Chargebacks

A chargeback is a transaction that is disputed by a cardholder or issuer. Chargebacks may happen for a variety of reasons: the most common are returns of goods, cancelled services, quality disputes or processing errors, and fraud.

Chargebacks can be a costly part of accepting card payments and entail administrative hassle for merchants. However, the risk of a chargeback can be managed by making sure that the customer is satisfied with their service and purchase, and that payment processes are followed correctly.

Below you will find a list of tips and best practices to reduce the hassle and cost of chargebacks.

Make sure that Chip & PIN cards - Europay, Mastercard and Visa (EMV) - are processed on EMV terminals so that the customer is asked to enter their PIN and verify the transaction at point of sale.

It is important to pay particular attention during swiped transactions: while verifying the customer's signature, merchants should check the card acceptance method displayed on the receipt. If the receipt displays a 'Keyed' or 'No cardholder verification' reference, or an asterisk sign, there is a risk that the payment card has been cloned. If there is a risk a card has been cloned, merchants are recommended to void the transaction and ask for payment in cash.

Failure to process a transaction correctly may result in the following chargebacks:

Fraudulent transaction – counterfeit card
Fraudulent transaction – card present environment

Commonly known as ‘card not present’ transactions, mail order (MO), telephone order (TO), and online transactions (collectively 'MOTO') are at greater risk of generating chargebacks than card present transactions. Here are some ways to reduce the risk of chargebacks for fraudulent or unauthorised mail, phone, or online transactions:

• 3D Secure transactions – if you run an ecommerce business and accept online payments, you should ask your ecommerce provider for a 3D Secure transaction authentication system. Used correctly in conjunction with a cardholder’s security code, 3D Secure (3DS) offers a robust level of security and a significant degree of protection from card not present fraud chargebacks


• Limiting MOTO – MOTO are higher risk transactions. Merchants should bear in mind that there are no measures or controls that can fully secure MOTO transactions against chargebacks.


• Keep a transaction record – By maintaining a record of your customers’ transactions, you may be able to identify high-risk transactions and disallow future purchases.
  


• Address Verification Service (AVS) – AVS is a fraud reduction service that allows merchants to verify a cardholder’s address prior to completing a sale. The AVS response informs merchants whether there is full, partial, no match, or no bank participation during the address verification stage of a card payment. Remember, you should always ask the cardholder for their billing address and ensure that it is a full match.


• Know your customer – Establish a process to gather information on your customers, and implement a suitable record-keeping system to store that data. The more you know about your customers, the more likely you are to spot transactions that do not match their risk profiles.


• Customer service phone number – Make sure your customer service phone number is printed on the receipt. This makes it easier for customers to resolve disputes by phone rather than through the chargeback process. Bear in mind that card not present transactions may only be fully secured with the 3D Secure standard.


• Corresponding trading name – To avoid confusion after settlement, make sure the trading name of your company matches the name that appears on cardholders’ bank statements.


• CVV2/CVC2 security – Both Visa and Mastercard® have the CVV security feature printed on the back of their card. Merchants can use CVV2/CVC2 verification as an additional security check. CVV2/CVC2 verification alone is not guaranteed to prevent a chargeback and it is highly advisable to use it in conjunction with other security measures.
  


• Bank Identification Number – Learn to recognise the card issuer’s Bank Identification Number (BIN), which is the first six digits of the card number. If a card was not issued in the cardholder’s country of origin, we suggest you do not accept it. You may contact Elavon to verify the issuing bank country, or use a BIN verification website.

Failure to process a card not present transaction correctly may result in the following chargebacks:

• No cardholder authorisation
• Cardholder does not recognise

Other fraud - Card absent environment

A properly identified DCC transaction receipt should contain:

• Local amount and currency
• DCC amount and currency (followed by the words ‘transaction currency’)
• Exchange rate
• The mark-up % displayed on the line underneath the exchange rate. For EEA transactions, the mark-up is a certain amount above the ECB rate, such as ‘3.72% over ECB rate’. For non-EEA transactions, display the mark-up as a percentage, such as 3.5%.
• A disclaimer that is easily visible to the cardholder, written as follows:
• ‘I have been offered a choice of currencies and have chosen to accept DCC and pay in <<DCC currency>> at today’s exchange rate.'

