Article

Chargeback Q&A: Issues related to COVID-19

July 22, 2020

What type of documentation is acceptable from the card schemes if shipping is delayed to a region that is not taking in goods?

Shipping delays vary between the shipping companies and between geographies. Merchants can use a temporary blacklist to stop transactions from regions in which delivery is not possible. This should accompany a written statement on the merchant’s homepage and on product pages, informing customers of the situation.

How do you access an official government notice to provide as evidence of a shipping delay?

Shipping companies should be able to provide the latest details on delivery restrictions specific to the geography and the delivery timelines.

We are typically notified of chargebacks by mail, but our offices are closed. Can we request Worldpay to notify us by email?

Worldpay from FIS offers a chargebacks portal, which enables merchants to view their received chargebacks and provide their responses. Chargeback notifications by electronic means is an alternative to paper letters. Speak with your Worldpay from FIS relationship manager for more information.

Since the start of COVID-19, we are seeing chargebacks for "Late Presentment." Is there anything we can do to protect ourselves against these chargebacks?

Late presentment is a rare chargeback reason code and easily avoided by prompt processing. Ensure your transactions are sent for processing as soon after authorization as possible. If you have remote or non-electronic transaction capture you will want to work to speed up submission.

Is it possible to get a partial refund on a chargeback as we seem to only be able to request the full amount?

A partial chargeback is possible if the issuer chooses this, but also you can make a defense to a chargeback based on partial services having been rendered.

When was the biggest impact on businesses due to COVID-19? Is the impact similar across business types?

The current situation is volatile and judging the timing of the biggest impact depends on a merchant’s vertical. Travel companies, for example, have seen a 300 percent increase in chargeback issuances since February. For other verticals, though, the impact will hit later.

Why have you not extended your chargeback response turnaround time, especially with the increase in volume?

Timeframes to respond to a chargeback have not changed with Visa and Mastercard. As a result, our timeframes for you to respond to us have remained unchanged.

What's the best approach to take when you have goods being imported to countries that have closed customs due to COVID-19?

In general, merchants are not responsible for goods are being held by a customs agency in the jurisdiction of the cardholder. You will need to provide evidence of this as a defense to a chargeback for non-receipt of goods.

What would happen with a return flight booking where the return leg was cancelled but the outbound flight wasn't? Could a full chargeback be claimed on the basis that the outbound was no use without the return?

It would depend on how the plans in question were booked. If this was booked as part of the same transaction through an OTA or other third-party service, the customer may be able to file a dispute on both transactions. If they were purchased separately, though, the customer would not be entitled to a dispute.

It was mentioned that if circumstances prevent us from providing a service, we're protected from chargebacks if we offer alternatives; how does this protection work?

Updated Visa rules on chargeback protection mention that acceptable alternatives include credit vouchers and credit notes, which can be used for future travel opportunities. Fundamentally, the substitutions must be consistent with the terms and conditions of the original purchase. This would only apply in situations where the cardholder cancelled. If the merchant had to cancel, then the cardholder is not obligated to accept an alternative over a refund.

How do we handle chargeback requests when the customer is unsatisfied with the provided voucher which is in accordance with government regulations?

If the merchant in this case provides a voucher in accordance with government regulations and is “willing and able” to provide service, but is prohibited by government restriction, then the customer should not be eligible for a dispute. Under new rules adopted by Visa, for instance, this dispute would be considered invalid.

Is there significant fraud occurring within payment wallet applications like Google, Apple, Samsung and what recommendations do you have to mitigate this?

We have not come across significant fraud occurrences for these wallets. These wallets commonly have a built-in authentication process so if there is fraud it’s most likely friendly fraud. Merchants, however, need to have adequate fraud tools in place and understand their liabilities based on the capture methods of transactions. If a transaction is captured as unsecure then fraud liability shifts do not apply.

What are the specified deadlines for chargebacks?

Chargeback timeframes can vary dependent on the reason for the dispute. The timeframe to raise a chargeback is 120 days from the transaction processing date, or the date that goods/services were due to be delivered. Visa has a maximum exposure timeframe of 540 days from the transaction processing date. Mastercard has the same maximum for on-going services (memberships for example) but no maximum for goods/services that are to be delivered at future date. Upon receipt of a chargeback, if you wish to dispute, it is key that you respond in the timeframe set by us to enable us the best possible opportunity to defend on your behalf.

What do the new Visa rules mean to merchants for addressing first party fraud?

