A credit card processing response of Auth Code 51, is a decline for insufficient funds, the credit limit has been exceeded. What happens when the customer says, “there’s nothing wrong my Visa card, put it through again”? If put through again without a voice authorization, the merchant is at risk for chargeback of funds for invalid authorization.
Visa Product and Service Rules, 126.96.36.199 Original Credit Transactions – Prohibition against Clearing a Declined Transaction
An Originating Member must not send an Original Credit Clearing Transaction if it received a Decline Response to the corresponding Authorization Request.
Further information at page PSR-564, 11.1.16 Chargeback Reason Code 71 – Declined Authorization. NEW. Effective for Transactions completed on or after 15 April 2016,
A Transaction for which Authorization was obtained after a Decline Response
was received for the same purchase. This does not include an Authorization
Request that received a Pickup Response 04, 07, 41, or 43 or was submitted
more than 12 hours after the submission of the first Authorization Request.
This period is known as the black hole or dark period. For the first 12 hours after a decline, merchants should not attempt to process the same retail transaction. The reality is a consumer could simply walk away and go back to another cashier and try again. Some cloud based payment gateways will enable merchants to choose to prohibit multiple attempts in the black hole period.
Disclaimer: The rules of card acceptance are very complex. Merchants should read the manual for complete details regarding card acceptance for your business type.
Business to business, automotive and parts dealers, are especially stung by chargebacks for disputes relating to the quality of merchandise or services received. Effective for transactions processed on or after April 18, 2015, is a new clause that can increase the chargeback period from 120 days to 540 days for US and Canada.
Both Visa and MasterCard have implemented the new rule. I didn’t find a similar rule in a quick research of Discover and American Express, but my research was not exhaustive. The rules are not identical and readers are advised to read the rules thoroughly, as this article does not include the full context for when the rule applies.
Visa Core Rules and MasterCard Chargeback Guide October 30, 2014:
- Visa Chargeback Reason Code 53 – Not as Described or Defective Merchandise
- MasterCard Reason Code 4853—Cardholder Dispute—Defective/Not as Described
One goal of the MasterCard rule appears to be providing customer recourse for ongoing interrupted services. The customer paid for something, they complained and worked it out within 120 days, but then there were recurring quality issues.
They both make it clear that a customer does not have to return goods and services in order to dispute at a later date. This is a change from the old rule.
How can merchants protect themselves in a dispute for these reasons?
- Written return policy and proof of acknowledgement
- All guarantees in writing acknowledged
- Signed sales orders; include specific deliverables and policies at the time of agreement
- All written communications, including emails, prior to and after the sale as part of the dispute process.
- Save a log of phone calls with who, what, when, to submit as evidence.
- For online payments, require check box to acceptance of your terms of sale
Note: the 540 day rule has been in existence, however, the rules have been updated with more specificity, certainly for Visa.