Tuesday, December 1, 2009

Arbitration Chargeback Amount

Card issuers process an arbitration chargeback for the same or lesser amount of the second presentment received from the acquirer in U.S. dollars, without any further currency conversion.

For intra-European transactions only. Issuers may process an arbitration chargeback for the same or lesser amount of the second presentment received from the acquirer either:
  • In the second presentment reconciliation currency, as specified in DE 5 (Amount, Reconciliation) of the Second Presentment / 1240 message.
  • In the amount debited in the issuer's payment currency used for settlement of the second presentment, as specified in DE 6 (Amount, Cardholder Billing) of the Second Presentment / 1240 message.
An arbitration chargeback may not be for an amount in excess of the acquirer's second presentment, but it may be for a lesser amount. To indicate a lesser amount, the issuer submits the Arbitration Chargeback / 1442 with a function code of 454 (partial amount).

If the acquirer has initiated the second presentment for an amount less than the original chargeback amount, the issuer must process the arbitration chargeback with the function code of 454 (partial amount).


Saturday, November 28, 2009

Processing Arbitration Chargebacks

Member banks must use the appropriate MTI and function code to identify the first chargeback.

MTI

Arbitration Chargeback / 1442

Function Code 451

Full amount

Function Code 454

Partial Amount


An issuer has the right to collect a $25 handling fee upon receipt of a sales receipt provided with a second presentment that reveals a merchant name, date, or location differing from the information transmitted in the first presentment. This fee is to reimburse the issuer for expenses incurred resulting from erroneous information provided with the original presentment that prompted the issuance of the unnecessary chargeback. The issuer collects this fee by processing a Fee Collection (Member-Generated) / 1740 message to the acquirer with message reason code 7612.

The issuer must start the processing cycle again with a First Chargeback / 1442 message if it receives a legible copy of the sales receipt through a second presentment of a chargeback for message reason code 4802 - Requested / Required Information Illegible or Missing and, after viewing the document for the first time, determines that it has another right of chargeback for a different reason.

The following standard procedure applies to an arbitration chargeback for each message reason code, unless otherwise stated. The issuer must process an Arbitration Chargeback / 1442 message to the acquirer through the Global Clearing Management System (GCMS), placing the same information in DE 95 (Card Issuer Reference Data) as was identified in the first chargeback and second presentment. The issuer must provide any new documentation that supports the arbitration chargeback or the change in the message reason code to the acquirer.



Wednesday, November 25, 2009

Second Presentment Amount

An acquirer processes a second presentment for the same or lesser amount of the chargeback received from the issuer in U.S. dollars, without any further currency conversion.

For intra-European transactions only. An acquirer may process a second presentment for the same or lesser amount of the chargeback received from the issuer either:
Acquirers cannot process a second presentment for an amount greater than the issuer's chargeback, but the acquirer may process a second presentment for a lesser amount. Acquirers can initiate a partial amount second presentment when an issuer has charged back the full amount of the original presentment. And through communication with the merchant, the acquirer accepts responsibility for a portion of the disputed amount. Acquirers notify MasterCard and issuers that the second presentment is for less than the full amount of the first chargeback, by submitting a Second Presentment / 1240 message with a function code of 282 (partial amount).

If the amount is not being reduced with the acquirer's second presentment, and the issuer originally submitted the First Chargeback / 1442 message with a function code of 453 (partial amount), the acquirer must submit the Second Presentment / 1240 message with a function code of 282 (partial amount).

To indicate a reduced chargeback amount, the issuer submits a First Chargeback / 1442-453 message and the acquirer submits a Second Presentment / 1240-282 message. If the issuer or acquirer does not reduce the amount, it should process the second presentment or arbitration amount with the same partial amount function code that it received.


