American Express Chargeback Reason Code F31: Fraud

chargeback reason code f31Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code F31, which indicates an unauthorized 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 F31 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is American Express Chargeback Reason Code F31?

American Express chargeback reason code F31 falls under the “Fraud” category. The shorthand description is “EMV Lost/Stolen/Non-Received.” This reason code means that a cardholder is claiming that they could not have participated in a transaction because their card was lost, stolen, or never received in the first place.

While EMV chips are designed to prevent fraud, fraudulent usage can escape detection if the card is run at a point-of-sale terminal that is not chip-and-PIN enabled, or if the merchant manually keys in the transaction.

This reason code is not supposed to be used for contactless payments, digital wallet payments, or charges that qualify for the “No PIN” program.

What Scenarios Might Lead to This Chargeback?

This reason code is supposed to be used only when an EMV chip card has been stolen by a fraudster and used to make unauthorized purchases that evade the EMV chip security protocols. Normally, the card would require the use of a PIN, but fraudsters will seek out merchants with outdated terminals or try to convince them to enter a transaction manually by claiming that the chip is damaged or faulty. Fraudsters can get away with a lot on a new card that they’ve intercepted in the mail, as the cardholder may just assume the delivery was delayed and isn’t likely to check online statements for a card they haven’t started using yet.

Of course, it is also sadly common to encounter friendly fraud claims where the cardholder is falsely claiming that their card was lost or stolen.

Merchants who do not follow the correct procedures for processing EMV chip transactions leave themselves vulnerable to erroneous and fraudulent chargebacks.

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 items:

  • If the purchase was a card-not-present transaction, provide proof that the transaction was properly authenticated and that the basis for the dispute is invalid.
  • If your point-of-sale terminal did in fact process the chip card correctly, provide proof that the transaction was validated with the EMV chip and PIN.
  • If you have already processed a refund for the transaction under dispute, provide documentation that proves you have credited the cardholder’s account.

How Can Merchants Prevent this Chargeback Code?

While most merchants are aware of the proper and secure procedures for handling EMV chip card transactions, many will still take the risk of running an uncooperative card with the magnetic stripe or manual entry rather than lose out on a sale. While this is understandable, it does put those merchants in a losing position when those transactions later become chargebacks. Carefully following the recommended guidelines for EMV chip transactions is the best way to keep yourself safe, but the following tips can also help protect your revenue:

  • Only use EMV-compliant point-of-sale terminals. If you have any older devices that don’t have chip readers, replace or upgrade them immediately.
  • Always use the correct cardholder verification method (signature or PIN) for the type of transaction you’re processing.
  • Make sure you differentiate between card-not-present and card-present transactions during clearing by noting internet, phone, or mail orders.

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.