Merchants who receive a chargeback for a transaction placed with a Mastercard card may encounter reason code 4871, 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 4871 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Mastercard Chargeback Reason Code 4871?
Mastercard chargeback reason code 4871 falls under the “Fraud” category. The shorthand description is “Chip/PIN Liability Shift.” This reason code is used in cases where a card with an EMV chip was issued to the cardholder, the merchant processed a transaction against the card without obtaining the cardholder’s PIN, and the cardholder is claiming that they did not authorize the transaction.
The EMV chip standard was designed to prevent fraud in card-present environments. One of the ways it does this is by requiring PIN validation prior to authorizing a transaction. When this validation is not performed, it leaves the merchant liable for chargebacks under the liability shift mandate.
What Scenarios Might Lead to This Chargeback?
EMV chip cards use PIN entry to verify the identity of the cardholder, which prevents fraudulent transactions from being processed. When a fraudster steals a credit card with an EMV chip, they need to find a way to use it that circumvents the PIN entry requirement. One way to do this is by finding merchants who use payment terminals that do not support PIN entry. Another way is to convince the merchant to process the card using some other method. Either way, the end result is an unauthorized transaction that necessitates a true fraud chargeback.
Merchants leave themselves open to friendly fraud chargebacks under this reason code when they don’t follow the rules and recommended procedures for processing chip card transactions.
If a deceptive customer convinces a merchant to bypass the PIN requirement, they can later go and file a friendly fraud chargeback even though they were using their own card.
What are the Important Timeframes?
Mastercard recommends that its cardholders file their dispute within 120 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 or inaccurate. Your chargeback response should include one or more of the following elements:
- Documentation that proves that the cardholder knowingly authorized the transaction.
- Proof that the card did not contain an EMV chip and that the transaction was properly authorized.
- 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?
With the EMV chip liability shift having taken effect, it is very important that merchants who process card-present transactions upgrade or replace their payment terminals so that they are all EMV-compatible. Merchants who do not use EMV-enabled terminals or follow the rules for processing chip transactions will automatically be assigned liability for chargebacks covered under the rules of the liability shift.
Adhering to the card network rules and recommendations for EMV cards is the best way to avoid these chargebacks.
The following best practices can help with prevention:
- Only use EMV-compliant terminals. If you are still using point-of-sale devices that do not include an EMV chip reader, upgrade or replace them immediately.
- Always use the correct cardholder verification method (such as signature or PIN) for the type of transaction you are processing.
- Make sure to obtain an electronic or manual imprint for all card-present transactions.
- Make sure your staff knows the correct procedures for handling EMV card transactions.
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.