• 'DCC provided by Elavon Merchant Services. Elavon Merchant Services receive Foreign Exchange Transaction Services from U.S. Bank.'


• The cardholder must actively make a selection (for example checking a box or pressing a button) when choosing DCC - the DCC option must not be pre-selected. Before authorisation, cardholders should be informed that DCC is a service provided by the merchant or acquirer.


• In response to a DCC-related chargeback, the merchant should provide a copy of the Transaction Receipt and evidence that the Cardholder actively chose DCC.

Failure to process a DCC transaction correctly may result in the following chargebacks:

• Point of interaction error
• Incorrect currency

To avoid chargebacks from cancelled recurring transactions, merchants should take immediate action when notified by a customer.

Merchants should stop processing recurring transactions as soon as the cardholder withdraws their permission to charge the account on a regular basis.

Failure to process recurring transaction cancellations correctly may result in the following chargebacks:

• Cancelled recurring transaction.

A cardholder may ask a merchant to provide a copy of a transaction receipt: this process is known as a retrieval. A retrieval notification always includes a deadline date: it is important that merchants send a copy of the requested receipt no later than this date.

To prevent credit not processed chargebacks, it is important to process customer refunds quickly.

Remember that each refund should always be processed on the same card as the original transaction. Failure to do so carries a high risk of financial loss.

Customers should always be made aware of your cancellation or refund policy in writing prior to payment - and should confirm their acknowledgement of the policy. Be sure to have your refund/cancellation policy clearly printed on the transaction receipt.
If you use a website to sell goods and services, your refund and cancellation policy should be displayed on your checkout screen. Customers should confirm their acceptance of the policy by checking a box or clicking an “I agree’’ button prior to completing the transaction.

If you do not give refunds, or offer in store-credit only, this information should also be included on your transaction receipt.
Please bear in mind that you should process credits within 15 days of the date that goods were returned by the cardholder.

Failure to handle credit not processed transactions correctly may result in the following chargebacks:

• Credit not processed
• Cancelled service

After swiping a card or manually key-entering card details, make sure the embossed card number and the displayed account number match. Print the full account number on all phone and mail orders. It is often advisable to ask phone customers to read back the full card number to ensure accuracy. If card authorisation is declined by the issuing bank, ask the customer for a different payment method.

Non-matching transactions can result in the following chargebacks:

• Account number not on file
• Non-matching account number on your transaction receipt.

If a customer does not receive their goods or services, a non-receipt of goods chargeback may occur.

To avoid this type of chargeback, merchants should obtain signed proof of delivery for all goods or services not immediately received at the point-of-sale. Here are some helpful tips to manage the delivery of goods and services:

Delayed delivery – If a sale is described as delayed delivery on the transaction receipt, it is useful to process the relevant transactions before delivery of the goods or services. You may not process a deposit or a balance transaction receipt before the delivery of the goods or services.

Prepayment – You may process a prepayment transaction if you advise your customer that they will be billed immediately. You may also process a full prepayment for custom order goods (that are manufactured to the customer’s specifications).

Delivery date and conditions – If the date of delivery for goods or services is not specified, you have 15 calendar days from the transaction date to deliver them. Make sure that the goods or services were received by the cardholder (or authorised person) on an agreed date or at an agreed location.

Transactions in which goods or services are not received can result in the following chargebacks:

• Non-receipt of merchandise
• Service not rendered

A decline code indicates that the card issuer does not approve a transaction. Do not continue to attempt authorisation on the card by reducing the amount requested or repeating the request. When you receive a decline code, you should return the card to the customer and ask for another form of payment.

If you are suspicious about a card transaction, contact your voice authorisation centre and request a Code 10 authorisation. The operator will ask you a series of yes or no questions. You will then be given information on how to proceed with the transaction.

If you did not receive authorisation for the full transaction amount do not attempt to obtain authorisation for one in smaller amounts in order to shift the payment below your floor limit.

Authorisations must be obtained on the transaction date unless:

1. You are a hotel, car rental, or cruise line company.
2. The authorisation is for a delayed delivery transaction.
3. The authorisation is for a MOTO transaction.
4. The authorisation is for an online ecommerce transaction (in which case, the date of Authorisation and the Transaction Date may differ).

If you see a Call Authorisation, Referral B message on your terminal screen, do not proceed with the payment before contacting Elavon’s Authorisation Line.

