Handling Debit Card Chargebacks

Transcription

1 Handling Debit Card Chargebacks Rules, Rights and Best Practices Diana Kern, AAP Senior Trainer

2 Disclaimer: The following does not constitute legal advice. The information provided herein may not be applicable in all situations, should not be treated as legal advice, and should not be acted upon without specific legal advice from your counsel based on the facts and circumstances of your institution. SHAZAM makes no representations or warranties as to the accuracy or completeness of this information. 2

3 WHAT IS A CHARGEBACK? 3

4 Relationships Governed Chargeback Rules Issuer Acquirer Federal Regulations Issuer Accountholder 4

5 ISSUER INVESTIGATION Dispute reason PIN- or signature-based? Card present or card-not-present (CNP)? ecommerce 5

6 EXAMPLE QUESTIONS FOR CARDHOLDERS Which transaction(s) is/are you disputing? What is the reason for your dispute? Do you have your card in your possession? Did you let someone borrow or use your card? When did you cancel the transaction(s)? Did you engage in the transaction(s), or receive any goods or benefits as a result of it? Have you attempted to contact the merchant? 6

7 MERCHANT CONTACT REQUIREMENT If the cardholder engaged in the transaction, it s not a fraud-related dispute Contact merchant prior to chargeback Via phone, , in-person, or web site are options Document the steps taken Specify how the attempt was made and the result For example 7

8 DISPUTES WHEN PIN AUTHENTICATED PIN-based transactions GENERAL PROVISIONS Fraud-related disputes PIN approved as valid by the issuer No right of return to acquirer Non-fraud-related disputes CB allowed, examples Incorrect amount Duplicate posting Subject to representment Process & rules specific to brand 8

9 ISSUER RESPONSIBILITIES What documentation is needed? SUPPORT YOUR CASE; RESEARCH One of these needed for most reason codes Cardholder letter Dispute form provided by your processor Only if applicable Receipt(s) Confirmations ( s, faxes, and etc.) Proof of shipping or return Any other document that supports your cardholder s case 9

10 ISSUER RESPONSIBILITIES Submit the chargeback request CONSULT YOUR NETWORK OR PROCESSOR FOR SPECIFIC PROCEDURES Is your procedure to submit on paper or electronically? Are any forms needed in addition to the required chargeback documentation? Get confirmation that your submission was received 10

11 OVERVIEW OF THE CHARGEBACK CYCLE Retrieval Request, if needed (issuer) Arbitration: 45 days (acquirer) Chargeback: 45, 60, 90 or 120 days (issuer) Second Chargeback: 45 days (issuer) Representment: 45 days (acquirer) 11

12 OVERVIEW OF THE CHARGEBACK CYCLE Retrieval Request, if needed (issuer) Arbitration: 60 days from representment (allowing 30 days for Pre-Arb) (issuer) Chargeback: 75 or 120 days (issuer) Pre-Arbitration: 30 days from representment (issuer) Representment: 45 days (acquirer) 12

13 ENTRY MODES FOR CARD INFORMATION Point-of-sale (POS) or Primary Account Number (PAN) Entry Mode Tells you how the card data was obtained Contained in the authorization message Common field values 01 Manual key entry 02 or 90 Magnetic stripe read 05 or 95 Chip read 07 Contactless, using chip data rules 91 Contactless, using magnetic stripe rules 81 Electronic commerce (MC) 13

14 UNAUTHORIZED CARD USE/FRAUD Card present, attended terminal MAGNETIC STRIPE ONLY CARDS Card swiped Signature obtained or not required by special merchant program Common POS entry modes 02 or 90 = mag stripe read No chargeback rights Internal documentation? 14

15 UNAUTHORIZED CARD USE/FRAUD Card present, attended terminal CHIP (HYBRID) CARD, MAGNETIC STRIPE READ Relates to October 1, 2015, EMV liability shift Acquirer/merchant liable have lesser technology EMV terminal capability codes include 05, 08 & 95 Magnetic stripe read = POS entry mode 90 Chip non-emv terminal = chargeback rights/chip liability shift for counterfeit fraud transactions Submit chargeback within 120 days Cardholder letter or form supplied by processor/network Visa allows issuer certification 15

16 PROVISION EXCLUSIVE TO MASTERCARD Acquirers assume lost, stolen, and never-received-issue fraud-related liability if a hybrid PIN-preferring card is used at a terminal that is not a hybrid PIN-capable POS terminal or where the PIN pad is not present or not working. 16