First-party fraud is a sub-set of friendly fraud where a customer regrets the purchase and falsely claims they made the purchase by accident or their child made the purchase without their permission. A lack of data on the issuer side generally allows the creep of friendly/first-party fraud – it is a relatively easy to make a chargeback for fraud for a non-secure card not present transaction. Providing data via services such as Deflector gives an opportunity to present your compelling evidence to the issuing bank enabling them to speak to the customer and avoid filing a fraud report and associated chargeback. Equally, being ready to defend chargebacks that you believe are unfair with compelling evidence is hugely important to show a pattern of behavior that you are not likely to just accept all chargebacks. Merchants will also be required to stop engaging in transactions with customers they believe are committing first-party fraud and prevent these customers from reopening accounts and re-authenticating the account if the first-party fraud was the result of account takeover.

Visa will require merchants to include the merchant contact details in the descriptors’ field printed on the cardholder’s account statement. This information is to be added to the “merchant location” field so the cardholder has an easy way to contact the merchant. Visa will provide quarterly reports to the merchant acquirer to notify the merchants who do not comply with this rule and have a higher dispute rate. Fines and penalties may be applied.

Many chargebacks are coming to our company from Worldpay with 14-day or 10-day deadlines. Worldpay is still delivering these by post and, as a result, we are receiving notification later than the end of the deadline. Are there any plans to adjust timeframes?

As a result of the Card Associations not amending their timeframes, we are unable to extend ours. Chargeback notifications via electronic means is an alternative to paper letters. If this is something you are interested in, please speak with your relationship manager. Additionally, this is where the Defender service is beneficial as it takes care of responding to chargebacks on your behalf.

We are in the tire business. Customers buy online and then bring their car to the store to have their tires fitted. Often, customers will fraudulently request a chargeback. We can never seem to defend against these because we're always told we don't have enough evidence that the cardholder received the goods. So, what evidence is required to successfully defend a chargeback and to prove the customer received the goods or service?

Some examples of valid evidence could include a photocopy of the customer’s license, along with a signed receipt verifying that the customer took possession of the tires. You may also be able to provide photographic evidence of the customer’s car with the tires installed. To minimize the fraud chargeback entirely, for online transactions, you should for be running the card as 3D secure, which gives a liability shift in your favor. Another alternative for the mail order/telephone type order transactions would be to take a deposit for the tires and then complete the balance as a Chip & PIN transaction when the customer is on site.

What are the current thresholds around Visa and Mastercard chargeback monitoring programs, due to COVID-19?

Thresholds have not changed and remain as they were pre-COVID-19. The Card Associations are mindful that transactions may have slowed while chargebacks have increased. As a result they have put in place steps to mitigate customers being put on monitoring programs.

How does Disputes Deflector work?

Dispute Deflector leverages VMPI and allows real-time collaboration with Visa issuers at the point a dispute is raised, but before a chargeback is filed. To find out how to get enrolled with Deflector, please contact your Worldpay from FIS relationship manager.

Is it recommended to apply a refund when we have already received a dispute and notify the acquirer about this move?

This is not recommended, as the customer has already received their funds via the chargeback cycle.

Did the payment providers try to get an extension on deadlines on behalf of their merchants? We have seen a huge increase in chargeback volume, and it is not realistic for merchants to comply with the deadlines.

We completely appreciate the situation our customers are in and we pushed hard on this issue. Unfortunately, due to the complexities of some Issuer, Acquirer and Scheme systems, deadline extensions were not deemed a feasible option. This is where the Defender service is beneficial as it takes care of responding to chargebacks on your behalf.

If a merchant offers a customer a voucher for future service and not a cash refund, is this acceptable?

In general you cannot force a customer to accept something unless your terms and conditions, or local law, allows you to do so. If you offer a voucher, you should record the customers’ acceptance of this as a defense to any later chargeback.

In what timeframe should we be refunding a cardholder where we have agreed to do so to avoid a Chargeback related to the transaction?

Scheme regulations generally advise that if a refund has been offered then 15 days must have passed (and refund not received) prior to raising a chargeback. That said, we are aware that many Issuers are mindful of the current situation and are holding out for longer periods before raising a chargeback. If you do expect there to be a delay on a refund to a customer, then the best policy to try and avoid a chargeback is to keep them up to date. If a customer is kept informed there is less chance of a chargeback.

Worldpay offers Portal, Defender and Deflector chargeback products. How can these be used and how do I find out more information?

These products are available now, please go to https://www.fisglobal.com/merchant-solutions-worldpay/products/disputes-solutions-suite or contact your relationship manager for more details.

Could you provide an example of a new schemes tool used in Dispute Deflector? When you talk about automated process, what do you mean by that? Could you illustrate it with a real example?

