1. Chargeback Monitoring Programs
Understanding Merchant Responsibilities and Fine Potential

2. Overview: Visa and MasterCard have established Chargeback Monitoring Programs to address the impact to the payment system by merchants who receive large numbers of chargebacks.
Important!!
As a merchant accepting Visa and MasterCard, it is crucial to understand the impact to the Payment System caused by excessive levels of chargebacks. Each of the entities involved in the processing, handling and reviewing of a chargebacks will incur some level of cost, both financial and operational

3. Anatomy of a Single Chargeback
Second Cycle
Debit to Merchant

4. One Chargeback Breakdown- TIME
STEP
TIME
Issuer receives/preps chargeback
15 minutes
Acquirer receives/preps chargeback
Merchant receives/responds to chargeback
Acquirer receives/ responds to merchant rebuttal to chargeback
Issuer receives/responds to Acquirer response
Cardholder receives/responds to Issuer response
Total Time
1 hour and 30 minutes

5. From the Program Archives: A true example of impact1
From the Program Archives: A true example of impact
Chargebacks:
810 for the Month
Impact
1,215 Operational Hours per month to Work Merchant Chargebacks for ONE Merchant. The equivalent of one full time employee for 6 months

6. Visa Chargeback Monitoring Program
A High Level Tour

7. Visa Program Parameters- If the merchant meets all of these conditions, they have exceeded excessive chargeback parameters
Processes 100 or more Visa Sales
Receives 100 or more Visa Chargebacks
Has 1% or greater CB/Sales Ratio
Excessive Chargebacks

8. Fines
Any fines levied by Visa will be passed on to the merchant. Fines begin at $50 per chargeback and increase to $100 per chargeback in addition to other fines
On Site Meeting with Visa
In month 6 of the chargeback program, Visa may require the Acquirer and the Merchant to attend an onsite meeting at Visa Headquarters in Foster City, CA to present the chargeback reduction plan to the Visa Risk Committee
Impact to the merchant:
A merchant who exceeds the chargeback program thresholds for 10 consecutive months may be disqualified from accepting Visa

9. Excessive Chargeback Program

10. MasterCard Excessive CB Parameters
50 CB’s in a Calendar Month
1% or greater CB to Sales Ratio in that Calendar Month
Excessive CB Merchant

11. Common attributes which can cause excessive levels of chargebacks
High Sales Volume
Usually processing thousands of transactions per month
Recurring billing models with Opt Out only
Cardholder is automatically enrolled in a month to month recurring billing of their card
In adequate support to address cardholder concerns or requests for refund
Minimal customer service support compared to transaction volume

12. Type of Business: Vitamin Supplements
How Sold:
Number of sales per month: 14,890
Price: $29.95
What they don’t tell you: “By purchasing from ourvitaminswillchangeyourlife.com, you agree to an automatic re shipment of a 30 day supply and a re-bill of your credit card each month”
Want to cancel the auto re-bill??-
Step 1-Call their toll free number to receive a return tag number,
Step 2- Fill out the request for Opt out, using your return tag number
Mail the request form to their offices
You will receive an e mail in 15 days confirming

13. (The entire) Customer Service Department
Customer Service Hours: Monday through Thursday 8-12 and 1-4 Pacific Time
Calls per day: 162
Average Wait Time: 47 minutes
Merchant Response when asked about lack of customer service causing disputes:
“People are just out to get free stuff”
“We have a process for them to cancel- it’s not my fault they call initiate disputes”
“I don’t have the ability to hire any reps to handle the calls”
“Tell Visa and MasterCard to investigate all the cardholders”
(The entire) Customer Service Department

14. Fine Schedule Example Warning Notice Month 1-2 Month 3 700 CB’s
$50 per CB
Month 4
650 CB’s
Month 5
825 CB’s No
Fine
$35,000 fine
$32,500 fine
$41,250 fine
Month 6
500 CB’s
$100 per CB
Month 7
635 CB’s
Month 8
CB’s
And
$25k Review Fee
Month 9
Month 10
700 CB’s
$50,000 fine
Acquirer and merchant to present reduction plan at Visa Corp offices.
Merchant incurs travel cost for merchant and Elavon to Visa Corp Offices
$63,500 fine
$90,000 fine and $25,000 review fee
$80,000 fine
Merchant and its Principals Disqualified from accepting Visa
Fine Schedule Example

15. Fine Schedule Example Warning Notice Month 1-2 Month 3 700 CB’s

16. The Customer Experience- Evaluating Chargeback Likelihood.
Understands what is being charged to their account
Can cancel easily at any time
Product or Service is provided as advertised
No Surprises!
No “burying” details which may impact transaction in the fine print

17. Merchant Chargeback Reduction Plan
Chargeback Analysis – Breaking it down
Questions
Merchant Response
Description of the Merchant’s Business and Explanation of the Chargeback Problem
Merchant to provide a thorough description of the business and provide detailed information regarding product/service sold
Tools and Processes Currently Utilized
Merchant to provide overview of what procedures,
systems and technology are currently in place to prevent chargebacks
Business Modifications planned to reduce chargebacks
What are the specific changes that the merchant will implement to reduce chargebacks
Expected Timeframe for remediation of chargeback issues
Merchant to forecast what timeframes are anticipated for the remediation efforts to reduce the chargebacks

18. Questions?