Discover Chargeback Reason Code UA02: Fraud

Table of Contents

1. What is Discover chargeback reason code UA02?
2. What causes code UA02 chargebacks?
3. What's the time limit to respond to code UA02 chargebacks?
4. How can merchants fight code UA02 chargebacks?
5. How can merchants prevent code UA02 chargebacks?
6. About Discover chargeback reason codes

Merchants who receive a chargeback for a transaction placed with a Discover card may encounter reason code UA02, 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 true fraud or friendly fraud. Merchants who believe they have received an invalid chargeback under reason code UA02 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is Discover chargeback reason code UA02?

Discover chargeback reason code UA02 falls under the “Fraud” category. The shorthand description is “Fraud – Card Not Present Transaction.” This code indicates that the cardholder claims a card-not-present transaction on their account wasn't authorized and must therefore be fraudulent.

Most payment card fraud occurs in card-not-present environments, where robust security protocols like the EMV chip standard cannot be used to identify and block suspected fraudulent transactions that are not made or authorized by the cardholder.

Online fraud can take many different forms, so the specific circumstances underlying this reason code can vary considerably from one chargeback to another.

What causes code UA02 chargebacks?

Code UA02 chargebacks have two common causes. The first is true fraud through the use of stolen payment or account credentials. The second is friendly fraud from customers disputing a legitimate purchase they made.

True fraud is unfortunately common in the world of eCommerce. Payment card credentials are frequently stolen through data breaches, phishing attempts, and account takeover attacks. These credentials are often sold in bulk on the dark web and other illicit markets.

Fraudsters can then try to use these stolen card numbers to make purchases at eCommerce sites where complete credentials suffice for authorization and no signature, ID, or EMV chip is required.

This reason code also shows up frequently in friendly fraud chargebacks. Merchants whose online storefronts don’t match the name on their billing descriptors may find themselves receiving chargebacks from customers who don’t recognize the charge.

Cyber-shoplifting is also common. In these scenarios, fraudsters will make a purchase with their own cards and falsely claim that it was done without their authorization because they know the burden of proof is on the merchant to demonstrate otherwise.

What's the time limit to respond to code UA02 chargebacks?

The acquirer or merchant has 30 days to respond to a chargeback filed under reason code UA02.

How can merchants fight code UA02 chargebacks?

Merchants can fight code UA02 chargebacks by providing evidence that the cardholder authorized the transaction, such as delivery confirmation, IP address records, etc.

Your chargeback response should include one of the following:

• Proof of delivery, plus proof that the Address Verification Service was used to verify the cardholder’s street address and ZIP code. If you were unable to verify the cardholder because their card was issued outside of the United States, provide a copy of this AVS response.
• Proof that the cardholder confirmed registration to receive electronic delivery of the goods or services ordered.
• For digital purchases, the cardholder’s email or IP address, timestamp of the download, a description of what was downloaded, and/or electronic logs showing that the cardholder received the downloaded item on or after the transaction date.
• 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 UA02 chargebacks?

Merchants can prevent code UA02 chargebacks by using effective fraud prevention methods and tools, blacklisting customers who commit friendly fraud, and fighting friendly fraud chargebacks in representment.

The following tips can also help you prevent these chargebacks:

• Always obtain proper authorization before processing a transaction.
• Use AVS and CVV matching
• Use velocity checking
• Use fraud prevention software
• Discontinue a transaction if the card has been declined and ask for an alternate form of payment.
• Never “force” an unauthorized charge to go through.

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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