isa U.S.A.'s Re-engineering Disputes (RED) project is an ongoing effort to streamline and simplify the chargeback process. As part of this effort, effective October 2004, Visa revised its operating regulations, including changes to its chargeback reason codes.

Visa reduced more than 44 chargeback reason codes, many of which were similar in nature, to 24 reason codes. The card Association eliminated the separate (but often duplicate) reason codes for travel and entertainment (T&E) transactions.

It also re-aligned the new reason codes into chargeback groupings, which should enable chargeback personnel to focus on capturing the underlying reason for the dispute rather than the technicality of choosing between multiple reason codes.

However, these changes could have an impact on how merchants should respond to retrieval requests and chargebacks. Moreover, with Visa's elimination of the "second chargeback" after April 3, 2004, it's more important than ever to get the merchants' re-presentments correct the first time.

In April, Visa eliminated the second chargeback cycle, which allowed issuers two opportunities to dispute transactions and merchants two opportunities to re-present chargebacks. Now, Visa no longer accepts second chargebacks from issuers, and merchants only have one opportunity to provide information to resolve the dispute.

Merchants should be educated to provide the proper rebuttal information to refute the chargeback, and the chargeback department must correctly follow the re-presentment rules.

If not, the issuer will send out a pre-arbitration to the acquirer. (Arbitration is a process where Visa determines financial liability between members for transactions that are presented and "charged back," and members must first send a pre-arbitration letter to the other member bank.)

The member must either accept the pre-arbitration or go to arbitration with Visa. However, the drawback in going to arbitration with Visa is that the loser pays Visa a $150 filing fee and a $250 review fee.

The unfortunate result that we have seen in working with merchants and acquirers' chargeback departments, since Visa eliminated the second chargeback last spring, is that when a pre-arbitration is received by the acquirer, a letter is generated advising the merchant of the fees and stating that the merchant will be responsible for the fees to take the case to arbitration at Visa.

This usually happens if the merchant provided the wrong information to dispute the chargeback or if the chargeback department did not properly re-present the chargeback to the issuer. For smaller dollar chargebacks, this gamble makes no sense to the merchant.

Both situations cause the merchants to blame the ISO or merchant level salesperson (MLS). Most chargeback departments don't do enough to work with the merchants to help them properly respond to their typical chargeback situations.

When we work with merchant clients to help them reduce chargebacks and teach them how to re-present chargebacks, their response is often, "I didn't know; nobody told me that."

If an ISO/MLS is going to sign up a high volume merchant (especially one that will make the ISO/MLS a lot of money) that's in a business likely to have chargebacks, it only makes sense for the ISO/MLS to educate the merchant on how to minimize chargebacks, including how to properly respond to retrieval requests and charge- back notices.

Below are Visa's revised chargeback reason codes (source: Visa U.S.A.):

Reason Code and Description

• 30 - Services Not Provided or Merchandise Not Received
  A merchant was either unwilling or unable to provide services or shipped merchandise was not received.
• 41 - Cancelled Recurring Transaction
  A merchant continued to charge a cardholder for a recurring or preauthorized health care transaction despite cancellation notification, or transaction amount not within preauthorized range.

  
  

• 53 - Not as Described or Defective Merchandise
  Goods or services received were not the same as described on the transaction receipt or other documentation presented to the cardholder at the time of the purchase or, for a mail/phone order transaction, not the same as the merchant's verbal description, or merchandise was received damaged, defective or otherwise unsuitable for the purpose sold.

  
  

• 57 - Fraudulent Multiple Transactions
  Multiple transactions from a single card occurred at the same merchant outlet without cardholder permission.

  
  

• 60 - Requested Copy Illegible or Invalid Issuer received an illegible transaction receipt, an incomplete substitute transaction receipt, or an invalid fulfillment.

