Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 12.7, 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 12.7 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 12.7?
Visa chargeback reason code 12.7 falls under the “Processing Errors” category. The shorthand description is “Invalid Data.” When you see this reason code, it means that a transaction has been processed using the wrong Merchant Category Code, transaction type indicator, country or state code, or some other required field contains incorrect data.
There are a lot of rules for processing Visa transactions, many of which are contingent upon the region, country, merchant category or other details. Merchants are required to submit this data with their transactions so Visa and the issuer know what rules must be followed.
Most of the time, merchants set up this information ahead of time with their payment processor and don’t have many reasons to change it around, but when special circumstances apply—or settings are erroneously changed—it is possible to submit invalid data.
When Visa or the issuer catch wind of this, they are likely to send back a technical chargeback bearing this reason code.
What Scenarios Might Lead to This Chargeback?
It is rare for this chargeback to result from anything other than merchant error, and this chargeback is often initiated by the issuing bank, rather than the cardholder (who usually has no reason to care about the categorical data being sent along with their transactions).
These errors can occur for unforeseen reasons, such as user error, corrupted data, or problems with the hardware and software that controls your payment processing operations. It’s also possible that you might start seeing this error when the conditions under which you’re doing business change—for instance, if you start operating out of a different state, or you expand or merge your business and get assigned a new Merchant Category Code.
These aren’t the most common root causes, but they are ones that be proactively avoided to prevent this type of chargeback.
What are the Important Timeframes?
For this dispute, Visa requires that action be taken within 75 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:
- If the correct data was submitted for authorization, provide documentation that proves that authorization approval was sent in response to accurate and complete transaction data.
- 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?
This chargeback tends to result from behind-the-scenes errors—misconfigured payment processing systems, faulty terminals, and the like. If you receive one of these chargebacks, audit your processes until you find the source of the invalid data. That’s the only way to ensure that it doesn’t keep happening again and again.
The following tips can help you avoid this kind of chargeback:
- Make sure every authorization request contains all of the required transaction data, such as the transaction date, Merchant Category Code, transaction type indicator, country code, and state code, and that all of it is complete and accurate.
- Make sure you are sending the correct Merchant Category Code with your authorization requests, especially if your business uses more than one. This code must match the one that will be sent with your transaction clearing records.
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.