Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 11.1, 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 merchant error. Merchants who believe they have received an invalid chargeback under reason code 11.1 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 11.1?
Visa chargeback reason code 11.1 falls under the “Authorization” category. The shorthand description is “Card Recovery Bulletin.” This reason code is assigned when a merchant processes a transaction that is above their floor limit, but they do not request authorization and therefore do not receive notification that the card account number was listed on the Card Recovery Bulletin and should not have been processed.
The Card Recovery Bulletin is a document created by Visa that lists credit card numbers that have been reported lost or stolen, are known to be counterfeited, or have other issues that should prevent them from being used. These lists have been distributed to merchants since the pre-digital era to prevent fraudulent and inappropriate transactions.
Fortunately, merchants no longer have to cross-check payment cards against hard copy documents to determine whether or not the card is acceptable to process. When a merchant sends an authorization approval request, the response code should automatically indicate if a card has been placed on the active Card Recovery Bulletin. If that is the case, the merchant should not proceed with the transactions. The response code may even direct them to hold on to the card and contact the issuing bank for further instructions.
What Scenarios Might Lead to This Chargeback?
When a card is lost, stolen, or otherwise compromised, the cardholder is supposed to report it to their issuer immediately. When they do so, the card will be placed on the Card Recovery Bulletin to notify merchants that the card should not be used for processing.
Few merchants are personally scrutinizing the published versions of this list nowadays, but any authorization request should let you know whether a card has been placed on it.
If a merchant ignores such a response and processes the card anyway—or does not obtain authorization approval in the first place—this chargeback is sure to follow.
What are the Important Timeframes?
For this dispute, Visa requires that action be taken within 75 calendar days of 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 basis for it is false or erroneous. Your chargeback response should include the following:
- If the transaction used an EMV chip, provide proof that PIN entry properly validated the transaction.
- For car rental, cruise line, or hospitality merchants dealing with a disputed transaction that had multiple authorizations, provide documented proof that the card number was not listed in the Card Recovery Bulletin on the rental/embarkation/check-in date.
- 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?
Most chargebacks in the “Authorization” category can be avoided by remembering to always seek authorization approval and only proceed with transactions that receive a clear, unambiguous approval.
Some codes offer the merchant and cardholder some leeway to try again, but any response that tells you that a card is on a Card Recovery Bulletin is a big red flag warning you to go no further—you’re dealing with a card that Visa already knows to be problematic, and you are sure to be fully liable for any chargeback that results from processing it.
The following best practices can help you avoid this kind of chargeback:
- Always obtain authorization approval before processing any transaction that is above your floor limit.
- If the transaction is below your floor limit, check the Card Recovery Bulletin before processing.
- Always follow the rules and regulations provided by Visa and your acquirer when processing transactions involving multiple authorizations.
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.