An example of Disputes Deflector will be the VMPI service from Visa. Worldpay integrates to this service, and then can either respond with refund decisions, depending on merchant settings, or with data, depending on the merchant integration to Deflector. Disputes Defender works by investigating merchant data and developing the defense document using that and artificial intelligence to best position the defense for the Issuer. Please contact your relationship manager for further details.

Is Deflector using VMPI and equivalent from Mastercard?

Yes, Deflector leverages VMPI and will include the Mastercard equivalent once available. To find out more, please contact your relationship manager.

We received a notification from VISA that we were above the limits of chargebacks. Shouldn't they be more flexible in this situation?

Visa is being flexible and suspended both the Visa Dispute Monitoring Program (VDMP) and Visa Fraud Monitoring Program (VFMP) specifically for merchants in the Travel & Entertainment (T&E) merchant category codes through the July Compliance cycle. Additionally, Visa Regional Risk teams are empowered to suspend and/or waive VDMP & VFMP fees for non T&E merchants that can demonstrate they have been directly impacted by the pandemic.

Mastercard have also made amendments to both their Excessive Fraud Merchant (EFM) and Excessive Chargeback Merchant (ECM) programs to support Merchants.

  • EFM – Effective April 1, assessments have been suspended for six months. Mastercard will continue to identify merchants with excessive fraud in the ecommerce space and we will continue to work with merchants identified to manage this. Beginning in November 2020, for violations occurring in October 2020, the assessments fees will commence.
  • ECM – Effective April 1, assessments have been suspended for four months for merchants identified as airlines, cruise lines, passenger railways and travel agents as it has been deemed these have been directly impacted by travel restrictions globally.

Likewise with Visa, an extension for Compliance to Mastercard standards to avoid assessments can be submitted to Mastercard if it can be clearly explained why/how a particular merchant has been impacted by any COVID-19-related events.

We have no idea how successful our challenges are or what we could be doing to present a stronger challenge. How do we get clear feedback regarding chargebacks that we challenge?

Worldpay from FIS is working to improve this process but as it stands you only know that a challenge is successful as your account either does not get debited, or you are re-credited for an item that has been charged back. If you have been debited for a chargeback that you feel is unjustified due to you replying with a response, please contact your Worldpay from FIS relationship manager who will be able to explain further details.

How should we dispute if the customer doesn't accept merchant refund processing fee?

The merchant refund processing fee is a cost that the merchant would generally be responsible for covering. Unfortunately, there’s no way to dispute this scenario.

When an acquirer sends through a chargeback, could they include the actual complaint?

We are working on ways to improve this process. For most disputes the “complaint” is quite straight forward and can be easily understood by the reason for the chargeback like “Fraud” or “Duplicate” charge, for example. In the rare situations where it is not clear, please call our Worldpay from FIS relationship manager who will be able to provide further insight.

Refund volumes are up, and some customers claim their cards are cancelled. But merchants wouldn't know this. And customers request refunds to alternate payment cards. How do we validate this? What if there's chargeback from the original card?

As a rule, you should never provide a refund to an alternate payment method. If you do, then the customer files a chargeback, there may not be any way to effectively dispute the charge. Even if the card in question is cancelled, you should still refund the amount to that payment method. If the customer requests a refund, the card issuer will have a mechanism to return the funds to the cardholder.

How do we know if we are in an identified sector and how will we know if our risk profile is being affected, either as an individual SME or as any industry sector?

The Payment Networks have identified airlines, hotels and travel sectors as being adversely impacted by chargebacks. We understand this is under constant review as the profile of customer claims evolves.

So if we mentioned a refund time frame to our customer, they should comply with the time frame and withdraw their chargeback application?

The rules or timescales have not changed. However, there is recognition that refunds are in some cases taking longer. Guidance to issuers is that they should show restraint in filing chargebacks where the merchant has outlined an expected timeline of refund to a cardholder. We see good evidence that issuers are abiding by this guidance.

Is it possible for Worldpay to provide a report as to what chargebacks are successfully disputed?

Worldpay from FIS isn’t advised by the card schemes when a Chargeback has been successful – we need to wait until the Issuer timeframes to respond have elapsed. Dispute Portal or Dispute Defender will help to have further insights into the chargeback status. To find out more, please contact your relationship manager.

Due to GDPR rules and regulations, it is usually very difficult to obtain information from airline/hotels stating if the cardholder flew or stayed at the hotel. How do we defend these chargebacks?

The GDPR highlights certain purposes that either “constitute” a legitimate interest or “should be regarded as” a legitimate interest such as Fraud Prevention. Please refer to the GDPR guidelines regarding exchanging data and to comply with the requirement.

There are many ways we can help during these challenging times. Please contact your relationship manager or reach out directly to learn how we can help your business.