Monday, November 23, 2009

Processing Second Presentment / 1240 Messages

Member banks must use the appropriate MTI and function code to identify the second presentment, as shown in the table below:

MTI

Second Presentment / 1240

Function Code 205

Full Amount

Function Code 282

Partial Amount


An acquirer can process a second presentment if the chargeback is invalid or if it can provide additional information to correct the original defect that led to the chargeback. The processing requirements for a second presentment are identical for many of the message reason codes. The following standard procedure applies to these message reason codes unless otherwise stated under the particular message reason code:
  • To process a second presentment electronically, the acquirer must process a Second Presentment / 1240 message through Global Clearing Management System (GCMS) with the applicable information in DE 95 (Card Issuer Reference Data) to identify the original chargeback. MasterCard does not require acquirers to return all original supporting documentation that the issuer provided with the original chargeback. Acquirers must provide only the additional documentation, as required in this guide, to support the current processing cycle.
  • If both a transaction certificate and related data are presented in the clearing record (but not the authorization record), the acquirer is entitled to be reimbursed by the issuer for a handling fee for a second presentment for message reason codes 4812 (Account Number Not On File) and 4835 (Card Not Valid or Expired). The acquirer can collect a $25 handling fee by submitting a Fee Collection / 1740 message.


Friday, November 20, 2009

First Chargeback Amount Requirements

A card issuer cannot charge back a transaction for an amount that exceeds the full amount of the transaction presented by the acquirer. It may, however, charge back a transaction for an amount less than the full amount of the transaction. This rule applies to all transactions, except for transactions converted to U.S. dollars. Under these circumstances, the chargeback may be for an amount greater than the transaction amount originally presented by the acquirer. To charge back a transaction for an amount less than the full amount of the transaction, issuers must submit the First Chargeback / 1442 message with a function code of 453 (partial amount).

DE 24 (Function Code) identifies chargebacks submitted for an amount that is different from the original transaction amount. Issuers must provide the partial amount function code throughout the life cycle of the chargeback, as follows:
  • Issuers in the U.S. region processing a First Chargeback / 1442 message will process the chargeback in U.S. dollars, using the First Chargeback / 1442 message, with no conversion.
  • Issuers outside the U.S. region processing a First Chargeback / 1442 message will convert the cardholder billing currency amount directly into U.S. dollars.
  • For intra-European transactions only issuers may process a chargeback for the same or lesser amount of the original presentment received from the acquirer either:
    • In the original presentment reconciliation currency, as specified in DE 5 (Amount, Reconciliation) of the First Presentment / 1240 message.
    • In the amount debited in the issuer's payment currency used for settlement of the original presentment, as specified in DE 6 (Amount, Cardholder Billing) of the First Presentment / 1240 message.

    For example, if the transaction is in EUR and the cardholder's currency is GBP, the chargeback amount may be in either EUR or GBP.

Thursday, November 19, 2009

Processing First Chargeback / 1442 Messages

The following codes must be used to identify the first chargeback:

MTI

First Chargeback / 1442

Function Code 450

Full Amount

Function Code 453

Partial Amount


An issuer may process a First Chargeback / 1442 message if it determines that for a valid chargeback reason specified below the transaction may be charged back to the acquirer.

Code

Chargeback Reason

4801

Requested Transaction Data Not Received

4802

Requested/Required Information Illegible or Missing

4807

Warning Bulletin File

4808

Requested/Required Authorization Not Obtained

4812

Account Number Not on File

4831

Transaction Amount Differs

4834

Duplicate Processing

4835

Card Not Valid or Expired

4837

No Cardholder Authorization

4840

Fraudulent Processing of Transaction

4841

Canceled Recurring Transaction

4842

Late Presentment

4846

Correct Transaction Currency Code Not Provided

4847

Requested / Required Authorization Not Obtained and Fraudulent Transaction

4849

Questionable Merchant Activity

4850

Credit Posted as Purchase

4853

Cardholder Dispute – Defective / Not As Described

4854

Cardholder Dispute - Not Elsewhere Classified (U.S. Region Only)

4855

Nonreceipt of Merchandise

4857

Card-Activated Telephone Transaction

4859

Services Not Rendered

4860

Credit Not Processed

4862

Counterfeit Transaction Magnetic Stripe POS Fraud

4863

Cardholder Does Not Recognize - Potential Fraud

4870

Chip Liability Shift

4871

Chip / PIN Liability Shift


An issuer may exercise one first chargeback per presented transaction within the time frame applicable for the chosen chargeback reason code. To generate a chargeback, the issuer must submit the First Chargeback / 1442 message with the applicable message reason.

