MasterCard started their efforts in October 2018 to make some changes to their chargeback process to simplify and speed up disputes. Some of these changes included:
First Phase: Requiring Issuers to request more information from their Customers for the following chargeback claim categories:
– 4863 – Cardholder does not recognize
– 4853 – Cardholder dispute (for recurring billing and digital goods)
– 4834 – Point of interaction error
– 4831 – Incorrect transaction amount/transaction amount differs.The goal with this first initiative was to reduce invalid chargebacks filed by Customers.
Second phase: Changes was initiated in April 2019, and this time mostly impacting Merchants. If a Merchant happen to initiate a refund after the first chargeback, the new rules stipulate this will result in double loss to Merchant. Previously this scenario was resolved with a compliance/pre-compliance filing for unjust enrichment. It is important for Merchants to keep track of their Customer Service records and communication to Customer to avoid a “double refund”. Customer Service Management should be trained on how to check system for chargebacks and ask Customers if they have already spoken to their Bank. Customers need to be informed that it can take days for refunds to post to their account and be patient during this process. If Merchant process refund before date of first chargeback filed, most processors will auto-dispute if a matching refund for full amount in the system. Partial refunds however will not trigger auto-dispute and this is also the case for inter-regional transactions, when Issuer apply a currency exchange causing the amount of chargeback to be different than the original sale and full refund amount. To recover the loss, Merchants need to be proactive and initiate their own dispute for such chargebacks.Other changes implemented was reducing the filing time frame from 120 to 90 days for Issuer filing reason code 4834 – Point of Interaction. Additionally, the following reason code 4840- Fraudulent processing of transactions, has been removed from the system and 4863 – Cardholder does not recognize, was scheduled to be removed but later postponed to April 2020.
Third Phase: The upcoming changes in effect October 2019, have not yet been announced by MasterCard. Their aim is to shorten and simplify the dispute process for most reason codes, and ultimately mirror VISA claims resolution (VCR) by implementing pre-arbitration filing instead of 2nd chargebacks. These final implementation changes to MDRI will be pushed out April 2020. For more information on MasterCard chargebacks, click here for their most recent chargeback guideline.
So far the changes implemented by VISA and MasterCard has not been a big improvement from Merchants perspective, and some even report the process being more confusing and difficult, and that they have less time to submit disputes. To make the dispute process work, it is important Merchants have access to an online dispute system, allowing them to manage the process and receive the notifications in a timely matter.
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Premier Payments Online can help with chargeback and representment process, regardless of the Acquirer/Merchant service provider used.