Discover Chargeback Reason Code UA01: Fraud
Table of Contents
- What is Discover chargeback reason code UA01?
- What causes code UA01 chargebacks?
- What's the time limit to respond to code UA01 chargebacks?
- How can merchants fight code UA01 chargebacks?
- How can merchants prevent code UA01 chargebacks?
- About Discover chargeback reason codes
Merchants who receive a chargeback for a transaction placed with a Discover card may encounter reason code UA01, 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 is usually either true fraud or friendly fraud. Merchants who believe they have received an invalid chargeback under reason code UA01 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Discover chargeback reason code UA01?
Discover chargeback reason code UA01 falls under the “Fraud” category. The shorthand description is “Fraud – Card Present Transaction.” This code indicates that the cardholder claims they didn't authorize a card-present transaction and it must therefore be fraudulent.
Code UA01 applies when the actual credit card was used to place the transaction, but the merchant processed it without proper authorization.
What causes code UA01 chargebacks?
Code UA01 chargebacks are usually caused by a fraudster with a stolen credit card either targeting a merchant who doesn't have EMV-compatible payment terminals or convincing a merchant to swipe or key in the card rather than scan the chip.
When a payment card is lost or stolen, a fraudster may try to find a retail merchant with lax security where they can use the card to make unlawful purchases. While the EMV chip standard was created to prevent this kind of thing from happening, fraudsters can still convince some merchants to run the card through alternate, less secure methods. When this happens and the cardholder realizes that somebody else has used their card, the result is a true fraud chargeback under this reason code.
Sometimes, cardholders will claim fraud when they regret or fail to recognize a purchase, resulting in a friendly fraud chargeback. Some may even premeditate friendly fraud and ask the merchant to manually key in a transaction because their EMV chip or magnetic stripe isn’t working. When they dispute the charge later, Discover will see that these protective steps weren’t taken and the EMV liability shift will kick in, transferring liability to the merchant.
What's the time limit to respond to code UA01 chargebacks?
The acquirer or merchant has 30 days to respond to a chargeback filed under reason code UA01.
How can merchants fight code UA01 chargebacks?
Merchants can fight code UA01 chargebacks if they have evidence proving that the cardholder’s claims are false and they did authorize the purchase.
Your chargeback response must include at least one of the following items:
- A valid, legible transaction receipt that includes a valid signature of the cardholder or another authorized user.
- A valid, legible transaction receipt that displays a complete and legible imprint of all security features required to be embossed on the card.
- If the chargeback carries the “Site to Store” transaction modifier, include a copy of the customer’s signature or identification that was presented when they picked up the order.
How can merchants prevent code UA01 chargebacks?
To prevent these chargebacks, merchants should always make use of the security and authorization features designed to prevent the use of stolen cards. When a customer asks you to bypass one of these features, that’s a major red flag.
The following best practices can help you avoid this kind of chargeback:
- Wait to receive authorization before finishing a transaction.
- Deploy all available internal fraud prevention tools and policies.
- Provide timely responses to all retrieval requests from Discover.
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 its 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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