American Express Chargeback Reason Code C04: Card Member Disputes

chargeback reason code c04Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code C04, which indicates a disputed 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 C04 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is American Express Chargeback Reason Code C04?

American Express chargeback reason code C04 falls under the “Card Member Disputes” category. The shorthand description is “Goods/Services Returned or Refused.” This reason code is used when the cardholder claims that they returned merchandise, but the merchant did not provide them with a refund or replacement. It may also be used if the cardholder refused to accept the services or delivery of goods, but received no credit back from the merchant.

This kind of chargeback is seen fairly often. It’s not uncommon for customers to return an unwanted or faulty product and file for this chargeback when they get no response from the merchant.

Also, customers may refuse a product delivery if they had a dispute with the merchant over the product quality but were unable to cancel the order before it was shipped. They are then likely to follow up with this chargeback.

What Scenarios Might Lead to This Chargeback?

True fraud occasional results in this chargeback when a fraudster takes over a customer account and places an order, but is unable to change the shipping address or intercept the delivery. The cardholder ends up with an unwanted item and may refuse the delivery.

As for friendly fraud, customers may try to take advantage of this chargeback reason if they have buyer’s remorse, or an issue with the quality of a product, but they don’t want to deal directly with the merchant.

Instead, they file a chargeback to get their money back. Some fraudsters will even keep and use the product and use the chargeback process to get it for free, effectively engaging in cyber-shoplifting.

Get the guide, Chargebacks 101: Understanding Chargebacks & Their Root Causes

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?

Merchants can fight this chargeback if they can prove that the cardholder’s claims are false. Your chargeback response should include at least one of the following elements:

  • If you haven’t gotten the returned merchandise back, provide proof that refutes the cardholder’s claim, such as delivery tracking information that shows the returned item still in transit.
  • If the merchandise was returned in a way that does not comply with your return policy, provide a copy of the policy, outline how you made the cardholder aware of your policy prior to their purchase, and explain how they failed to follow your rules.
  • If the cardholder claims to have refused delivery, provide proof that the goods or service were accepted, such as signed delivery confirmation from the carrier.
  • 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?

The following best practices can help you avoid this chargeback:

  • For card-present transactions, clearly disclose the return policy on the transaction receipt. If the policy is on the front of the receipt, it should be near the customer signature line. If it is printed on the back, the cardholder should be made to sign the front and initial the back near the policy disclosure.
  • For card-present transactions, print the words “no refunds” or “in-store credit only” on all copies of the transaction receipt if you do not allow returns or have a limited return policy.
  • For online transactions, clearly disclose the return policy, either on the checkout page that contains the final purchase amount or on the checkout page near the “submit” button. Require customers to check a “click to accept” box or acknowledge the policy in some other way before allowing them to complete the purchase.
  • Don’t accept delivery of returned merchandise if it doesn’t comply with your return policy.
  • Fulfill all qualified cancellations or refund requests promptly so the credit will appear on the cardholder’s next monthly statement.
  • If you will be crediting the cardholder for a reduced amount, notify them of the difference before processing the credit.

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.