Chargebacks and
Retrievals General Overview
Agenda
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Retrieval Requests/Copy Requests Process Overview
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Chargeback Basics
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Arbitration Overview
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Pre-Compliance & Compliance Overview
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Good Faith Collection Overview
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Retrieval/Chargeback Statistical Volume
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ADRP – Automated Dispute Resolution Processing
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Four Top Chargeback Reason Codes – Conditions to Raise and Representment
Chargebacks
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Best Operating Practices to Reduce Chargebacks
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Retrieval Requests/Copy Requests
Overview
Why are copy requests initiated?
Usually the issuer will raise a copy request to help their cardholder identify a
transaction that has appeared on the cardholder’s bill that they do not
recognize. There are a few other reasons that are common as well. Sometimes
the cardholder needs a physical copy of the voucher for tax or other
identification purposes. Many times, the issuer is satisfying a requirement that
comes with raising a chargeback later, especially if they suspect fraud.
Regardless of the reason it is initiated, it’s important for merchants to respond
to all retrieval requests.
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Retrieval Requests/Copy Requests
Overview
How are copy requests different from chargebacks?
Copy requests are non-financial and chargebacks are financial: that is the
biggest difference. When a chargeback is initiated, it comes with an
automatic debit from the issuer to the acquirer that must be passed to the
merchant. When a copy request is initiated, it does not have an
accompanying debit – it is a request for information only.
It should be noted that non-response to a copy request grants the issuing
bank a chargeback right that they would not have available if the
copy request was answered within appropriate timeframes with
required information.
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Chargeback Process Flow
The Chargeback Process
9. Cardholder
Receives information resolving initial dispute
and may be re-billed for item
1. Cardholder
. Disputes transaction
. Contacts card issuer with disputed information
2. Card Issuer
Returns transactions (charges it back) to merchant
bank through Visa or MasterCard (electronically)
8. Card Issuer
Receives represented item and, if appropriate,
re-posts to cardholder's account. If chargeback
issue is not appropriately addressed, card issuer
may charge back the item a second time (MasterCard)
or initiate a pre-arbitration request (Visa)
Visa and MasterCard
7. Visa and MasterCard
Receives re-presented item and,
if appropriate, forwards it to card issuer
(electronically)
6. Merchant Bank Forwards represented
item to Visa or MasterCard(electronically)
Visa and MasterCard
3. Visa and MasterCard
. Reviews eligibility of transaction for
chargeback . If appropriate, forwards
chargeback to merchant bank
(electronically)
4. Merchant Bank Receives chargeback
and resolves issue, or forwards to merchant
5. Merchant. Receives chargeback
. If appropriate, and under certain conditions, can re-present chargeback to its merchant bank
. If conditions aren't met, merchant may have to accept chargeback
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Chargebacks Basics
Where exactly do chargebacks come from?
The cardholder’s issuing bank initiates a chargeback or copy request by
keying information through their system and attaching supporting
documentation (if required), which in turn is passed through the card
association to the merchant’s bank/processor. The merchant’s
bank/processor reviews the incoming chargeback to ensure rulecompliance, then passes it on to the merchant if all requirements have
been met.
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Chargeback Basics
Why are they initiated?
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There are a variety of reasons that chargebacks are initiated. The primary
reasons are cardholder-based, and include claims of fraud, that they are
due a credit, they are dissatisfied with the quality of services or
merchandise, they didn’t receive merchandise, they don’t recognize the
transaction or for cancellation of recurring transactions.
• There are also issuer-based disputes that can be initiated, primarily for
technical reasons when the issuer is in a position to take a loss on the
transaction. For example, the cardholder’s account is in a collection status,
and the merchant did not obtain a valid authorization when processing the
transaction.
• Processing issues are also a common reason why chargebacks are
initiated. These problems can occur from either the merchant’s end or on
the acquirer’s end.
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Chargeback Basics
What are the chargeback cycles?
• The first incoming cycle for Visa and MC is the chargeback dispute initiated by the
issuer/cardholder.
• If the item is invalid on the part of the issuer, or if the merchant provides a valid
response to the chargeback, then it can be represented back to the issuing bank.
• The next level of dispute for MC is called a second-cycle chargeback, and means
that the issuer/cardholder did not agree with the representment. If the merchant
chooses to continue disputing the issuer/cardholder claims, the case is sent prearbitration to the issuing bank notifying them of our intention to file the case with
MasterCard’s arbitration committee should they not accept our pre-arbitration
attempt.
• The next level of dispute for Visa is actually an incoming pre-arbitration. The issuer
is notifying our center of it’s intention to file the case with Visa’s arbitration
committee if we do not accept their pre-arbitration attempt.
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Arbitration Overview
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Arbitration is used when the issuer/cardholder and the acquirer/merchant
cannot agree about which party should be financially liable for a transaction
during the pre-arbitration stage.
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Visa - the issuers file the arbitration cases against the acquirer/merchant.
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MasterCard - the acquirer files the arbitration case against the issuer on behalf
of the merchant.
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Visa and MasterCard rule on the case filings. The losing member is
responsible for any filing fees
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Technical fees can also be assessed during this stage.
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Pre-Compliance &Compliance Overview
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Pre-Compliance can be initiated by the issuer or the acquirer, but is most commonly
raised by the issuer.
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Pre-Compliance is a part of the dispute process available when either member claims
that the other member violated card association regulations however they do not have a
chargeback right available to shift financial liability per their claim.
•
The issuer and/or the acquirer can choose to accept or decline an incoming precompliance case.
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If pre-compliance is declined, it can be filed as a compliance by either the issuer or the
acquirer.
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Cases filed compliance are sent to the associations for ruling.
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The association will rule in favor of either the issuer or the acquirer.
