Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code P07, which indicates a transaction that was not processed correctly by the merchant. The actual underlying cause of this chargeback is usually merchant error or friendly fraud. Merchants who believe they have received an invalid chargeback under reason code P07 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code P07?
American Express chargeback reason code P07 falls under the “Processing Errors” category. The shorthand description is “Late Submission.” When this reason code shows up, it means that the transaction was not submitted within the required timeframe. A transaction in progress is not valid forever. Authorizations expire, circumstances change, and if you wait too long you need to initiate and authorize a new transaction instead of pushing an old one through and expecting it to be honored.
Most merchants process transactions as soon as a payment method is prevented, but there can be valid reasons to delay processing.
Sometimes merchants make promises in good faith to wait on processing a payment for the customer's sake, but the rules set in place by American Express and your payment processor must always be followed.
What Scenarios Might Lead to This Chargeback?
The typical cause of this chargeback is that a merchant has initiated a transaction but does not finalize and submit it until much later, after the allowable window of time has expired. This can happen due to forgetfulness or procedural error, but sometimes a merchant may do it on purpose. For instance, they might keep a card on file in case of some contingency, or assure a customer that their card won't be charged until an order is sent out for delivery.
Customers who have agreed to recurring billings or contingent payments may file friendly fraud chargebacks under this reason code if they do not realize (or choose to ignore) the fact that the perceived delay they are objecting to was permitted by their purchase agreement with the merchant. These payment arrangements must always be handled with care, and you should always notify customers well in advance whenever you’re about to process a delayed payment.
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?
If the cardholder’s claims are false and you did in fact submit the transaction within the permitted window of time, you can fight and win against this chargeback. One of the following documented proofs must be included in your response:
- If the transaction was processed on time, provide documentation that proves that the charge was valid and completed timely.
- 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?
If your chosen business model puts you in the position of having to process delayed, scheduled, or unpredictably timed payments, it is essential that you understand the rules for processing these payments inside and out. Review the timeframes with your payment processor and thoroughly train any employees who might process these payments.
Remember that there are specific guidelines that must be followed when processing transactions for recurring billings, scheduled installment payments, or cards left on file for security purposes.
- Make sure you send completed transactions to your payment processor within the timeframe specified in your merchant agreement.
- If you believe that a customer might be caught off-guard by the timing of a transaction, notify them in advance, ideally giving them enough time to switch to a different payment method if needed.
- The safest practice is to submit transactions on the day of the sale or as soon as possible thereafter.
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.