  
  

• 62 - Counterfeit Transaction
  Counterfeit transaction occurred at merchant or member location where required risk control procedures were not followed, or counterfeit magnetic-stripe transaction or chip-initiated transaction occurred in which authorization was obtained without transmission of the entire unaltered data on the track of the magnetic stripe or chip.

  
  

• 70 - Account Number on Exception File
  Transaction did not require authorization, merchant did not obtain an authorization or account number verification, and the account number was listed on the exception file or acquirer received a negative account number verification.

  
  

• 71 - Declined Authorization
  A merchant completed a transaction after receiving a decline response.

  
  

• 72 - No Authorization
  A merchant did not obtain authorization for a transaction exceeding the merchant's floor limit.

  
  

• 73 - Expired Card
  A merchant completed a transaction with a card that expired prior to the transaction date and the merchant did not obtain authorization.

  
  

• 74 - Late Presentment
  An acquirer did not process the transaction within the required time limit.

  
  

• 75 - Cardholder Does Not Recognize Transaction
  Either cardholder does not recognize one of the following transaction types: mail/phone order, recurring, preauthorized health care, non-authenticated security, or non-secure or, cardholder does not recognize a transaction completed in a card-present environment and acquirer failed to fulfill a properly requested retrieval request.

  
  

• 76 - Incorrect Transaction Code
  An acquirer processed a transaction using an incorrect transaction code.

  
  

• 77 - Non-matching Account Number
  A transaction using an account number not on the issuer's master file was processed, and no authorization was obtained.

  
  

• 79 - Requested Transaction Information Not Received
  Issuer did not receive the correct transaction receipt that was properly requested using retrieval request reason code 33, "Request for Legal Process or Fraud Analysis."

  
  

• 80 - Incorrect Transaction Amount or Account Number
  An acquirer processed a transaction using an incorrect account number or transaction amount.

  
  

• 81 - Fraudulent Transaction - Card Present Environment
  
  Merchant processed a transaction in a card-present environment and did not obtain both a card imprint and cardholder signature (or PIN).

  
  

• 82 - Duplicate Processing
  A single transaction was processed more than once.

  
  

• 83 - Fraudulent Transaction - Card-absent Environment
  Merchant processed a transaction in a card-absent environment without cardholder permission or with a fictitious account number, or processed an electronic commerce transaction that meets specified requirements.

  
  

• 85 - Credit Not Processed
  The merchant issued a credit transaction receipt or provided a refund acknowledgment, but a credit transaction was not processed through Interchange; the cardholder returned merchandise or cancelled merchandise or services, and the merchant did not issue a credit transaction receipt/refund acknowledgment; or the cardholder cancelled an advance payment service transaction and the merchant did not issue a credit transaction receipt.

  
  

• 86 - Paid by Other Means
  A transaction was paid by an alternate means and also posted to the cardholder's account.

• 90 - Services Not Rendered - ATM or Visa TravelMoney Program
  A cardholder acknowledged participation in an ATM or Visa TravelMoney Program transaction and no funds or only a portion of requested funds were received.

  
  

• 93 - Risk Identification Service
  A transaction appeared on the issuer "Risk Identification Service Chargeback Exception" report.

  
  

• 96 - Transaction Exceeds Limited Amount
  A limited-amount or self-service terminal transaction exceeded the allowed amount.

  For more information on recent changes to Visa's RED project, visit:http://usa.visa.com/business/accepting_visa/ops_risk_management/re-engineering_disputes.html#anchor_3

  I know that much of the language in the reason code descriptions above might confuse ISOs/MLSs. If so, this might be an indication of the need to become more familiar with the chargeback process, especially when signing up merchants with special processing rules (i.e. T&E, mail/phone order, recurring, preauthorized health care, etc.). I will write future articles regarding chargeback issues based on questions received from The Green Sheet's readers. Please submit your questions to me at info@integritybankcard.net .

  David H. Press is Principal and President of Integrity Bankcard Consultants Inc. Phone him at 630-637-4010, e-mail dhp@integritybankcard.net or visit www.integritybankcard.net.