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The member that is deemed responsible for the case is required to pay the compliance
fees for both parties and any technical fees that pertain to the case.
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Good Faith Collection Overview
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A good faith collection case can be initiated by the issuer or the acquirer.
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Good Faith Collection is a level of the dispute process that is used when no
other avenue is available (chargeback, representment, or pre-compliance) to try
and resolve a claim for financial liability of a transaction, and is essentially
“asking” the other party to consider acceptance of that liability.
•
The issuer and/or the acquirer can choose to accept or deny an incoming good
faith collection case.
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There are no definitive time frames surrounding the good faith/collection
process.
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We will contact the issuer with a good faith collection letter and reminder letters
at 30, 60, and 90 days.
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If there is no response from the issuer after 120 days, the case is closed.
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Chargeback and Retrieval Statistics
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Approximately 58,000 incoming chargebacks per month
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Approximately 50% auto decisioning percentage for incoming cases
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Approximately 27% representment rate on first cycle chargebacks – 15% of which
are auto-represented back to the issuer without financial impact to the merchant
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Approximately 23,000 retrieval requests per month
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99.5% retrieval fulfillment rate which has contributed to industry awards received
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What a year’s worth looks like…
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2007 Volumes:
• 275,153 retrieval cases (9% increase over 2006)
• 694,487 chargeback cases worth over $196 million (10% increase over 2006)
• 33,971 pre-arbitration cases worth over $18 million (37% increase over 2006)
• 7,944 good faith cases
• 3,947 pre-compliance cases
• 414,804 quality control cases
• 371,502 indexed documents
• 153,058 incoming merchant calls (10% increase over 2006)
 The Chargeback team maintained an average of 1.8 days of inventory and
worked all chargebacks on average within 4.7 days from the date it was
received at NOVA
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Automated Dispute Resolution
Processing (ADRP)
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Our proprietary system designed specifically for working chargebacks and
retrievals with direct links to the card associations – updated regularly
Systematic chargeback edits for compliance of Visa and MasterCard operating
regulations
Auto-decisioning logic is built into the system
The system will allow processing in 14 currencies settled throughout 8 portfolios
worldwide
Systemic retrieval fulfillments with FSD (facsimile draft) when the retrieval is
received based on Visa/MasterCard eligibility
25 Day FSD fulfillments on any retrieval request still pending a merchant
response
System assigns chargeback and retrieval cases for manual work based on highest
dollar amount and oldest item, insuring cases do not go past timeframes
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ADRP Document Processing
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System generated letters print with a barcode used for auto indexing
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Autofax feature provides notification of Chargeback and Retrieval Requests the
same day they are processed. This feature also provides a second notice on all
retrieval requests faxed but not responded to within 15 days
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Connectivity with Associations allows systematic processing of incoming
cardholder documents
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All chargeback letters to merchant include a Preventative Tips letter to educate
merchants on avoiding chargebacks
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No Cardholder Authorization
Reason Code 4837
Chargeback Conditions:
• The cardholder states in writing that neither he, she, or anyone authorized by
him or her engaged in the transaction
• A face-to-face or non-face-to-face transaction took place and the card was
either not swiped or an imprint was not obtained at the time of the transaction
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No Cardholder Authorization
Reason Code 4837
Representment Conditions:
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Chargeback is improper or invalid
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Signed/swiped or imprinted sales draft showing cardholder participation. If cardholdersigned documentation cannot be provided, supply all compelling evidence supporting
cardholder participation such as:
 AVS (Address Verification Service) response code
 CVC2 (Cardholder Verification Confirmation) response code
 SecureCode transaction validation
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Transaction Not Recognized/Cardholder
Does Not Recognize Transaction 4863/75
Chargeback Conditions:
• The cardholder does not recognize a transaction showing on their credit
card statement
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Transaction Not Recognized/Cardholder
Does Not Recognize Transaction 4863/75
Representment Conditions:
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Documentation to assist the cardholder in identifying the transaction such as:
 A signed/swiped or imprinted sales draft
 A signed contract with card imprint
 An invoice
 Signed POD
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Fraud – Card-Not-Present Reason Code 83
Chargeback Conditions:
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The cardholder states in writing that neither he, she, or anyone authorized by him or her
engaged in the transaction
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A non-face-to-face transaction took place and the card was not swiped or an imprint was
not obtained at the time of the transaction
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Fraud – Card Present Reason Code 83
Representment Conditions:
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Chargeback is improper or invalid
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Signed/swiped or imprinted sales draft showing cardholder participation. If cardholdersigned documentation cannot be provided, supply all compelling evidence supporting
cardholder particiaption such as:
 AVS (Address Verification Service) response code
 CVV2 (Cardholder Verification Confirmation) response code
 Verified by Visa transaction validation
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Duplicate Processing Reason Code 82
Chargeback Conditions:
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The cardholder was billed more than once for a single transaction in error
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The transactions were processed by the same merchant location
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The transaction amounts and transaction dates do not have to be the same
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Duplicate Processing Reason Code 82
Representment Conditions:
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Proof of two valid transactions authorized by the cardholder
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Best Operating Practices to
Reduce Chargebacks
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Make sure cardholder statements reflect accurate transaction information including
the contact phone number for the MID (for assistance with updates or issues on this
point, contact MSP Support).
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Secure an authorization code for every transaction.
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Check point-of-sale devices before reprocessing transactions to help avoid
duplication processing.
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Respond to retrieval requests/copy requests in a timely manner.
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Utilize fraud-prevention tools and process transactions correctly according to
regulations.
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If you have any questions in relation to a retrieval or chargeback notice you have
received, please call the toll free number printed on the notice, or go through the
MSP Channel at 1-866-600-5008.
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