Your credit card terminal goes down or your wireless unit can’t get a signal, but you’ve got customers lined up to buy. Is a pencil rubbing of the credit card or a photocopy of the credit card OK to defend against chargebacks?
No. The merchant must have an imprint of the card on a credit card voucher form that is fully completed and signed by the customer.
Below are excerpts of the relevant rule from Visa and the condition I most often see cited on merchant chargeback forms. (Other cards have similar language. Please note the Visa International Operations Guidelines book is over 1100 pages so too keep this brief, this is a very narrow look. Link t
Visa Chargeback Reason Code 81 Fraud Card-Present Environment
Chargeback Conditions – Reason Code 81
pg 825 One of the following:
1. Cardholder did not authorize or participate in a Card-Present Environment Transaction.
CHARGEBACK PREVENTION TIPS:
- A signature and imprint or magnetic stripe card data is required on all retail merchant accounts with a Terminal ID that is set up for retail presentment. For most merchants, this means they need two merchant accounts- one for card present or retail, and another for card not present or MOTO if they have key entered transactions and the card is absent.
- To save time, merchants will only partially fill in the form, but this is not sufficient. All fields must be completed and the customer must sign.
- When a merchant account is opened merchants are issued a metal plate with their required merchant account identifying information to use with imprinting forms. Don’t toss is into a drawer. Buy an imprinter (about $25 from most office supply stores) and some voucher forms, put your plate in and keep it secured but handy in case you need it. If you don’t know where your plate is, call your processor and ask for a new one.
Editors note: Two merchant accounts will help mitigate risk because card absent aka card not present requirements differ from card present. For example, depending on the transaction method, address verification and or security code may be required. Merchants with a single dial up terminal that has two merchant accounts my experience costly errors when the salesperson or cashier processes the transaction on the wrong account. It happens. I see it all the time when I review statements and dig for downgrade reason codes. One solution is automated merchant account switching via Cenpos.
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
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.
If a retail customer walks in an pays with their credit card, but the cashier made a mistake and entered the wrong amount, can the merchant go back and charge the customer the balance AFTER the customer has left the store? No. According to the Visa Card acceptance guide, “Merchants must NOT alter a sales receipt after the cardholder has signed it and left the establishment. If the cardholder has been undercharged, attempt to contact the cardholder and obtain permission to adjust the receipt so that it reflects the correct amount.”
This issue is outlined in Chargeback Reason Code 80: which includes invalid adjustment.
This question was presented by a building supply company that is largely in the wholesale B2B business, but also has some walk-in retail traffic. The consumer selected their merchandise and an invoice for the materials was issued and presented to the customer. Then the card was charged, but the amount entered was wrong. The customer does not sign the invoice.
The merchant can research information about the transaction in their processors online transaction research, if they offer that capability. Finding the customer can be difficult, but you can try whitepages.com and hope the customer has an unusual name and is from the local area.
The merchant may not be allowed to, and should not try to, charge more than the original authorization, even if they locate the customer. The merchant or the processor may have risk management tools in place to prevent this. If the retailer locates the customer, get permission to create a new transaction which will be key-entered. In the B2B world, ideally, a note with invoice copy is faxed and the customer signs authorization to be billed the balance due. Charging a different amount than the original authorization is an automatic interchange rate downgrade.
On a final note, if the customer DID SIGN THE INVOICE then the merchant MIGHT have a basis to re-bill the customer, provided they had adequate information to do so. Since card issuers generally side with the customer, not the merchant, if the customer disputed the bill, the merchant will likely lose. PLEASE READ THE CURRENT MERCHANT RULES for the specific card association ( MasterCard, Visa etc) for clarification.
When do you need to take a manual imprint? Why does a key entered face to face transaction occur? If the magnetic strip is bad or if there is a card reader malfunction you wonâ€™t be able to get proper swipe. If you put a card present transaction on a card present merchant account, a signature on a receipt is not enough to protect you from a chargeback if the customer disputes the charge. You have to prove that the card was present with a physical imprint to protect yourself in a fraudulent transaction dispute.
If you are unable to take an imprint with an old fashioned imprint machine with metal plate, then get a pen and paper and pass the pen back and forth until you get the imprint.
A power outage or special off site events are additional reasons why you may need to get a card imprint. We send all merchants a metal plate for manual imprinting, and many ask why they ever would need it. The manual imprint is required for all key entered face to face transactions.
How can technology increase protection from card present fraudulent transactions?
CenPOS smart payment engine has many functions to reduce risk. For example, a standard set up might require the cashier to enter the last 4 digits of the credit card. FakeÂ credit cards are a major crime problem in the US. Most fake cards have a valid credit card number on the front, but the number wonâ€™t match the magnetic strip information on the back. The logic of CenPOS will protect you from this type of attempted credit card fraud.
When a card is declined for a last 4 digits mismatch NEVER attempt to put through the transaction by overrides or any other method. Even if you get the transaction through, you will lose any chargeback fight because there will be a record of the failed attempt with the reason code for mismatch.
This is just one example of many features CenPOS has built in to protect merchants from both internal and external fraud. Contact Christine Speedy at 954-942-0483 for additional information on CenPOS technology and other merchant services.
Our solution offers extremely robust chargeback management. How does this compare with Paypal?
Unfortunately, we can’t show you the paypal screens due to copyright issues.
Since Paypal is web based, they do have a web based solution. Buyers and sellers alike manage disputes and chargebacks in the Paypal Resolution Center. There are two main types:
– Buyer and seller negotiate to resolve issue. Communications are via email using the Resolution Center.
– Dispute is resolved or escalated to PayPal claim.
– Paypal investigates and resolves the claim. This section says they “try to resolve within 30 days.”
– Buyer says they didn’t make the purchase. A lot of times the buyer may not remember who they made the purchase from.
Paypal reviews the claim and asks seller to respond.
Seller are notified and have 7 days to respond. Paypal resolves the claim.
A more robust solution works like this. First, the buyer calls the credit card company to complain. They file a form which asks questions like ‘have they contacted the merchant and attempted to resolve first’. Ultimately, the payment processor sends notification of the dispute via email, fax, or mail. The most common practice is via mail. The clock is ticking since you only have so many days to respond.
The best system sends you an email alert so you can respond quickly.
With the addition of a scanner, you can even respond to retrieval requests right from your PC and upload documentation.
Compared to most processors, the Paypal solution is very robust so you can respond quickly. Where it falls apart from the merchants perspective, ie numerous complaints from merchants, is the unilateral decision making and sometimes long process that can last months.
The optimum solution is two-way communications. You can manage all chargebacks from a web based interface. The processor will give you a decision within 14 days after you respond. They will tell you if additional information is needed. If you think the disagree with a decision, you can add additional documentation via file upload, fax or snail mail.
|chargeback & dispute notification method
||email, fax, snail mail options
|days to respond
|days for Processor to resolve after merchant responds
||up to 30+
|merchant response method
||upload and add to file
|merchant contact with processor
||none after response filed
||via phone, online; multiple contacts allowed
|recourse if unhappy with decision
||add additional documentation via fax, email, file upload