Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 10.2, 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 10.2 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 10.2?
Visa chargeback reason code 10.2 falls under the “Fraud” category. The shorthand description is “EMV Liability Shift Non-Counterfeit Fraud.” This reason code is used when a cardholder has an EMV chip card with PIN entry as the preferred verification method and the cardholder is claiming that an unauthorized transaction has been charged to their account. This claim strongly suggests that the merchant processed a stolen card on a payment terminal without EMV chip capability, or used a chip-compatible terminal without PIN entry capability.
In addition to providing a way to detect counterfeit cards, the EMV chip standard adds stronger cardholder verification methods, such as PIN entry, that can prevent the use of stolen cards.
Under the rules of the EMV liability shift, merchants who don’t upgrade their payment terminals to take advantage of EMV technology and the protections it provides are responsible for certain chargebacks that may later occur.
What Scenarios Might Lead to This Chargeback?
This chargeback may result from true fraud. In this scenario, the fraudster has obtained a stolen credit card with an EMV chip, but does not know the PIN. To use the card, they must find a merchant where they can run the card on an older payment terminal that will allow them to bypass PIN entry or avoid the use of the EMV chip altogether. When the cardholder sees the unauthorized charge, they will dispute it and receive a chargeback under this reason code.
Merchant error is always a contributing factor in these chargebacks, as full compliance with the recommended EMV protocols would prevent the above scenario from occurring.
Friendly fraudsters may also opportunistically capitalize on non-compliant merchants by disputing legitimate charges, knowing that the EMV liability shift means that the merchant will be on the hook for the chargeback.
What are the Important Timeframes?
For this dispute, Visa requires that its cardholders file their claim within 120 calendar days of placing the transaction. The acquirer and/or merchant have 20 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. Your chargeback response should include at least one of the following items:
- If the transaction was made at a terminal that was both EMV chip and PIN compatible, provide documentation showing that the transaction was correctly authorized and processed.
- 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?
Now that the EMV liability shift has taken effect, it is extremely important to upgrade their terminals to be complaint with EMV chip technology and capable of utilizing PIN-entry verification. The EMV standard prevents the use of counterfeited or stolen cards and has proven highly effective at reducing card-present fraud. It is in every merchant’s best interests to take advantage of this.
The following best practices can help you avoid this kind of chargeback:
- Upgrade or replace all of your payment terminals for EMV and PIN capability.
- Always follow the recommended procedures for processing EMV chip transactions.
- Always obtain proper authorization approval and an electronic or manual imprint for every card-present transaction
- Always use the appropriate cardholder verification method (signature or PIN entry) for the transaction.
- Train your staff on how to process card-present transactions correctly.
- Make sure your payment processing system is working correctly and configured to submit the full set of required data for all authorization approval requests.
About Visa 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.
Visa specifies 46 reason codes under the categories of Fraud, Authorization, Point-of-Interaction Error, Consumer Disputes, and Processing Errors. Visa uses a numeric 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.