Exploring Mastercard's Chargeback Mandates

Table of Contents

  1. What Changes Did Mastercard Make to Their Chargeback Rules?
  2. October 2018 Mastercard Chargeback Changes
  3. April 2019 Mastercard Chargeback Changes
  4. July 2020 Mastercard Chargeback Changes
  5. What Do Mastercard's Rule Changes Mean for Merchants?

In order to keep up with changes in the payment landscape—including fraud tactics payment technology, and customer behavior—all the major card networks occasionally update their rules, issuing new mandates for banks, merchants, and processors when appropriate.

New call-to-actionThese mandates often involve changes to the transaction process, the addition or removal of certain chargeback reason codes, or changes to the various phases and deadlines involved in the chargeback process.

In this article, we'll cover some of the major changes that Mastercard has made to chargebacks in recent years, starting with several changes that were made to specific chargeback reason codes in 2018.

The current versions of Mastercard's rules for merchants can be found here, but given that these documents contain hundreds of pages of information, we're going to break down the latest changes to chargebacks so merchants can be sure they're up to date.

What Changes Did Mastercard Make to Their Chargeback Rules?

Over the past few years, Mastercard has merged or eliminated many reason codes, required issuing banks to obtain evidence from the cardholder before filing certain chargebacks, and changed the rules for arbitration and pre-arbitration for certain reason codes.

October 2018 Mastercard Chargeback Changes

In October of 2018, Mastercard made the following changes:

  • For No Cardholder Authorization chargebacks (reason code 4837), when the merchant’s information contains a mismatch between authorization and clearing, new information such as the merchant’s name, location, or the transaction date is no longer a remedy to this type of chargeback during representment.

  • The Late Presentment chargeback rights and language were moved from chargeback reason code 4834 (Point of Interaction Errors) to reason code 4808 (Authorization-Related Chargebacks).

  • Reason code 4842 (Late Presentment) was retired.

  • For reason code 4863 (Cardholder Does Not Recognize), supporting documentation like a letter or email from the cardholder is required. The documentation must be a direct result of communication with the cardholder. Expedited dispute resolution forms are no longer allowed. For digital goods, documentation is required to support the reason for the dispute.

  • For canceled recurring payments, supporting documentation is required for the first chargeback, even if there was a previous recurring payment chargeback involving the same merchant and PAN. This can be either new documentation or the same documentation provided in the previous chargeback.

  • Disputes over reason codes 4834 (Point of Interaction Error) and 4831 (Transaction Amount Differs) require documentation such as the cardholder’s final bill or receipt.

The following pre-compliance and compliance case filing reasons were removed:

  • SecureCode (outside of a rejected transaction)
  • Counterfeit goods
  • Deadline extensions

In addition, pre-compliance is now required prior to escalating a compliance case for all applicable compliance filing reasons, cases, products, or transaction types (with the exception of fee collection disputes).

The pre-compliance and compliance case filing deadline was changed from 180 days to 120 days after the central site processing or violation date. For escalated compliance cases, the deadline is 45 days.

April 2019 Mastercard Chargeback Changes

The following changes took effect on April 12, 2019:

The arbitration cycle was removed from most dual message processed chargebacks, reducing it from three cycles to two. Arbitration chargebacks are no longer allowed, and applicable documentation requirements were moved to the first chargeback cycle. This change excluded Fraud and Cardholder Dispute reason codes.

Pre-arbitration is required for the following chargeback types before they can be escalated to an arbitration case filing:

  • Fraud, excluding 4870 (Chip Liability Shift), and 4871 (Chip/PIN Liability Shift) chargebacks
  • Cardholder Disputes
  • Point of Interaction Errors

For reason code 4834 (Point of Interaction Errors), the first chargeback time limit was reduced from 120 days to 90 days. Point of Interaction Error chargebacks involving ATM transactions still use the 120-day time limit.

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July 2020 Mastercard Chargeback Changes

In July 2020, Mastercard overhauled their list of reason codes, consolidating most of them into several broad categories, with the text description providing information on the specifics rather than the code itself.

Here's a comparison of the old vs. new reason codes:

  Old Reason   Codes Description New Reason Codes Description
Fraud   Fraud  
4837 No Cardholder Authorization 4837 No Cardholder Authorization
4840 Fraudulent Processing of Transaction 4849 Questionable Merchant Activity
4849 Questionable Merchant Activity 4870 EMV Chip Liability Shift
4863 Cardholder Does Not Recognize — Potential Fraud 4871 EMV Chip/PIN Liability Shift
4870 Chip Liability Shift Authorization  
4871 Chip / PIN Liability Shift 4808 Warning Bulletin File
Authorization   4808 Authorization-Related Chargeback
4807 Warning Bulletin File 4808 Account Number Not on File
4808 Requested / Required Authorization Not Obtained 4808 Required Authorization Not Obtained
4812 Account Number Not on File 4808 Expired Chargeback Protection Period
Point of Interaction Error   4808 Multiple Authorization Requests
4834 Point-of-Interaction Error 4808 Cardholder-Activated Terminal (CAT) 3 Device
4831 Transaction Amount Differs Point of Interaction Error  
4842 Late Presentment 4834 Point of Interaction Error
4846 Correct Transaction Currency Code Not Provided 4834 Transaction Amount Differs
4850 Credit Posted as Purchase 4834 Late Presentment
4999 Domestic Chargeback Dispute (Europe Region Only) 4834 Point-of-Interaction Currency Conversion
Cardholder Disputes   4834 Duplication/Paid by Other Means
4853 Cardholder Dispute – Defective / Not as Described 4834 ATM Disputes
4841 Cancelled Recurring Transaction 4834 Loss, Theft, or Damages
4854 Cardholder Dispute – Not Elsewhere Classified (U.S. Region Only) Cardholder Disputes  
4855 Non-receipt of Merchandise 4853 Cardholder Dispute of a Recurring Transaction
4859 Cardholder Disputes 4853 Goods or Services Not Provided
4860 Credit Not Processed 4853 No-Show Hotel Charge
    4853 Addendum Dispute
    4853 Credit Not Processed
    4853 Goods/Services not as Described or Defective
    4853 Digital Goods $25 or less
    4853 Counterfeit Goods
    4853 Transaction Did Not Complete
    4853 Credit Posted as a Purchase
    4854 Cardholder Dispute Not Classified Elsewhere
    4850 Installment Billing Dispute (Participating Countries Only)
    4999 Domestic Chargeback Dispute (Europe Region Only)

What Do Mastercard's Rule Changes Mean for Merchants?

Aside from the reason code changes, there's not much for merchants to worry about regarding Mastercard's recent changes to chargebacks. Most of the substantive changes, such as requiring issuing banks to obtain evidence before filing certain chargebacks, only serve to make things easier for merchants.

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