Many merchants unaware of new chargeback fees

Most merchants are unaware of changes in chargeback resolution procedures – a knowledge gap that could prove costly for many, said Suresh Dakshina, president of Chargeback Gurus. The Visa Claims Resolution (VCR) initiative, introduced in April 2018, aims to streamline and expedite the chargeback resolution process.

The initiative includes enhanced tools, new categories of disputes, consolidated reason codes, changes in dispute response times and new procedural requirements. A key new procedural requirement is that a merchant now must acknowledge a chargeback by either accepting or disputing the claim upon being notified of the claim. Failure to do so could result in a fine of $0.75 and $2.50 per chargeback. "That's on top of the chargeback fee," Dakshina said.

Dakshina stated the non-acknowledgement fees are significant, particularly for merchants with large numbers of chargeback claims. Yet, he added, a recent survey of merchants by Chargeback Gurus found 84 percent are unaware of the new fees. In fact, only 12 percent of merchants surveyed are even aware of the new dispute acknowledgement requirement. Dakshina presented the findings at the Northeast Acquirers Association annual conference last week.

"We found that merchants simply did not know what their acknowledgement requirements were with the new VCR process, and more troubling, they didn't know there were fees associated with those acknowledgment requirements," Dakshina said. He urged acquirers, ISOs and merchant level salespeople to do more to educate merchants about the changes, stating, "We need to keep merchants aware of what's going on in the industry."

VCR's positive impact

The experiences of Chargeback Guru's merchants suggest the VCR initiative has helped many. The firm is seeing notable reductions in chargeback volumes and chargeback resolution cycles. Most chargebacks are now resolved within 30 days; in the past it took upwards of 60 days, Dakshina noted.

"The new VCR process has made a real impact, with our customers reporting as much as 18 percent reductions in their chargeback volume," Dakshina said, adding that bogus fraud claims also have fallen, by as much as 13 percent. "But those gains may be offset for merchants who are unaware that they have acknowledgment requirements that result in fees that cut into their bottom lines," he cautioned.

The VCR initiative also appears to be prompting more merchants to fight chargebacks. Among clients surveyed by Chargeback Gurus, 17 percent started disputing chargebacks since VCR took hold, Dakshina reported.

Editorial Note:

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