Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code P05, which indicates a transaction that was not processed correctly by the merchant. 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 P05 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code P05?
American Express chargeback reason code P05 falls under the “Processing Errors” category. The shorthand description is “Incorrect Charge Amount.” This reason code is used when a cardholder claims that the merchant charged them for a different amount than what they agreed to pay. Various situations can lead to a dispute for this reason, so it is important to examine these chargebacks carefully to determine the circumstances that led to the cardholder filing it.
Most transactions are pretty straightforward when it comes to the purchase amount. The price is listed, the sales tax is a known quantity, and the register or checkout page clearly shows the final total.
Where things get complicated is when things fees, shipping and handling expenses, or the cost of parts and materials come into play. These add-ons aren’t always known in advance when the sale is made, and when merchants and customers don’t communicate clearly, the end result can be a dispute and a chargeback.
What Scenarios Might Lead to This Chargeback?
Friendly fraud chargebacks based on this reason code are often the result when a customer doesn't fully understand what they have agreed to pay. They might have missed the inclusion of fees or taxes on an invoice, or they may have calculated a gratuity incorrectly, or failed to realize that they were consenting to recurring billings when they signed up for a service. These are all common scenarios that come from genuine confusion on the customer's part, but they are not legitimate reasons for a chargeback.
Intentional perpetrators of friendly fraud may try to use this reason when they know that their prior relationship with the merchant, or other factors, will make claims of true fraud implausible.
Merchant error can cause these chargebacks as well, when merchants neglect to inform customers about add-on costs but charge them anyway. It can also happen when merchants key in the wrong amount by mistake.
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 and the amount charged is the same amount that was agreed upon and authorized. Your chargeback response must include at least one of the following elements:
- If the transaction amount was correct, provide documentation that proves the cardholder agreed to the amount, including any additional or delayed charges.
- 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?
Merchants should always take special care to explain any increases or changes to the purchase price before submitting a transaction.
When customers agree to pay estimated costs, added fees, or shipping and handling charges that weren’t set at the time of the initial sale, make sure to get their agreement in writing and keep records of your communications.
You can also prevent some of these disputes by doing the following:
- Once you have obtained authorization for a particular charge amount, never change it mid-transaction unless you have obtained the customer's consent and sought authorization approval for the new amount.
- Use caution when entering handwritten transaction information. If the amount is unclear, find a way to verify it.
- Always run cards by swiping or dipping them—only use fallback options like manual keying in emergency situations.
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.