Discover Chargeback Reason Code 5: Services
Table of Contents
- What is Discover chargeback reason code 5?
- What causes code 5 chargebacks?
- What's the time limit to respond to code 5 chargebacks?
- How can merchants fight code 5 chargebacks?
- How can merchants prevent code 5 chargebacks?
- About Discover chargeback reason codes
Merchants who receive a chargeback for a transaction placed with a Discover card may encounter reason code 5, which indicates an improperly authorized 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 5 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Discover chargeback reason code 5?
Discover chargeback reason code 5 falls under the “Services” category. The shorthand description is “Good Faith Investigation.” This reason code means the merchant has accepted liability in response to a Good Faith Investigation ticket retrieval request.
A Good Faith Investigation is a type of dispute that may be initiated after the normal time frame to dispute a transaction has expired. Remember that for card networks, the purpose of dispute and chargeback rules is to encourage trust and confidence in the payments ecosystem.
While most disputes are raised soon after the transaction occurs and the time limits for filing a chargeback are generous, sometimes a cardholder can go months or years before they realize they’ve been victimized by credit card fraud.
The Good Faith Investigation process is a pathway to provide a remedy for cardholders in these situations. In a nutshell, it allows card networks to bend the rules somewhat in order to provide some relief to cardholders. The Good Faith Investigation process is not required by law; it is negotiated between issuers and acquirers. Merchants may be given the option to accept or decline Good Faith Investigation disputes. Upon acceptance, a merchant will receive a chargeback with this reason code.
What causes code 5 chargebacks?
Code 5 chargebacks usually occur when a cardholder becomes aware of a fraudulent charge several months or even years after the fact. When the cardholder contacts their bank, the bank may open a Good Faith Investigation.
Good Faith Investigations can be opened any time Discover chooses. When one occurs, Discover notifies the acquirer, who passes along the information to the merchant. Upon reviewing the transaction, if the merchant believes it was fraudulent, they may accept liability for the chargeback.
What's the time limit to respond to code 5 chargebacks?
The acquirer or merchant has 30 days to respond to a chargeback filed under reason code 5.
How can merchants fight code 5 chargebacks?
Code 5 chargebacks can only be processed with the merchant's consent, so there shouldn't be any reason to fight them in the vast majority of cases.
The only circumstance in which you can fight a code 5 chargeback is if you mistakenly accept it when you have already provided a refund to the cardholder for the disputed transaction.
If that is the case, submit proof that a credit was processed to the cardholder’s account for the disputed charge.
How can merchants prevent code 5 chargebacks?
Since merchants must agree to code 5 chargebacks, the easiest way to prevent them is to simply refuse to accept them in the first place. However, this may not always be the best option.
While it may be tempting to protect your revenue and refuse, consider the value in providing a good experience for the customer—and the potential harm to your reputation if you refuse to return funds provided under a fraudulent transaction simply because the cardholder waited too long to dispute it.
About Discover 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 if 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, Discover specifies 26 reason codes under the categories of Fraud, Not Classified, Authorization, Expired, Processing Errors, Services, and Dispute Compliance. Most of Discover’s reason codes are a two-letter abbreviation of the dispute description.
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.
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