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Chargebacks

Chargebacks (Transactions disputed by cardholders/card issuers)

A chargeback is an unpaid transaction returned to us by the Card Issuer. The following section describes the procedures which you should follow together with suggestions which will help you reduce the risk of chargebacks being debited to your account. Remember you may be liable for a chargeback in some circumstances even if you obtained authorisation for a transaction.

A cardholder, or the Card Issuing Bank has the right to question/dispute a transaction. Such requests can be received up to 180 days after the transaction has been debited to the cardholder’s account, and in some circumstances, beyond 180 days.

Retrievals

In many cases, before a chargeback is initiated, the Card Issuing Bank requests a copy of the sales slip, via a ‘Retrieval Request’. Once a Retrieval Request is received from the Card Issuer, we will respond by sending a copy of the transaction, if available.

Where you hold sales/terminal slips for electronically processed transactions it is your responsibility to respond to all retrieval requests received from Cardnet within fourteen (14) calendar days of our initial request. You are responsible for retaining and providing copies of transactions for a minimum of eighteen (18) months from the original transaction date.

Please fax copies of requested documentation to the fax number provided on the Cardnet Retrieval Request letter or, alternatively, you may mail your response to the Bank. We recommend recorded delivery or registered post when sending evidence of high value transactions.

If you fax your response, please set your fax machine to print your fax number and name on the documents you send. We can use this information to re-contact you in the event the transmission is not clear or complete. Also, when using the fax machine, please set the scan resolution on the machine to the highest setting. The higher resolution setting improves the clarity of characters and graphics on the sales documents transmitted and helps reduce chargebacks for illegible copies.

If Cardnet does not receive a clear legible copy of the sales slip within fourteen (14) calendar days of the initial request you may be subject to a chargeback. A courtesy call or letter may be sent if the request is not responded to within that time. However the potential liability remains with you if the item is not supplied in time and you may become liable for the chargeback simply by failing to meet the payment scheme timeframe.

Chargebacks for ‘non-receipt of requested item’ cannot be reversed unless the requested documentation is provided within fourteen (14) calendar days of the initial request.

Please remember: due to the timeframes imposed by MasterCard and Visa it is extremely important that you respond to/resolve a retrieval request or chargeback enquiry immediately. The more information we have at the time of the retrieval request or chargeback, the better we can dispute the item on your behalf.

We recommend that when you send a copy of a transaction, you send all pertinent documents (e.g. till receipt together with any supporting invoices/sales tickets) as evidence of the transaction including any documents signed by the cardholder. In the case of Card Not Present transactions, details of the goods ordered together with evidence of delivery e.g. a signed delivery receipt should be sent.

Reversals

When we receive a chargeback from a Card Issuer we will normally debit your Bank account and advise you accordingly. Our letter will provide details of the transaction together with the information/documentation required from you. Our letter will also tell you the latest date by which you must reply with the information/documentation required. If the information provided is

a. sufficient to warrant a reversal of the chargeback, and
b. within the applicable timeframe

we will defend (reverse) the chargeback if possible but reversal is contingent upon acceptance by the Card Issuing Bank under Visa and MasterCard guidelines. A reversal is not a guarantee that the chargeback has been resolved in your favour. If the chargeback is reversed, the Card Issuing Bank has the right to present the chargeback a second time and your account will be debited again if you have not complied fully with the terms of your Cardnet retailer agreement and the Cardnet Operating Manual.

Please refer to the situations described in the following text, which highlight the common reasons for chargeback disputes and how they can be avoided. In the majority of cases, where the cardholder is present, retailers can avoid chargebacks by following the advice given.

We will do our best to help you to defend a chargeback. However, due to the short timeframes and the supporting documentation necessary to successfully (and permanently) reverse a chargeback in your favour, we strongly recommend the following:

Convert or upgrade your Cardnet facility to accept chip and PIN transactions electronically. Being chip and PIN enabled will offer you the most protection from face-to-face transactions.
Ensure transactions are completed in accordance with the terms of your Retailer Agreement/Operating Guide.
If you do receive a chargeback, investigate and send in the appropriate documentation within the required timeframe.
Whenever possible, contact the cardholder directly to resolve the inquiry/dispute.

