Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code A02, which indicates an improperly authorized transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback may be true fraud, friendly fraud, or merchant error. Merchants who believe they have received an invalid chargeback under reason code A02 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code A02?
American Express chargeback reason code A02 falls under the “Authorization” category. The shorthand description is “No Valid Authorization.” This means that the cardholder or issuer is disputing the charge because an authorization approval was not obtained before the transaction was processed.
There are various reasons why a charge might be processed without a valid authorization. Merchants can attempt to force transactions through after they receive a decline response, or when a card is expired—or perhaps they bypassed the authorization request step altogether. Regardless of the reason, this is a very risky and unadvisable practice.
Merchants will always lose these disputes if they cannot show that they sought and obtained an authorization approval.
What Scenarios Might Lead to This Chargeback?
Normally, a merchant’s point-of-sale system or payment processor will prevent a transaction that has not been authorized to proceed any further, but there are ways to “force” a transaction to bypass the authorization process. While there may be rare circumstances in which there is a legitimate reason to do this, it’s never a good idea. An unscrupulous or fraudulent merchant may do this to charge a customer’s card without their consent, and sometimes fraudsters can hack into merchant accounts or hardware to force transactions for their own benefit. All of these scenarios present a valid use case for this chargeback reason code.
Friendly fraudsters will often claim that a charge they want to dispute wasn’t authorized, but this is easy to disprove. Because most friendly fraud transactions do receive proper authorization, it’s much more common to see them filed under fraud-related reason codes.
What are the Important Timeframes?
The acquirer and/or merchant have 20 days to respond to this chargeback after it is filed. No special timeframes apply to the cardholder.
How Can Merchants Fight this Chargeback Code?
You can fight and win against these chargebacks if you can prove you received a valid authorization response. It’s important to document your transaction processes and maintain complete records. Provide one of the following items as evidence in your response:
- If you processed the transaction correctly, provide proof of the valid authorization approval.
- If you processed a transit contactless transaction, provide proof that authorization was obtained within the given time limit for any aggregated charge that caused you to exceed the chargeback protection threshold. Alternately, provide proof that a new account status check authorization was obtained after the authorization time period expired on the last approved transaction.
- If the chargeback was filed because the card expired, provide proof that the transaction was processed before the expiration date.
- If you have already processed a refund for the transaction in question, provide documentation that proves you have credited the cardholder’s account.
How Can Merchants Prevent this Chargeback Code?
These chargebacks can be avoided by obtaining a valid authorization approval before processing any transaction and following all rules and guidelines for handling recurring billing transactions and other special cases. These tips can help you:
- Always send an authorization request before processing a transaction.
- If you receive a “decline” response to an authorization request, send a second request or ask for an alternate form of payment. Never proceed without authorization.
- Check the card’s expiration date before processing the transaction. If the card is no longer valid, ask for an alternate form of payment.
About American Express Chargeback Reason Codes
Reason codes are alphanumeric codes that provide the justification for granting a chargeback. Pursuant to the Fair Credit Billing Act of 1974, cardholders have the right to dispute unauthorized or erroneous charges and issuing banks must reverse a disputed transaction of the cardholder’s claim is valid.
When a cardholder contacts their issuing bank to dispute a transaction and receive a chargeback, the dispute is assigned a reason code that most closely matches the substance of the cardholder’s claims. The reason code provides the merchant and other stakeholders in the dispute with a concise explanation for why a chargeback has been granted.
Each card network—Visa, Mastercard, American Express, and Discover—defines and maintains their own unique set of reason codes, which are applied to disputes by the banks that issue credit and debit cards under their brands.
As both a card network and an issuer, American Express specifies 34 reason codes under the categories of Fraud, Authorization, Processing Errors, Card Member Disputes, and Inquiry/Miscellaneous. Each American Express reason code consists of one or more letters, indicating the category, and a number that identifies the specific dispute reason.
Understanding chargeback reason codes is one of the most essential parts of effective chargeback management. Identifying the chargeback reason code and the evidence required to fight it is the first step in chargeback representment, and analyzing your chargeback reason codes can provide you with insights into what types of disputes are causing you the most trouble. With this information, you can determine the root causes of your chargebacks and take action to prevent them from reoccurring.