Discover Chargeback Reason Code UA06: Fraud

Table of Contents

1. What is Discover chargeback reason code UA06?
2. What causes code UA06 chargebacks?
3. What's the time limit to respond to code UA06 chargebacks?
4. How can merchants fight code UA06 chargebacks?
5. How can merchants prevent code UA06 chargebacks?
6. About Discover chargeback reason codes

Merchants who receive a chargeback for a transaction placed with a Discover card may encounter reason code UA06, 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 UA06 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is Discover chargeback reason code UA06?

Discover chargeback reason code UA06 falls under the “Fraud” category. The shorthand description is “Fraud – Chip and PIN Transaction.” This code indicates that the cardholder reported a card-present transaction as fraudulent and the merchant failed to properly authenticate the card through the chip-and-PIN system.

In most countries other than the U.S., chip-and-PIN transactions are the standard for modern credit cards. These cards require the cardholder to enter a PIN into the terminal in order to authenticate each transaction.

Merchants who don't have terminals compatible with PIN entry may be subject to these chargebacks.

This reason code may also indicate that the merchant’s point-of-sale terminal did not transmit all of the data required for proper authorization, or that the transaction was made fraudulently by a person who was not authorized to use the card.

What causes code UA06 chargebacks?

Code UA06 chargebacks are often caused by a fraudster with a stolen credit card targeting a merchant who doesn't have chip-and-PIN compatible payment terminals or convincing a merchant to bypass PIN entry.

EMV chip cards can be used in combination with PIN entry to validate the cardholder’s identity and prevent fraudulent transactions. When a fraudster does get ahold of a stolen card with an EMV chip, they can try to get around the PIN requirement by finding payment terminals that do not support PIN entry, or by convincing merchants to bypass their normal secure transaction processing protocols in favor of a less-secure method that will allow the transaction to go through.

Merchants who make exceptions to proper authorization procedure or who fail to upgrade to EMV-compliant payment terminals may also find themselves on the receiving end of friendly fraud chargebacks bearing this reason code.

If a merchant processes a transaction in a way that leaves them vulnerable to a chargeback pursuant to the EMV liability rules, knowledgeable fraudsters may take advantage of them by making purchases on their own cards and then later asking for chargebacks. If the merchant hasn’t followed the proper procedures, they may have no leg to stand on when it comes to fighting the dispute.

What's the time limit to respond to code UA06 chargebacks?

The acquirer or merchant has 30 days to respond to a chargeback filed under reason code UA06.

How can merchants fight code UA06 chargebacks?

Merchants can fight code UA06 chargebacks only if the chargeback was filed in error and the merchant did, in fact, follow proper card authentication procedures.

Your chargeback response must include at least one of the following items:

• Proof that the chip card transaction was completed with PIN entry on a chip card terminal.
• Proof that authorization was requested prior to completing the transaction and a “Fallback” response code was sent.
• Proof that the transaction was made in a card-not-present environment.
• Data from the authorization request proving that the transaction was not made on a contact chip payment device as required by the technical specifications.
• Proof that the transaction was a cash advance at an ATM.

How can merchants prevent code UA06 chargebacks?

• Upgrade to payment terminals compatible with the EMV chip standard.
• Obtain proper authorization for all transactions.
• Use the correct cardholder verification method, such as a signature or PIN, for every transaction you process.
• Train your staff on the correct ways to handle point-of-sale procedures.

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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