Failure to follow authorisation procedures correctly can result in the following chargebacks:

• Authorisation related chargeback
• Declined authorisation
• No authorisation

To avoid duplicate transactions that can result in multiple chargebacks you should:

• Process one transaction at a time through your point of sale terminal.
  
• Balance your deposit at the end of the day.
• Create a separate invoice describing each purchase if your customer makes more than one purchase in a day, or makes purchases in duplicate amounts.
• Check your batch totals at the end of every shift or business day to ensure that your customers were not charged twice.
• If you discover that a customer was charged twice in error, you should immediately credit the cardholder’s account.

Failure to handle duplicate transactions correctly may result in the following chargebacks:

• Duplicate processing
• Payment by other means

A decline code indicates that the card issuer does not approve a transaction. Do not continue to attempt authorisation on the card by reducing the amount requested or repeating the request. When you receive a decline code, you should return the card to the customer and ask for another form of payment.

If you are suspicious about a card transaction, contact your voice authorisation centre and request a Code 10 authorisation. The operator will ask you a series of yes or no questions. You will then be given information on how to proceed with the transaction.

If you did not receive authorisation for the full transaction amount do not attempt to obtain authorisation for one in smaller amounts in order to shift the payment below your floor limit.

Authorisations must be obtained on the transaction date unless:

1. You are a hotel, car rental, or cruise line company.
2. The authorisation is for a delayed delivery transaction.
3. The authorisation is for a MOTO transaction.
4. The authorisation is for an online ecommerce transaction (in which case, the date of Authorisation and the Transaction Date may differ).

If you see a Call Authorisation, Referral B message on your terminal screen, do not proceed with the payment before contacting Elavon’s Authorisation Line.

Failure to follow authorisation procedures correctly can result in the following chargebacks:

• Authorisation related chargeback
• Declined authorisation
• No authorisation

Best practices for managing documentation that may be required during the chargeback process are as follows:

• Keep a record of your sales drafts for at least 18 months.
  Ensure all required documentation is legible
• Make your transactions easy to identify: some chargebacks happen because the customer does not recognise the transaction on their card billing statement. It can be helpful to make clear to your customers what business name they can expect to see on their statement.
  
• Add your customer service telephone number to the statement narrative: if you add your phone number to the city/state field, it will show on the customer’s statement so that they can easily contact you directly with transaction queries. Please contact Elavon Customer Services to set this up.
• When dealing with card not present transactions (MOTO), you will need to provide all available information regarding the disputed transaction. The required information may vary depending on your Category Code and transaction specifications.

Cardholder Authorisation – You are required to obtain permission from the cardholder prior to charging the card. The onus is on you to prove permission was obtained.

Authorisation Code – The Issuing Bank’s approval for the transaction, confirming the card is valid at the moment of the transaction and that sufficient funds are available. The Authorisation Code does not guarantee the payment and does not defend from chargeback.

Card Not Present (CNP) Transactions – You are liable for all keyed/order and telephone transactions (MOTO). Internet transaction liability will vary depending on the transaction authentication method used: when 3D Secure (verified by Visa/MasterCard Secure) is used, liability for authenticating the transaction shifts to the Card Issuer.

Documentation – The documentary evidence which you must present within a required time frame in response to a retrieval or chargeback notification. If evidence is not provided as requested, Elavon will not be able to defend the chargeback.

Chargeback Fee – The contractual fee that applies to every debit imposed due to a chargeback case on your account.

Fees – Elavon has the right to pass the compliance, arbitration, and other fees imposed by Card Schemes, onto you.
No Shows: In the event of a hotel guest no show, merchants can charge for a one night stay only. The full amount cannot be charged, unless the merchant can prove that the cardholder accepted specific terms and conditions before finalising the reservation.

Refunds – A refund can only be processed on the card initially presented for payment. If possible, the refund should be equal to the value of the original sale. Under no circumstances must a cardholder be given a refund by any other means, such as by cash or bank transfer.

Splitting Transactions – The processing of more than one transaction for a single purchase in order to obtain authorisation is not permitted under Card Schemes rules, and must not take place under any circumstances: one transaction, one authorisation code.

Note
To ensure chargeback and retrieval cases are addressed promptly, please ensure all requested documentation supplied to the Elavon Chargeback Team is legible and sets out all requested information. You are contractually obliged to retain transaction documentation for a minimum period of 13 months from processing date.