Visa Chargeback Reason Code 13.7: Consumer Disputes

chargeback reason code 13.7Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 13.7, 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 13.7 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is Visa Chargeback Reason Code 13.7?

Visa chargeback reason code 13.7 falls under the “Consumer Disputes” category. The shorthand description is “Cancelled Merchandise/Services.” This reason code is applicable when a cardholder is disputing a transaction with a claim that they returned merchandise or cancelled their services with the merchant, but they have not received a refund within a reasonable timeframe.

This chargeback may occur when there are miscommunications with the customer about returns or cancellations, when the customer misunderstands the merchant’s policies, or when merchants are too slow to process credits that customers have reason to expect.

What Scenarios Might Lead to This Chargeback?

Merchant error can lead to this chargeback when merchants delay refund processing or withhold refunds in defiance of their own policies.

Friendly fraud is common under this reason code, as many cardholders will feel morally entitled to a refund when they have a problem with their merchandise or services, even if the sales agreement they signed says that they are not.

Get the guide, Chargebacks 101: Understanding Chargebacks & Their Root Causes

What are the Important Timeframes?

For this dispute, Visa allows their cardholders to file for a chargeback within 120 calendar days of the date that the disputed goods or services were received, not to exceed 540 days from the original transaction processing date. 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 chargeback is invalid because the disputed amount involves the cash-back portion of the transaction.
  • Proof that the chargeback is invalid because the dispute concerns a transaction made at an automated fuel dispenser.
  • Proof that the chargeback is invalid because the dispute is centered on the subjective quality of the goods or services purchased.
  • Proof that the chargeback is invalid because the merchandise cleared customs in the merchant’s country, but is still being held by customs at the cardholder’s delivery location.
  • A copy of your return or cancellation policy, proof that the cardholder agreed to it prior to the sale, and one or more of the following items:
    • If you never received a return of merchandise from the cardholder that would have entitled them to a refund per your stated policies, provide documentation that proves this.
    • If you did receive a return of merchandise from the cardholder but did not accept it because it was outside of the allowed timeframe for returns, was in non-returnable condition, or was refused for any other reason in accordance with your stated policies, provide documentation that explains why the return was refused.
    • If the cardholder did not cancel their services in accordance with your stated policies, provide documentation that explains why the cancellation request was not processed.
    • If you processed the cardholder’s cancellation request but they continued to use your services, provide documentation that shows that the disputed transaction covered services that the cardholder used after the cancellation 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? 

The best way to prevent these disputes is to be very clear to your customers about when they would be entitled to a refund and what they need to do to claim one. The following advice can help you avoid this kind of chargeback:

  • Make sure your return, refund, and cancellation policies are easy for your customers to find and understand.
  • Make sure your customers agree to abide by your return, refund, and cancellation policies prior to completing the 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.