The Corporate Purchasing Department Account Program does not have chargeback rights for the following message reason codes:
  • 4835 - Card Not Valid or Expired.
  • 4837 - No Cardholder Authorization.
  • 4840 - Fraudulent Processing of Transactions.
  • 4847 - Requested / Required Authorization Not Obtained and Fraudulent Transaction.
  • 4862 - Counterfeit Transaction Magnetic Stripe POS Fraud.
  • 4863 - Cardholder Does Not Recognize - Potential Fraud.


Monday, November 16, 2009

Processing First Presentment / 1240 Messages

The first presentment occurs when the acquiring bank submits transaction data to the card issuer for the first time, for posting to the cardholder's account.

To minimize subsequent retrievals, chargebacks, and second presentments, acquirers must ensure that all presented clearing transactions contain accurate and complete data in the applicable first presentment and addendum messages. To further minimize subsequent chargebacks and second presentments, issuers must ensure that all transaction details provided by the acquirer are readily available to the cardholder and to internal operations. The acquirer must send all presented transactions to the Global Clearing Management System (GCMS).

The acquirer must present all cash disbursements, purchases, credits, unique transactions, and payment transactions for the full amount of the original transaction currency as agreed to by the cardholder. The amount may not be increased (or reduced in the case of a credit or a payment transaction) unless specifically authorized. Acquirers must present these transactions promptly to issuers.

Except as otherwise provided for member banks participating in bilateral agreements with MasterCard, all transactions processed through GCMS will be converted into the equivalent reconciliation currency amount for settlement. MasterCard (not the merchant or acquirer) will convert the transaction using the buy, mid, fixed, and sell rates of the representative group of currencies most frequently traded.


Friday, November 13, 2009

MasterCard Chargeback Processing Cycles and Time Frames

Following the first presentment of a transaction, the chargeback life cycle includes the first chargeback and, if necessary, a second presentment, arbitration chargeback, and arbitration case filing. The time frames associated with the generation of a first chargeback depends on the message reason code.
  • Global Clearing Management System (GCMS) support of time frames. GCMS edits the First Chargeback / 1442, Second Presentment / 1240, and Arbitration Chargeback / 1442 messages to validate chargeback processing and time frame requirements.
  • Time frame for first presentment. An acquirer has 30 calendar days to process the transaction to the card issuer. This time frame is defined as the time between the transaction date and the business date. An issuer must accept a transaction submitted beyond the 30-day time frame if the account is in good standing or the transaction can be honored. When calculating the number of days, do not count the transaction date as day one, but do count the business date as day one.
  • Time frame for first chargeback. The time frames for the first chargeback are 45, 60, 120, and 540 calendar days after the business date, depending on the individual reason for the chargeback. GCMS measures this time limit from the business date of the presentment, except for certain chargeback reasons.When delayed delivery of goods or performance of services by a merchant results in a subsequent dispute about the condition of the goods or the quality of the services, MasterCard will calculate the period of 120 days using the delivery or performance date.In cases that involve the delayed delivery of goods or performance of services that the cardholder asserts the merchant never provided, MasterCard will calculate the period of 120 days from the latest anticipated date that the card acceptor was to provide the goods or services.

    In cases that involve interrupted services, the period of 120 days will begin on the date that the services cease. In no case will the first chargeback exceed 540 days (approximately 18 months) from the business date of the first presentment. The issuer must prorate the chargeback amount to reflect the services received.

  • Time frame for second presentment. The time frame for a second presentment is 45 calendar days. GCMS measures this period as the time between the business date that the member bank received the chargeback, and the date the transaction is subsequently processed as a second presentment. GCMS will reject any second presentment submitted more than 45 calendar days after receipt of the previous cycle.
  • Time frame for arbitration chargeback. The time frame for an arbitration chargeback is 45 calendar days. The above rules apply.
  • Time frame for arbitration case filing. If the dispute is not resolved after completion of the first presentment, chargeback, second presentment, and arbitration chargeback cycles, a member bank may proceed to arbitration within 45 calendar days of the business date of the arbitration chargeback.

