Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 13.2, which indicates a disputed transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually either friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code 13.2 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 13.2?
Visa chargeback reason code 13.2 falls under the “Consumer Disputes” category. The shorthand description is “Cancelled Recurring Transaction.” This reason code means that the cardholder is claiming that the merchant processed a recurring billing transaction after they had submitted a cancellation request or closed their account.
This chargeback is also applicable when the cardholder withdraws their permission to charge a card on file, when the cardholder or their issuer terminates the payment account, or when the merchant does not process a cancellation request in a timely manner in accordance with their agreement with the cardholder.
What Scenarios Might Lead to This Chargeback?
Recurring billing transactions are a frequent source of conflict, disputes, and chargebacks for merchants and their customers. Many cardholders will sign up for recurring billings without being fully aware of what they’re getting into, and may dispute later transactions even though they did, in fact, agree to them. Cardholders may also decide that instead of figuring out how to cancel a recurring billing agreement for subscription services or the like directly with the merchant, they’ll simply cancel it by disputing the latest transaction with their bank instead. These chargebacks can be considered friendly fraud, and they are quite common for recurring billing merchants.
However, these chargebacks are not always illegitimate. Many merchants make it difficult for their subscribers to cancel services online, or they may inadvertently overlook a cancellation request or neglect to notify cardholders about an incoming charge.
Visa has recently updated their rules for processing recurring billing transactions, and when merchants find themselves on the wrong end of a chargeback because they neglected to follow these rules, they must acknowledge that their own error is the root cause.
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 the following:
- Proof that the disputed transaction was part of an installment payment plan or some other valid charge, not a recurring billing transaction.
- If the disputed transaction covers services that were used before the cancellation took effect, provide documentation that proves that the transaction covered services used during the last billing cycle prior to cancellation.
- 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?
Reasonable policies and proactive communication are excellent defenses against recurring billing chargebacks. The following advice can help you avoid them:
- Provide clear and easy-to-locate information about your billing and cancellation policies.
- Provider customers with an online cancellation link that is easy to find and use.
- Offer a no-strings-attached cancellation policy.
- When a customer cancels their recurring billings, process the request immediately and do not charge them again.
- Send the cardholder a notification when their cancellation is successfully processed.
- If a cardholder incurs new charges after cancelling a recurring billing, ask them what payment method they want to use to cover the new charges—do not automatically charge the card used for the recurring billings.
- Send advance notice and reminders of any upcoming billings via the customer’s preferred contact method. This is especially important if a lot of time passes in between billings.
- Before processing a recurring transaction, use the Visa Account Updater to correct outdated payment card information.
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.