 month.

Tags: Chargeback Defense, Credit Card Receipts, Chargebacks

What are chargebacks?

Posted by Alex Neir on Thu, February 24, 2011 @ 01:40 PM

What are chargebacks?

A chargeback is the process in which a customer contacts their credit card issuing bank to dispute a charge on their credit card bill. All credit card holding patrons have the right to initiate a chargeback as it is part of the contract between the issuer and card holder. The chargeback process was established to protect card holders from the liability associated with stolen credit cards.

The chargeback process begins with the customer contacting their bank to dispute a charge. A dispute may arise from any number for reasons, as few are - an unknown or unauthorized charge, product delivered did not match what was advertised, the list goes on and on. Once a chargeback has been opened with  the card issuing bank an investigation take place. The bank will call the merchant involved with the charge to determine the nature of the issue. In the case where the charge is disputed due to an unauthorized charge the merchant will be given the opportunity to prove that the charge was authorized. Typically the merchant’s best defense is a signed sales receipt or credit card authorization for the transaction. If the signature on the sale receipt or authorization matches the signature on file with the bank the merchant will usually win the dispute.

Card holders or customers have up to 18 months from the time the charge shows up on their statement to chargeback the transaction. So, it is VERY important for merchants to hold on to their sales receipts and authorizations for 18 month from the time of the sale.

Tags: Merchant Account Education, Chargeback Defense, Chargebacks