17 UNAUTHORIZED CARD USE/FRAUD Card-not-present (CNP) HYBRID OR MAGNETIC STRIPE ONLY CARD Authentication tools such as Address Verification & CVV2/CVC2 helpful, but not foolproof Merchant s use of MasterCard Secure Code or Verified by Visa prevents their liability Submit chargeback within 120 days Cardholder letter or form supplied by processor/network Visa allows issuer certification Have an expectation of representment 17

18 3D SECURE: ONLINE AUTHENTICATION Optional for online merchants to offer, and for issuers to enroll bank identification number (BIN) Effects chargeback liability when offered by merchant When BIN enrolled, issuer authenticates the cardholder s password during authorization; therefore no chargeback rights When BIN not enrolled but merchant offers, also no chargeback rights View transaction data to determine if used MasterCard field UCAF Visa field CAVV 18

19 CARDHOLDER DISSATISFACTION SCENARIOS Reasons include Defective merchandise/not as described Merchandise or service not received Canceled services, merchandise or reservation Steps to resolution and variables Chargeback within 120 days Does the dispute meet Regulation E definition of error? Good faith attempt to resolve with merchant required Representment possible, even likely Documentation needed Cardholder letter or equivalent form provided by your processor Proof of good faith attempt 19

20 SPECIAL RULES & LIMITS MasterCard Max number CBs per PAN fraud-related reason is 15 Visa $25 limit counterfeit EMV-related CBs Max number CBs per PAN w/in 120 days 10 for counterfeit Travel and entertainment merchants $25 AFD transactions $10 minimum applies only to Fraud-Card Present reason Limits set by issuer Consider processor or network fees Consider MC or Visa fee Consider soft costs including staff time spent Commonly set between $25 and $50 20

21 MONITOR CHARGEBACK STATUS What happens next? How long before feedback is available? How do you get status updates? What reports are available for monitoring? 21

22 RE-PRESENTMENT Merchant re-submits the charge AKA SECOND PRESENTMENT Allowed within 45 days of the chargeback Supporting data could include A card imprint to prove it was present + a signature Proof that a service wasn t canceled or merchandise was delivered Merchant rebuttal statement Monitor communications and reports from your processor to determine next steps 22

23 SMALL TICKET MERCHANT PROGRAMS MasterCard QUICK PAYMENTS SERVICE Ticket amount $25 or under (US) Visa EASY PAYMENT SERVICE Ticket amount varies by merchant category code $25 or under (US) $50 or under (US) Merchant types include fast food, convenience stores, video stores, pharmacies, parking garages, tollways, and more Lack of signature doesn t improve chargeback position 23

24 AUTOMATED FUEL DISPENSERS Using the credit option Merchant category code (MCC) 5542 $1.00 authorization allows merchant up to $100 of fuel purchase per transaction No liability shift yet (Oct 2017) Counterfeit chargebacks only for amount in excess of $100 Lost or stolen chargeback rights regardless of amount; no signature obtained 24

25 CARDHOLDER LIABILITY Zero liability for cardholders MasterCard s rules have two basic conditions The cardholder exercised care in safeguarding the card from loss or theft Upon becoming aware of the loss or theft, the cardholder promptly reported it Visa has no stated conditions 25

26 ADDITIONAL IMPORTANT THINGS TO KNOW Status a card HOT any time a cardholder claims unauthorized transaction occurred Required when using certain reason codes, so make it a habit Know where to look so can provide that date if needed later Both brands require fraud reporting Regardless of chargeback outcome All stakeholders rely on industry statistics When possible, get your cardholder s story in his/her own words Have written policies and procedures for dispute handling, and follow them Easier and more efficient to support when everyone follows the same instructions Avoid the appearance of discriminatory practices 26

27 HOW TO LEARN MORE Members-only site for the brand you issue MasterCard Connect Visa Online Contact the account executive for your brand, or your network or processor to gain access Both also offer in-person and web seminars for dispute resolution and many other topics Public site for the brand you issue Ask your processor or network about chargebacks training available to learn their specific procedures 27

28 CONTACT INFORMATION Diana Kern, AAP Senior Trainer SHAZAM, Inc Pioneer Parkway Johnston, IA

29 Handling Debit Card Chargebacks Q & A