American Express Chargeback Reason Code C28: Card Member Disputes

chargeback reason code c28Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code C28, which indicates a disputed transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually either friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code C28 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is American Express Chargeback Reason Code C28?

American Express chargeback reason code C28 falls under the “Card Member Disputes” category. The shorthand description is “Canceled Recurring Billing.” This reason code is used when a cardholder claims that they canceled a recurring billing transaction, but were still charged, or that they tried to cancel a recurring billing transaction but were unable to because the merchant did not provide a way for them to do so.

Recurring billing transactions are a frequent source of chargebacks for merchants, often of the friendly fraud variety.

Many customers will happily sign up for a recurring billing subscription without reading the terms and conditions, and will assume that the merchant will need to obtain their permission before billing them for a second month of service. When they find themselves receiving charges that they don’t want (but did, in fact, agree to pay), they run to their issuer to ask for a chargeback.

However, some merchants do themselves no favors by obscuring the details and subsequent charges of free trial offers, or by deliberately making it hard to cancel a subscription in the vain hopes that customers will just give up and relent to monthly charges. American Express and other card networks have revised the rules around recurring billings in recent years to protect consumers, make it easier for them to cancel unwanted subscription services, and require transparency around free trials and promotional offers.

What Scenarios Might Lead to This Chargeback?

When this chargeback is the merchant’s fault, it’s usually because they either neglected to honor a valid cancellation request, or they did not provide a way for the customer to cancel their subscription in accordance with American Express’s requirement for recurring billing merchants. In these cases, the chargeback is valid.

This reason code is also very commonly used in friendly fraud. You will often see parents attempting to dispute subscriptions that their children signed up for, despite the fact that the transaction is ineligible for a chargeback because they allowed their child access to the credit card. Cardholders who know that disputes can be rejected on these grounds may falsely claim that an unknown fraudster placed the transaction.

Customers who miss a cancellation deadline by one day and receive a full month’s charge may feel ripped off and decide to dispute the transaction even though they agreed to these terms and the merchant is entirely within their rights to charge them.

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 the cardholder’s claims are false. Your chargeback response must include at least 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 the cardholder did not cancel the recurring transaction and continues to use the goods or services, provide documentation that refutes the cardholder’s claim.
  • 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?

Carefully crafted and thoroughly-explained terms and conditions can help you avoid receiving these charges from ethical customers.

Always make it easy for customers to cancel a subscription they no longer want—it’s better to let them go rather than invite a chargeback by trying to make it too much of a hassle for them to leave.

The following best practices can help prevent these chargebacks:

  • Make sure qualified cancellation and non-renewal requests are fulfilled promptly.
  • Send a notification after you’ve cancelled a recurring payment.
  • If new fees are incurred after the cancellation, communicate with the cardholder about how those charges should be handled.
  • Clearly and concisely communicate your cancellation policy and make it easy for customers to find this information.
  • Remind customers of upcoming charges, especially if a significant amount of time passes between each recurring billing cycle.

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.