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Visa Claims Resolution (VCR) & What It Means For Merchants

Blog Image - VCR, What it means for merchants

Table of Contents

  1. What is Visa Claims Resolution?
  2. What chargeback terminology did Visa change with VCR?
  3. The Visa Claims Resolution dispute process
  4. What is VCR Allocation?
  5. What is VCR Collaboration?
  6. How does Visa Claims Resolution affect merchants?
  7. What happens if you don't acknowledge a chargeback dispute?
  8. Can the acquirer acknowledge chargeback disputes on behalf of a merchant?
  9. What do I have to do to ensure I am in compliance with VCR?

In order to improve their processes, reduce fraud, and address any loopholes or abuses of their systems they discover, all the major card networks make frequent updates to their rules and policies. Most of these changes are fairly minor, but every once in a while a change comes along that really shakes things up. The EMV liability shift is one example of this.

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The Visa Claims Resolution (VCR) initiative is another. What is Visa Claims Resolution, what changes did it make, and how did those changes affect merchants?

What is Visa Claims Resolution?

Visa Claims Resolution is a global mandate from Visa that went into effect on April 15, 2018. It made major changes to Visa's chargeback process, terminology, and reason codes.

What chargeback terminology did Visa change with VCR?

The first thing Visa changed is the word chargeback. Visa now refers to them as "disputes" instead. Visa also now refers to the part of the chargeback process where the merchant can present evidence disproving the cardholder's claim as a "dispute response" rather than representment.

Visa also overhauled its system of chargeback reason codes. The new codes, which can be found in our reason code guide, start with a two-digit number indicating which of Visa's four dispute categories it falls into:

  • 10 — Fraud
  • 11 — Authorization
  • 12 — Processing Errors
  • 13 — Consumer Disputes

The Visa Claims Resolution dispute process

Visa made several changes to the dispute process. With Visa Claims Resolution, the dispute process is now split into two different workflows. Which workflow a chargeback goes through depends on the dispute category for the chargeback.

Fraud and Authorization disputes will follow the Allocation workflow, while Processing Errors and Consumer Disputes will follow the Collaboration workflow.

What is VCR Allocation?

Allocation is a process for Visa disputes that attempts to weed out some illegitimate chargebacks and shorten the time affected disputes take to resolve. Visa uses internal data and processes to automatically block disputes that don't meet Visa's requirements for validity.

Disputes that Visa determines to be invalid will have their liability assigned to the issuing bank. If a dispute is considered valid, the merchant can still contest it. However, rather than representment, (or a dispute response, as Visa now calls it), the merchant will be initiating pre-arbitration.

What is VCR Collaboration?

Collaboration is the new name for Visa's old chargeback process, where each party has several chances to investigate and submit evidence in order to determine whether a chargeback is legitimate.

This process is largely the same as it was before, but issuers will now have to fill out a form providing greater detail about the dispute before initiating the process.

Visa has also tightened the deadlines for both merchants and issuers. Here's a rundown of all the changes in detail:

Visa Claims Resolution (VCR) Before & After

 

How does Visa Claims Resolution affect merchants?

The biggest change for merchants is that they're now required to acknowledge all disputes, either by accepting them or by filing a dispute response. Merchants who don't acknowledge a dispute will still default to accepting it, but will now be charged an additional fee.

Download your copy of An Introductory Guide to E-Commerce Fraud PreventionFor Fraud and Authorization disputes, merchants now experience a faster and more automatic dispute process. Issuing banks are also now incentivized to conduct a more thorough investigation of cardholder claims before filing a chargeback.

This makes the process more focused on resolving disputes without Visa getting involved through arbitration. Once a dispute enters arbitration, merchants and cardholders must accept Visa's decision. With the new process, a chargeback is more likely to be resolved before that happens.

FAQ

What happens if you don't acknowledge a chargeback dispute?

For Visa chargebacks, merchants who don't acknowledge a dispute will be charged an additional fee. Merchants can respond by either accepting the dispute or fighting it.

Can the acquirer acknowledge chargeback disputes on behalf of a merchant?

Not usually. Merchants must acknowledge disputes themselves. However, platforms like PayPal and Amazon essentially take the role of the merchant in a dispute since they received the payment. These platforms may allow the actual merchant to dictate their course of action.

What do I have to do to ensure I am in compliance with VCR?

Your payment processor can provide instructions on how to acknowledge a dispute, a list of compelling evidence requirements, penalty information, and ways to respond to disputes faster.


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