Merchants who receive a chargeback for a transaction placed with a Mastercard card may encounter reason code 4850, 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 friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code 4850 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Mastercard Chargeback Reason Code 4850?
Mastercard chargeback reason code 4850 falls under the “Point-of-Interaction Error” category. The shorthand description is “Installment Billing Dispute.” With this reason code, the cardholder is claiming that an incorrect installment billing transaction was charged to their account.
Any type of recurring billing scenario can lead to confusion and conflicts with customers, and installment payment plans are no exception. In theory, these transactions should be more straightforward and easy-to-understand than more open-ended recurring billing scenarios such as online subscriptions, but any time you process a delayed or scheduled transaction there is a risk that the customer won’t recognize or remember it and jump straight into a dispute.
Clear documentation and communication are the cornerstones to avoiding disputes and chargebacks related to installment payment plans.
What Scenarios Might Lead to This Chargeback?
It is not uncommon for merchant error to be the cause of these chargebacks, in which case the cardholder has a legitimate claim that is likely to be upheld. The merchant might mistakenly key in the wrong amount, or add on a fee not previously disclosed to the cardholder, or neglect to factor in a previous payment the cardholder made, resulting in an installment billing transaction that is not the amount expected and agreed to by the cardholder. Ideally the cardholder will reach out to the merchant when these situations occur, but often they will take their complaint to their issuing bank and receive a chargeback under this reason code.
Of course, it also sometimes happens that a customer fails to recognize or recall an installment payment that they agreed to make, and they assume fraud and ask to dispute the charge. These would be considered friendly fraud chargebacks.
What are the Important Timeframes?
Mastercard recommends that its cardholders file their dispute within 45 calendar days of placing the transaction. The acquirer and/or merchant have 45 calendar days to respond to this chargeback after it is filed.
How Can Merchants Fight this Chargeback Code?
Merchants can fight this chargeback if the cardholder’s claims are false and the amount charged was correct. Your chargeback response should include the following:
- Transaction documents that show that the cardholder agreed to the number and amount of the installment payments processed.
- Evidence showing that the chargeback does not comply with Mastercard’s rules and is therefore invalid.
- If you have already processed a refund for the transaction in question, provide documentation that proves you have credited the cardholder’s account.
- If you have resolved the issue directly with the cardholder, provide proof, such as written correspondence, that proves they no longer wish to dispute the charge.
How Can Merchants Prevent this Chargeback Code?
The best way to prevent this chargeback is to make sure the cardholder knows ahead of time exactly how much they will be charged, and when, and how many more payments are due. It is important to communicate this when the sale is initially made, but you should also provide frequent updates and reminders so that nobody ends up unpleasantly surprised.
The following best practices can help you avoid this kind of chargeback:
- Always obtain a signed agreement from the cardholder that specifies the number of installment payments to be made, the amount of each installment payment, and the dates on which the payments will be charged.
- Before processing an installment payment, send advance notice to the customer a few days ahead of time, using their preferred contact method.
- Provide an easy and accessible means for the cardholder to change their payment method for future installment payments, if they wish to do so.
About Mastercard 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.
Mastercard specifies 21 reason codes under the categories of Fraud, Authorization, Point-of-Interaction Error, and Cardholder Disputes. Mastercard uses a four-digit numbering scheme for its chargeback reason codes.
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.