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A survey conducted recently by Chargeback Gurus such as those for unrecognized transactions, incorrect
found the chargeback resolution cycle had been reduced transaction amounts and recurring billing disputes.
to 30 days or less under VCR. Plus it found a 15 to 18 Mastercard said it expects requesting more information
percent reduction in chargeback volume, and a 13 percent upfront will reduce cases of invalid chargebacks.
reduction in bogus fraud claims, Dakshina said.
Under phase 2 of the Mastercard initiative, set to take
These results may not be representative of the overall state hold in April, merchants no longer can initiate refunds
of chargebacks, however. Eaton-Cardone said her firm has once a chargeback has been filed, and support for
not yet seen any measurable changes in chargeback loss refund transaction authorizations will be required from
rates. "Until [compliance] is universal and consistent we both issuing and acquiring banks. Mastercard also is
aren't going to see the best results," she said. eliminating some chargeback reason codes (such as late
presentments) and slashing the timeframe for filing point-
Chargeback Gurus also found many merchants were of-interaction error chargebacks from 120 days to 90 days.
unaware of a key requirement under VCR: to acknowledge Beginning in April 2020, all Mastercard merchants (except
chargebacks by either accepting or disputing claims upon airlines) will be required to initiate online authorization
being notified of disputed transactions or risk fines of $0.75 requests for every refund transaction.
to $2.50 per chargeback. "We found that merchants simply
did not know what their acknowledgement requirements Meanwhile, Visa is reducing its thresholds used to evaluate
were with the new VCR process, and more troubling, the chargeback risks of merchants, which determine
they didn't know there were fees associated with those whether merchants get enrolled in a fraud-monitoring
acknowledgment requirements," Dakshina said. Among program.
surveyed merchants, just 12 percent were aware of the
new requirement. Helping merchants help themselves
Mastercard on negative option billing Understanding all the recent and pending changes in
chargeback rules can be a tall order. "This has never been
One major source of chargebacks in recent years has a core competency of merchants," Marchand said, adding
involved negative option billing programs. These involve that "some merchants look at chargebacks as a cost of doing
consumers accepting "free trials" in exchange for providing business." That's not going to cut it anymore, however,
their card details to cover shipping. Many are unaware considering the new mandatory acknowledgement
that their cards will be billed on a recurring basis unless requirements and lowered thresholds for mandatory
they cancel prior to expiration of the trial period. Often placement in fraud monitoring programs.
this is because sellers are less than transparent about how
to cancel or when billing will begin. So they dispute these "Acquirers and ISOs need to get up to speed on how these
with their card issuers. changes are going to affect their [merchants], especially
if they have a lot of card-not-present merchants," Eaton-
Mastercard took the lead in addressing the problem with a Cardone said.
mandate that took effect in October 2018. Now, companies "There is always a lot of speculation and confusion when
that employ negative option billing are classified as high- new mandates take effect. Many merchants can't make
risk merchants, and acquirers must register these clients sense of them," said Dakshina. "It's the responsibility of
with Mastercard. Plus Mastercard created a new merchant the ISOs and payment processors to work with merchants."
category code specific to these companies.
He advised acquirers, ISOs and their sales partners
Also, companies offering negative option billing now to conduct webinars to educate clients about the new
must contact cardholders before charging their accounts, chargeback rules and procedures. He also recommended
informing them of the exact timing and amount of working with clients to analyze chargeback activity to
transactions, and they must provide written confirmation identify policy and operational changes that can help
of cancellation requests. reduce the chances of chargebacks.

More changes coming Better understanding will become increasingly important
Mastercard also implemented several changes specific to as more businesses adopt recurring billing or subscription
the chargeback dispute resolution process. Some changes, models, which today make up a disproportionate share of
known as the Mastercard Dispute Resolution Initiative, chargeback claims, Dakshina added. "A lot of merchants
took effect in October 2018; others are queued up to start are getting into subscription models, and we expect that
in April and in October 2019. trend to continue," he said.

The Mastercard initiative, like VCR, seeks to reduce the Patti Murphy is senior editor at the Green Sheet and president of
time it takes to resolve chargeback claims. Issuing banks, ProScribes Inc. Follow her on Twitter @GS_PayMaven.
for example, now are required to request more information
from cardholders before filing certain chargeback claims,
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