Late Presentment Chargebacks

We’re all late for things once in a while. Even the most punctual people get stuck in traffic on occasion. The consequences of being late depend greatly on the circumstances. If you’re late to a movie, you might only miss the trailers. If you’re late to a job interview, chances are good that your career search may be ongoing for a while yet.

When it comes to submitting credit card charges to your bank, the penalty for lateness is usually something quite unwanted: a late presentment chargeback. Why do late presentment chargebacks occur, and what can merchants do to prevent them?

Understandably, discussions of chargeback prevention tend to focus on e-commerce fraud, but it’s also important to look at chargebacks that result not from fraud or false claims, but from merchant error.

The “good” news about merchant error chargebacks is that unlike fraud, which is a constantly evolving and shifting problem, merchant error is entirely self-inflicted.

If you can identify the source of your merchant error chargebacks and fix the problem that’s causing them, they’ll stop for good and you can turn your attention to other challenges.

Late presentment chargebacks happen when merchants miss the deadline for presenting a transaction to their bank. The cardholder might not have any issue with the delay, but the issuing bank will initiate a chargeback anyway if a transaction is presented outside of the allowed time frame.

The exact amount of time that a merchant has to present a charge can vary depending on the transaction type and the card network.  Many merchants routinely batch and submit their transactions within 24 hours, and have little reason to fear this type of chargeback, but there are situations where it can be necessary to delay presentment, and in these cases it is important to follow the rules carefully.

What Is Presentment?

Making a card payment is a multi-step process that involves numerous actors: the cardholder, the merchant, the payment processor and/or acquirer, the issuing bank, and the card network.

The first step in a credit card transaction is to authorize it: send a communication to the issuing bank to verify that the card is in good standing and has sufficient funds to cover the transaction. If the issuing bank sends back a positive response, the merchant can complete the transaction.

Presentment is the second step, when completed transactions are batched, or grouped together, and submitted to the acquiring bank and then on to the card network.

Next is clearing and settlement, when the card network collects the funds from its issuers and sends them to the acquirer, who can then place the funds into the merchant account.

Once a transaction has been processed and completed, it’s up to the merchant to batch it and present it, and any amount of time can elapse between when a transaction is completed between the merchant and cardholder and when it gets presented to the issuer.

Note that the act of fighting a chargeback is called “representment” because it involves the merchant presenting the charge a second time, after the chargeback has been received, along with the evidence that will prove to the issuing bank that the charge is valid and should not have been disputed.

Why Do Late Presentment Chargebacks Occur?

Issuing banks and card networks have good reasons to want merchants to present transactions soon after processing them. Immediate presentment ensures that the card account will still be in good standing with sufficient funds, and helps make sure cardholders can easily recognize and remember their transactions.

When a credit card charge doesn’t show up on a cardholder’s online statement until days or weeks after they made a purchase, they may mistake the unusual timing for fraud and try to dispute it.

To compel merchants to present their transactions within a reasonable time frame, the card networks set a maximum time limit on presentment. When an issuer receives a transaction outside of this time limit, they have chargeback rights and no cardholder dispute is required.

Except in rare cases where the issuer makes some kind of internal error, late presentment chargebacks are usually valid. Merchants can avoid them by presenting all card transactions within 24-72 hours of processing.

If, for some reason, you have to delay presentment, first make sure that all of the transactions within the delayed batch are within their allowed time frame. Visa, for example, allows late presentment chargebacks on any transaction that is more than 180 days old, but also on any transaction made to a closed or fraud-flagged account outside of the much shorter acquirer processing time frame—which is 8 days for most normal transactions.

The region, transaction type, and card network are all factors in whether or not a transaction might trigger a late presentment chargeback. When in doubt, consult the published rules or ask your acquirer for guidance. If you have an old transaction that can no longer be presented, you can try contacting the cardholder and asking them to initiate a new transaction.

Conclusion

If a review of your chargeback data reveals that you’re getting hit with late presentment chargebacks are more than just an isolated occurrence, there must be some operational errors or inefficiencies to blame.

Late presentment chargebacks are a totally avoidable problem and merchants should act quickly to find out their cause and make whatever changes are necessary.

It may just be an issue with personnel or training. If presentments are being delayed on purpose for some reason, a more thorough review and overhaul of your procedures may be called for.

Just remember that when you don’t study your chargeback data and research the causes, you can’t fight them effectively. There’s no need to keep suffering through merchant error chargebacks, but the methods you use to prevent them are very different from what works on true fraud or friendly fraud chargebacks.

By analyzing your chargebacks and coming up with an action plan based on the specific insights you learn, you can target the root causes of your chargebacks and implement the most effective solutions for getting rid of them.

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