Tuesday, November 10, 2009

MasterCard Chargeback Stages

After the first presentment of a transaction from the acquiring bank to the card issuer, the issuer may determine that, for a specific reason, the transaction may be invalid. The issuer may then return the transaction to the acquirer as a chargeback. When an issuer has billed a transaction to its cardholder's account for payment and then initiates a chargeback, the issuer must credit the cardholder's account for the amount of the chargeback. The issuer should not be reimbursed twice for the same transaction. Similarly, an issuer should not credit a cardholder twice because of a chargeback processed by the issuer and a credit processed by the merchant.

For each individual transaction, the interchange procedures allow for the following processing:
  • First Presentment / 1240.
  • First Chargeback / 1442.
  • Second Presentment / 1240.
  • Arbitration Chargeback / 1442.
  • Arbitration Case Filing.
Additionally, if an issuer needs a copy of the sales receipt, the retrieval process has two steps - Retrieval Request and Retrieval Fulfillment. The retrieval process also may include Image Review.

The following table identifies the stages of a transaction when the issuer initiates a chargeback.

Stage

Description

MTI-Function Code(s)

First Presentment

Acquirer submits the transaction to the issuer.

1240-200

Cardholder or issuer disputes the first presentment.

Retrieval Request

Issuer may request a copy of the sales ticket to support or identify a potential chargeback.

Note: Most chargebacks do not require a retrieval request.

1644-603

First Presentment

Acquirer submits the transaction to the issuer.

1240-200

Chargeback

Issuer initiates a chargeback within the time frame applicable to the specific message reason.

Note: If an issuer receives a legible copy of the sales receipt through a second presentment for message reason code 4802 - Requested / Required Information Illegible or Missing, and after viewing the item for the first time determines that it has another right of chargeback for a different message reason code, the issuer must start the process again with a new chargeback.

1442-450 (full amount)

1442-453 (partial amount)

Second Presentment

When applicable, the acquirer may process a second presentment within 45 calendar days of the business date of the chargeback.

1240-205 (full amount)

1240-282 (partial amount)

Arbitration Chargeback

When applicable, the issuer may initiate an arbitration chargeback within 45 calendar days of the business date of the second presentment.

1442-451 (full amount)

1442-454 (partial amount)

Arbitration Case Filing

The acquirer may file an arbitration case to MasterCard, for a decision on the dispute, within 45 calendar days of the business date of the arbitration chargeback.

N / A

Friday, November 6, 2009

Bank Responsibilities for Clearing and Settling MasterCard Credit Card Transactions.

All member banks have certain rights and obligations when clearing and settling transactions. Members are required to submit and to accept specific transaction records electronically through GCMS.

Acquirer Responsibilities

All acquiring banks are responsible for the following:
  • Ensuring that presented data is accurate, complete, and in compliance with the MasterCard operating rules.
  • Editing, monitoring, and reconciling messages sent and received by balancing the IPM reconciliation messages to their internal system reports of member-generated data and data generated by MasterCard.
  • Receiving all IPM First Chargeback / 1442 messages that card issuers submit and either:
    • Accepting responsibility for the transactions received.
    • Pursuing a remedy for the transactions in accordance with the rules and procedures specified within this guide.

    For example, after receiving a chargeback, the acquiring bank must not enter the item invalidly into interchange as a new first presentment unless the applicable chargeback rule states that is the proper procedure. Normally, if the acquirer can remedy the dispute, it will have to submit the transaction as a second presentment.
Issuer Responsibilities

All card issuers are responsible for the following:
  • Receiving all IPM First Presentment / 1240 messages as presented by the acquiring bank.
  • Ensuring that all necessary data is passed to the cardholder, or is readily accessible for transaction research and monitoring purposes.
  • Editing, monitoring, and reconciling messages sent and received by balancing the IPM reconciliation messages to their internal system reports of incoming data received by, and outgoing data sent to, MasterCard. This requirement ensures that member banks reconcile all rejected and accepted messages.
Clearing and Settlement

When a cardholder uses a card to purchase products or services from a merchant, the acquiring bank will reimburse the merchant for the transaction. The acquirer then settles those funds with the card issuer by presenting the transaction into interchange.

In summary, clearing is the movement of data from the acquirer to MasterCard, and from MasterCard to the issuer. Settlement is the process used to exchange funds between member banks for the net value of the monetary transactions cleared for that processing day. Interchange is the exchange of transaction data between member banks.