American Express Chargeback Reason Code C05: Card Member Disputes

chargeback reason code c05Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code C05, 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 C05 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is American Express Chargeback Reason Code C05?

American Express chargeback reason code C05 falls under the “Card Member Disputes” category. The shorthand description is “Goods/Services Canceled.” This means that the cardholder is claiming that they canceled their order for the merchant’s goods or services, but the merchant did not provide a refund.

This is a relatively common chargeback that often comes about when customers don’t read or fail to understand the merchant’s cancellation policy.

Many consumers believe they are entitled to a refund of any unused services or time as soon as they submit a cancel request, but not every purchase agreement works that way.

What Scenarios Might Lead to This Chargeback?

True fraud can cause this chargeback when fraudsters take over customer accounts, purchase goods or services, and leave the cardholder stuck with the bill. When the cardholder recovers their account and cancels services, they will be expecting an immediate refund.

When merchants neglect to follow their own cancellation policies and issue refunds that their customers are entitled to, they risk inviting legitimate chargebacks under this reason code.

Of course, this chargeback is widely used in friendly fraud as well. Customers who don’t like a cancellation policy that leaves them with unused goods or services that they’ve already paid for may try to talk American Express into giving them a chargeback, even though they read and agreed to the terms of purchase.

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 have evidence that shows that the cardholder’s claims are false. Your chargeback response should include one of the following elements:

  • If the cancellation request did not comply with your policies, provide a copy of your cancellation policy, outline how you made the cardholder aware of the policy prior to their purchase, and explain how they failed to follow your rules.
  • 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?

Merchants don’t always like to be explicit about cancellation policies that seem unfriendly to the consumer, but it’s always better to be upfront about your rules and billing procedures rather than risk a chargeback from an angry customer later. These tips can help you avoid this kind of chargeback:

  • For card-present transactions, clearly disclose the cancellation 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 online transactions, clearly disclose the cancellation 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.
  • Fulfill all qualified cancellations 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.