Chargeback Prevention

Understanding the Mastercard Excessive Chargeback Program

Mastercard Excessive Chargeback Program

Nobody likes chargebacks. Even though they may be necessary at times to protect consumers from fraudsters and deceptive merchants, in an ideal payment ecosystem chargebacks should be few and far between. The card brands are keenly aware of this, and they frequently put out mandates and guidelines designed to reduce the number of chargebacks that pass through their networks.

Last year, Mastercard tackled this problem with their Excessive Chargeback Program, which monitors dispute activity and penalizes merchants who let their chargeback rate spiral out of control. What do merchants need to know about the ECP—and how to avoid getting placed in it?

New call-to-actionMastercard created the ECP in 2019 as part of a broader push to bring down fraud and chargeback rates. This program tracks all Mastercard chargebacks and establishes a multi-tiered system for dealing with merchants who carry excessive chargeback rates. The lowest tier of the program is essentially just a warning, but merchants who fail to bring their chargeback rates down may find themselves escalated to the higher tiers where fines are imposed and the merchant's acquiring bank may be penalized as well.

All this might sound a bit draconian, but the goal of reducing chargeback rates is something that merchants should already be on board with, for their own financial health and protection. With or without Mastercard's involvement, a high chargeback rate can pose an existential threat to a merchant's ability to stay in business.

What is the Mastercard Excessive Chargeback Program?

Mastercard’s purpose for the ECP is to reduce fraud and chargebacks and create better payment experiences by keeping a watchful eye on dispute activity and enforcing compliance with practices that minimize the occurrence of chargebacks. Acquiring banks are responsible for tracking their merchants’ chargeback levels, reporting them to Mastercard, and communicating the requirements of the program to merchants.

Placement in the ECP is determined by calculating a merchant’s chargeback ratio by dividing the number of chargebacks received in one month by the number of transactions processed in the preceding month. Merchants who exceed certain thresholds, which we will discuss below, are automatically entered into the program.

While many chargebacks are caused by fraudsters, merchants often inadvertently invite chargebacks with suboptimal customer service and other business practices, such as using billing descriptors that confuse customers. Chargebacks that result from these bad habits are costly, create negative customer experiences, and are completely avoidable. The ECP is intended to help merchants rid themselves of these habits for the overall benefit of the Mastercard payments ecosystem.

The ECP also provides Mastercard with a mechanism for severing ties with merchants who deliberately flout their guidelines or intentionally defraud customers.

What are the Different Tiers of the ECP?

Merchants who receive more than 100 chargebacks within a month and carry a chargeback-to-transaction ratio exceeding 1% are classified as a Chargeback Monitored Merchant (CMM). At this level, merchants are not subject to fines or other penalties, but they are nearing excessive levels and are being scrutinized more carefully.

A merchant is categorized as an Excessive Chargeback Merchant (ECM) when they receive 100 or more monthly chargebacks and their ration exceeds 1.5% for two consecutive months. At 300 or more chargebacks per month and a ratio of 3% or higher, the High Excessive Chargeback Merchant (HECM) classification is assigned.

Additional program tiers exist based on how long a merchant has been in ECM or HECM status:

  • Tier 1: 1 to 6 months
  • Tier 2: 7 to 12 months (Mastercard may advise the merchant’s acquirer on chargeback remediation steps that need to be taken, or may require the merchant to enroll in a fraud management program)
  • Tier 3: 12 or more months (Mastercard may penalize the acquirer for each month that the merchant remains in the program—often, this means that the acquirer will terminate their relationship with the merchant at this point)

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanyThe penalties that Mastercard assesses can vary, but they will not exceed the total amount of Mastercard chargebacks incurred by the merchant. They consist of a $100 reporting fee, an issuer recovery fee, and a violation assessment. The violation assessment amounts are higher for merchants at the HECM level.

Mastercard did not immediately begin charging penalties for merchants in the ECP when the program first launched, but as of May 2020, penalties are being enforced for all merchants except those in Canada.

How Do You Get Out of the ECP?

Once a merchant is enrolled in the ECP, Mastercard will typically ask them to submit a remediation plan. This is a document that outlines the steps the merchant is taking to reduce their chargeback levels. The plan should include a description of the business, an explanation of the circumstances that have led to their current high chargeback levels, the dates on which specific actions were taken to mitigate these circumstances, and a list of any anti-fraud tools the merchant is using.

The only way to “graduate” from the ECP is to maintain chargeback levels below the CMM threshold for two consecutive months. Once a merchant has accomplished this, they are considered to be back in compliance. There’s no probationary period once a merchant exits the ECP—they’re safely back to square one.


Chargeback monitoring programs can motivate merchants to take a growing problem with disputes seriously and dig themselves out of a bad situation, but it's better to not get placed in one at all. A proactive fraud and chargeback prevention strategy can keep your chargeback rate low enough that you won't have to worry about crossing any excessive chargeback thresholds. After all, Mastercard isn’t the only card network with a compliance program.

The costs of chargebacks are considerable, far exceeding the loss of revenue alone—and that's before you factor in the fines charged by the ECP and similar chargeback monitoring programs. If you're sweating bullets every month hoping you skate under the threshold, it might be worth investing in a chargeback management firm that can give you the knowledge and resources to win disputes, prevent chargebacks, and stay in the good graces of the card networks.

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