Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 12.1, which indicates an improperly processed transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually merchant error. Merchants who believe they have received an invalid chargeback under reason code 12.1 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 12.1?
Visa chargeback reason code 12.1 falls under the “Processing Errors” category. The shorthand description is “Late Presentment.” This reason code applies in situations where the merchant initiated a transaction and waited too long to finish processing it, because by the time the transaction was finally completed and submitted, the cardholder’s account was no longer in good standing.
Transaction processing is a multi-step operation, and while it is common for all of the steps to be completed within a few moments of each other, this is not mandatory and is not always the case. Many days can pass between the start of a transaction and its final presentment to the issuing bank, and as long as the card is still in good standing the transaction would be considered valid. But if the card expires, exceeds its credit limit, gets lost or stolen, or is otherwise rendered unusable during that time, the merchant may end up vulnerable to this type of chargeback.
What Scenarios Might Lead to This Chargeback?
In most instances, merchant error is to blame when this chargeback occurs. Usually, a credit card sale goes from start to finish quite quickly, but sometimes there are reasons to wait before finalizing a transaction. Perhaps the merchant agreed not to charge the card until a product was received in stock and ready to ship, or perhaps there was a miscommunication between the merchant and the cardholder that took some time to resolve. Whatever the reason, if too much time passes or the card is no longer valid when the merchant finally presents the charge, either the cardholder or the issuer can exercise their chargeback rights against the merchant.
When a presentment is considered late because something happened to take the card out of good standing—such as theft, a data breach, or the cardholder exceeding their spending limit—it’s not really the merchant’s fault per se, but it is nevertheless the delay in processing that makes the transaction subject to a “Late Presentment” 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 basis for it is false or erroneous. Your chargeback response should include the following:
- A transaction receipt or other documents showing that late presentment did not actually occur.
- 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 of the time, transactions are initiated, authorized, and submitted on the same day. However, there are circumstances where the merchant has valid reasons to delay processing, and it is not possible to do an immediate presentment. In these scenarios, merchants must be aware of the time limits that apply, and should be careful not to wait too long before finalizing the transaction.
Sometimes, it may be safer to cancel the transaction, contact the cardholder, and start over.
The following tips can help you avoid this kind of chargeback:
- Try to finish and submit transactions on the same day you authorize them.
- Always present transactions to the issuing bank within the allowable timeframe.
- Send completed transactions to your payment processor as soon as possible—preferably on the day of sale.
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.