Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code FR2, which indicates an unauthorized charge that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually either true fraud or friendly fraud. Merchants who believe they have received an invalid chargeback under reason code FR2 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code FR2?
American Express chargeback reason code FR2 falls under the “Inquiry/Miscellaneous” category. The shorthand description is “Fraud Full Recourse Program.” This reason code is used when a cardholder claims that they did not authorize a particular transaction, and the merchant is currently enrolled in the American Express Fraud Full Recourse Program.
American Express has several levels of fraud and chargeback monitoring programs for merchants with fraud or dispute activity that reaches certain thresholds. One of the most significant consequences of these programs is that once a merchant is in one, they won’t be given any leeway when a dispute is raised. Instead, American Express will bypass the merchant inquiry step they might otherwise take and proceed directly to a special chargeback with a reason code related to the monitoring program the merchant is enrolled in.
In this case, the Fraud Full Recourse Program is for merchants who have accepted an excessive number of fraudulent transactions.
What Scenarios Might Lead to This Chargeback?
The root causes behind the disputes that lead to this chargeback tend to be either true fraud or friendly fraud. The cardholder sees a transaction on their statement that they don’t recognize and believe they did not authorize, and call American Express to dispute it.
Normally, American Express would send an inquiry to the merchant to review any details or relevant documents the merchant might have pertaining to the cardholder’s claims. If, after hearing out the merchant, they decided to proceed with the chargeback, they would assign it a fraud or authorization-related reason code.
In this case, where the merchant has already been placed in the Fraud Full Recourse Program, American Express skips the inquiry and assigns this special chargeback reason code that automatically assumes that accusations of fraud are correct.
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?
When a merchant receives a chargeback like this, it is because they have let a fraud problem fester so long that the normal chargeback rules no longer apply to them, and they are automatically assumed to be at fault.
Instead of fighting individual chargebacks, merchants need to focus on preventing fraud enough to be taken out of the monitoring programs.
However, on the rare chance that American Express hits you with this reason code by mistake, you can try to fight it by sending one of the following responses:
- Proof that you had not been placed in the Fraud Full Recourse Program at the time of the chargeback.
- Proof that a credit which directly offsets the disputed charge has already been processed.
How Can Merchants Prevent this Chargeback Code?
The monitoring program invoked here specifically relates to fraud. To that end, fraud detection and prevention tools represent the merchant’s best chance to get their problem under control, remove themselves from the monitoring program, and get back to dealing with disputes on a level playing field. Merchants should take advantage of any anti-fraud tools American Express has to offer, look into appropriate third-party tools, and consider engaging the services of a chargeback management firm. They can also employ the following best practices:
- Issue credits and refunds within 7 calendar days.
- Make sure your refund and cancellation policies clearly state a timeframe for when customer can expect refunds to be issued.
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.