Exploring Mastercard's Chargeback Mandates
Table of Contents
- What Changes Did Mastercard Make to Their Chargeback Rules?
- October 2018 Mastercard Chargeback Changes
- April 2019 Mastercard Chargeback Changes
- July 2020 Mastercard Chargeback Changes
- 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.
These 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?
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.
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|
|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|
|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||Credit Not Processed|
|4853||Goods/Services not as Described or Defective|
|4853||Digital Goods $25 or less|
|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)|