Common causes and reasons for chargebacks

Reason	How to avoid it
The card account number indicates that it has chip and PIN capability but is susbsequently found to be fraudulent	Upgrade your Cardnet facility to chip and PIN capability.
The Retailer fails to respond to requests for a copy of the sales slip	Prepare clean, legible sales slips at the point of sale and store in a secure and orderly fashion so that you are able to respond to retrieval requests within the required timeframe. To identify a transaction you will be given the cardholder number, date and amount of the transaction. (Card issuers are not obliged to supply cardholder names or addresses so it is important that you store your records carefully.)
Cardholder did not authorise the transaction – (primarily Card Not Present transactions)	Mail/telephone orders – follow the recommended procedures in the Card Not Present transactions (CNP) section.
Non-matching account number – This is where a transaction has been processed on an account not found on an Issuing Bank’s masterfile. In the following circumstances it is possible that a card has been created by a fraudster or that an existing cardholder’s account details have been ‘skimmed’ i.e. copied on to another plastic card.	If you do not use an electronic terminal, clearly imprint the card using the manual imprinter machine and do not alter in any way. If you use an electronic terminal, insert the chip card in the chip slot or, if you do not have a chip terminal, swipe the card through the swipe slot and ensure the displayed card number matches the number on the card. Alternatively, you can compare the card number with the number on the sales slip produced by the terminal. If the chip or magnetic stripe cannot be read, for example, failed read or the terminal is inoperable, an imprint of the presented card must be taken. (Follow procedures in Section 4, Using an Electronic Terminal – Fall back procedures in your Cardnet Operating Manual.) Carefully examine the front and back of the Card at the time of the transaction. (Follow the procedures in Section 3 – Checking the Card in your Cardnet Operating Manual.) Check the signature Telephone orders – confirm the account number provided by the customer by repeating the number back to the customer. Properly authorise all transactions.
Transaction was processed more than once to the same Cardholder.	Settle and reconcile batches of sales and refunds on your terminal/register daily. Ensure that the total amount submitted (displayed on terminal) balances with/matches to the card receipts. (See your terminal operating instructions.)
Sales slip was not imprinted. The sales slip provided was not imprinted using a manual imprinter machine nor was the Card chip or magnetic stripe read (e.g. the transaction was key entered into your terminal and the cardholder denies participation in the transaction.)	If you are unable to read a card through your terminal to capture the cardholder’s information via the chip or magnetic stripe, you must imprint a Cardnet sales voucher with the customer’s card to prove the cardholder was present at the time of the transaction. Manually key-entering the information into the terminal does not protect you from this type of chargeback. The date, amount and terminal sales receipt number must be written on the Cardnet sales voucher to tie the imprinted ticket to the transaction – refer to Section 4, Using an electronic terminal – Fallback Procedures in your Cardnet operating Manual.
Refund not processed – the cardholder is claiming that a refund voucher or refund acknowledgement issued by you was not processed.	Ensure proper disclosure of your refund policy is on the transaction receipt, for example, the words ‘No Exchange, No Refund’ must be clearly printed on the sales voucher or terminal receipt. Process refunds immediately Refunds must be applied to the same cardholder account as the original sale. Do not issue in-store or merchandise credit Do not issue a cash or cheque refund
Transaction not authorised.	Authorise all transactions which are equal to or above your floor limit and use the proper method of authorisation. Clearly write the authorisation number on your paper vouchers.
Non-receipt of goods – cardholder is claiming they did not receive the goods or goods were paid for by other means.	Do not process a transaction until the goods are despatched Do not process any credit/debit card transaction where the cardholder has already paid for the goods or services using another method of payment Obtain the cardholder’s signature on your delivery note.
Card used before effective date or after expiration date.	Carefully examine the card for the effective start and expiry dates when accepting it for a transaction Do not process a transaction prior to the effective date appearing on the card Do not process a transaction after the expiry date appearing on the card.

Invalid sales vouchers

A sales voucher will be regarded as invalid and may be charged back to you if:

The signature is incompatible with the signature on the card.
The sales voucher handed to the Bank differs from the customer’s copy.
The card is not yet valid, or has expired at the time of the purchase.
You have been advised that the card is void.
The sale is equal to or exceeds your floor limit and authorisation has not been obtained.
The sales voucher is incomplete – for example, it is unsigned, has not been imprinted, is not dated, or the authorisation code obtained is not quoted on the voucher.
The sales voucher is completed for an illegal transaction.
Two or more vouchers have been made out for one transaction over the floor limit.
Any terms of the Agreement between the retailer and Lloyds TSB and all the instructions in this guide have not been followed.
The correct authorisation telephone number was not used.
You are unable to provide a copy of the transaction proving that the cardholder authorised the sale.
The transaction is a card not present transaction and is disputed by the cardholder.
The goods or services have not been supplied, are defective or not as described.
The voucher has not been banked within the stipulated timescale as detailed in your Retailer Agreement.
It is clearly evident that the transaction was made with a counterfeit card, for example, a typed ‘V’ instead of the authentic flying ‘V’.
For any reason you process a transaction on the same card number that has failed both chip/PIN and Magnetic Swipe

Please note
Authorisation does not confim the identity or authority of the cardholder and therefore is not a guarantee of payment. It confims that the funds are available on the account and that the card has not been reported lost or stolen at that time.