Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code M01, which indicates a chargeback generated as a result of an inquiry from American Express. 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 M01 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code M01?
American Express chargeback reason code M01 falls under the “Inquiry/Miscellaneous” category. The shorthand description is “Chargeback Authorization.” One might almost consider this chargeback a technicality, as it only exists when the merchant explicitly agrees to take liability for a dispute and accept a chargeback. Like most issuers, American Express may send inquiries to the merchant via their acquirer when a card member is disputing a charge. If a merchant receives an inquiry and responds by authorizing American Express to proceed with a chargeback, this reason code will be assigned to it.
Inquiries often give merchants a chance to avoid a chargeback by submitting relevant information that sheds new light on a dispute and gives the issuer a reason to push back against the cardholder’s claims or remind them that an unfamiliar charge was, in fact, legal and authorized.
However, merchants also have the opportunity to simply accept the customer’s claims and take liability, which is a reasonable choice to make in circumstances where a valid, unwinnable chargeback is headed your way.
What Scenarios Might Lead to This Chargeback?
Because this chargeback can only be triggered by a direct inquiry to the merchant, the root cause can be anything: true fraud, friendly fraud, or merchant error. It’s just that the originating claim must be of such a nature that American Express cannot proceed directly with another chargeback reason code, but has to contact the merchant via the inquiry process to gather more information.
Sometimes, cardholders contact their issuers with sufficient information and documents that they are able to establish and escalate the dispute to the appropriate chargeback reason code immediately. Other times, the dispute claims may be ambiguous, confusing, or poorly substantiated. In these latter cases, issuers often send an inquiry to get more details.
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 receive it in error, but because they have already accepted liability during the inquiry phase, it’s rare to succeed in representment unless the merchant later finds that they have already made the cardholder whole with a credit. If you’re going to fight this chargeback, this is the evidence you want to submit:
- Proof that you have already processed a refund for the transaction in question.
- Documentation that shows when and how much you credited the cardholder’s account.
How Can Merchants Prevent this Chargeback Code?
Merchants should be careful about accepting liability when they receive an inquiry from an issuer or card network. Usually, it is best to proceed cautiously, gather your own records, investigate the transaction, and see whether or not it makes sense to accept the chargeback or fight it by representing the charge with your compelling evidence.
Some cases, however, are cut and dried.
If you receive an inquiry about an obvious case of true fraud or merchant error, it might make sense to save time and hassle by accepting liability on the spot—but only do so if you are absolutely sure that you would have no chance of fighting the chargeback successfully.
These tips can help you with avoidance and prevention of unnecessary inquiry chargebacks:
- Maintain complete and accurate records for each transaction you process.
- Make sure you can access this information quickly and easily when you need it.
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.