Handling Debit Card Chargebacks - prodevmedia.com Debit Card Chargebacks. Learn the rules and...

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Handling Debit Card Chargebacks Learn the rules and procedures for signature-based transactions. Diana Kern, AAP Senior Trainer

Transcript of Handling Debit Card Chargebacks - prodevmedia.com Debit Card Chargebacks. Learn the rules and...

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Handling Debit Card Chargebacks

Learn the rules and procedures for signature-based transactions.

Diana Kern, AAPSenior Trainer

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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.

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What we’ll cover:

Define and level-set Issuer’s role; responsibilities Common scenarios & reasons Next steps Related rules and tips

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WHAT IS A CHARGEBACK?

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Relationships Governed

Chargeback Rules•Issuer•Acquirer

Federal Regulations•Issuer•Accountholder

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ISSUER INVESTIGATION

• Dispute reason• PIN- or

signature-based?• Card present or

card-not-present (CNP)?• eCommerce

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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?

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MERCHANT CONTACT REQUIREMENT

If the cardholder engaged in the transaction, it’s not a fraud-related dispute

• Contact merchant prior to chargeback– Via phone, email, in-person, or web site are options– Document the steps taken– Specify how the attempt was made and the result– For example

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PIN-based transactionsGENERAL 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

DISPUTES WHEN PIN AUTHENTICATED

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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 (emails, faxes, and etc.)– Proof of shipping or return– Any other document that supports your

cardholder’s case

ISSUER RESPONSIBILITIES

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Submit the chargeback request

CONSULT YOUR NETWORK OR PROCESSORFOR 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

ISSUER RESPONSIBILITIES

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OVERVIEW OF THE CHARGEBACK CYCLE

Retrieval Request, if needed(issuer)

Chargeback: 45, 60, 90 or 120 days

(issuer)

Representment: 45 days

(acquirer)

Second Chargeback: 45 days(issuer)

Arbitration: 45 days(acquirer)

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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)

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Card present, attended terminalCARD WITH MAGNETIC STRIPE, NO CHIP

Card swiped Signature obtained or not required by

special merchant program Common POS entry modes

– 02 or 90 = mag stripe read– 01 = key entered

No chargeback rights Internal documentation?

UNAUTHORIZED CARD USE/FRAUD

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Card present, attended terminalCHIP CARD, MAGNETIC STRIPE READ

Relates to October 1, 2015, EMV liability shift Acquirer/merchant liable if has the “lesser technology” Chip POS entry modes include ‘05’ and ‘95’ Example: your chip card + POS entry mode of ‘90’ =

chargeback rights/chip liability shift for counterfeitfraud transactions

Submit chargeback within 120 days Cardholder letter or form supplied by

processor/network– Visa allows issuer “certification”

UNAUTHORIZED CARD USE/FRAUD

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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

UNAUTHORIZED CARD USE/FRAUD

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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’

3D SECURE: ONLINE AUTHENTICATION

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•Defective merchandise/Not as described•Merchandise or service not received•Canceled services, merchandise or reservation

Reasons include

•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

Steps to resolution and variables

•Cardholder letter or equivalent form provided by your processor•Proof of good faith attempt

Documentation needed

CARDHOLDER DISSATISFACTION SCENARIOS

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MasterCard has none Visa

– Travel and entertainment merchants $25– AFD transactions $10 applies only to ‘Fraud-Card

Present’ reason– None for other merchant types or reason codes

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

MINIMUM CHARGEBACK AMOUNTS

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What happens next?

How long before feedback

is available? How do you get status updates?

What reports are available for

monitoring?

MONITOR CHARGEBACK STATUS

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Re-presentment by merchant– 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

Pre-arbitration/Arbitration Pre-compliance/Compliance Rights

NEXT STEPS

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MasterCardQUICK PAYMENTS SERVICE

Ticket amount $25 or under (US)

SMALL TICKET MERCHANT PROGRAMS

VisaEASY 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

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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 for chip cards yet Counterfeit chargebacks only for amount

in excess of $100 Lost or stolen chargeback rights regardless

of amount; no signature obtained

AUTOMATED FUEL DISPENSERS

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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

CARDHOLDER LIABILITY

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IMPORTANT THINGS TO KNOW

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• Status a card HOT any time a cardholder claims unauthorizedtransaction 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

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HOW TO LEARN MORE

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• Members-only site for the brand you issue– MasterCard Connect www.mastercardconnect.com– Visa Online www.visaonline.com– 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– https://www.mastercard.us/en-us.html– https://usa.visa.com/

• Ask your processor or network about chargebacks training available to learn their specific procedures

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CONTACT INFORMATION

Diana Kern, AAPSenior TrainerSHAZAM, Inc.

6700 Pioneer ParkwayJohnston, IA 50131

[email protected]

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Handling Debit Card Chargebacks

Q & A