Visa new chargeback rules go into effect April 16 2011

Phase 1 of Visa’s new chargeback rules are now in effect. Effective for fraud-related chargebacks processed on or after 16 April 2011, in lieu of a paper-based signed cardholder letter stating that the cardholder neither authorized nor participated in a transaction, issuers may submit information collected from the cardholder electronically.

Essentially, the dispute can now be completed elecronically instead of having to mail in a letter. The following reason codes are impacted by this rule change:
•     Reason Code 57 Fraudulent Multiple Transactions
•     Reason Code 62  Counterfeit Transactions
•     Reason Code 81  Fraud – Card-Present Environment
•     Reason Code 83  Fraud – Card-Absent Environment

Fraud-Activity Certifications
In April 2011, in lieu of a cardholder letter, card issuers will be required to certify through Visa Resolve Online (VROL) three fraud-activity  certification requirements to support their chargeback.  VROL is an innovative Visa back-office system used by all Visa members to process disputes. The three requirements are the following:
•     Card status at the time of transaction (lost, stolen, counterfeit)
•     Date fraud activity was reported through VisaNet
•     Date account number was listed on the Exception File
The fraud-activity certifications validate that the issuer closed the cardholder’s account, fraud reported the account number to Visa and statused the account either lost, stolen or counterfeit. The fraud-activity certifications will only be required if the issuer elects not to send a cardholder letter. In October 2011, Visa will mandate issuers to send the fraud-activity certifications with or without a cardholder letter.

What does this mean for merchants? The time that lapses between the customer initiated dispute to the time  merchant receives such notification shrinks.