American Express Chargeback Reason Code F24: Fraud

chargeback reason code f24Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code F24, which indicates an unauthorized transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually true fraud or friendly fraud. Merchants who believe they have received an invalid chargeback under reason code F24 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is American Express Chargeback Reason Code F24?

American Express chargeback reason code F24 falls under the “Fraud” category. The shorthand description is “No Card Member Authorization.” This reason code is used when a cardholder claims that while they have previously shopped with the merchant, they did not participate in or authorize this particular transaction.

Issuing banks will often ask cardholders who are disputing a charge whether they have had legitimate transactions in the past with the merchant in question. This can help to avoid erroneous friendly fraud chargebacks, as it may jog the cardholder’s memory or spur them to look up their order history and reevaluate their claim.

However, it is not that unusual for fraudsters to target merchants who have a preexisting relationship with their victims.

In account takeover scenarios, this is almost exclusively the case, but it can happen coincidentally with stolen card numbers as well—especially if the merchant is large and widely-known.

What Scenarios Might Lead to This Chargeback?

In account takeover fraud, cybercriminals gain access to their victim’s account on an ecommerce site by guessing their password or obtaining it through phishing or other nefarious means. They can then use the victim’s stored payment credentials to place orders for digital goods (which they can immediately download and use) or physical products (which they can have sent to their own shipping address). When the account owner discovers the breach, they may receive a chargeback under this reason code after explaining their history with the merchant to the American Express representative.

Of course, this chargeback can also result if a fraudster happens to use a stolen card at a store their victim frequents. It’s also not uncommon to see it in cases of friendly fraud.

A cardholder may become upset with a merchant and decide to claim fraud to get out of paying for a recent purchase even though they used to be a loyal customer.

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 you believe the cardholder did participate in the purchase and the account has not been breached, provide a valid authorization as evidence.
  • If you have already been alerted to an account breach or unauthorized purchase and have issued a refund to the cardholder, provide documentation that proves that you already credited their account.

How Can Merchants Prevent this Chargeback Code?

Account takeover attacks can be prevented by requiring strong passwords and other security measures to protect user accounts. The following best practices can help you avoid true fraud attempts, establish proof of authorization, and protect you from illegitimate chargebacks filed under this reason code:

  • Use tools like Address Verification Service (AVS) and card identification number (CID) verification to screen out fraudsters.
  • Use third-party fraud detection tools that step in before the sale is completed to verify the cardholder’s identity, detect potential criminal activity, and evaluate the risk of accepting an authorized transaction.
  • Use billing descriptors that cardholders will easily recognize.
  • Always submit an authorization request, no matter how small the transaction amount.
  • Create an electronic or manual imprint for every card-present transaction.
  • Only enter transaction data manually as a last resort.
  • Upgrade to EMV-compliant terminals.
  • Always use the correct cardholder verification methods: signature, PIN, or whatever is specified for the circumstances.

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.