Visa Chargeback Reason Code 41: Consumer Disputes

chargeback reason code 41Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 41, which indicates a disputed transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback may be either friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code 41 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is Visa Chargeback Reason Code 41?

Visa chargeback reason code 41 falls under the “Consumer Disputes” category. The shorthand description is “Cancelled Recurring Transaction.”

With this reason code, the cardholder is claiming that they were charged for a recurring billing transaction that they had already cancelled.

The rules for when this reason code can apply vary depending on the region in which the transaction took place.

All regions:

  • The cardholder revoked permission to charge their card account for a recurring billing transaction.
  • The merchant or their acquiring bank was notified that the cardholder’s account had been closed, but still processed a recurring transaction.
  • The transaction amount was not within the range agreed to and pre-authorized by the cardholder.

Europe Region:

  • The cardholder revoked permission to charge their card for an installment payment transaction.
  • The merchant processed a recurring transaction against the cardholder’s account after the cardholder became deceased.

US Domestic Region:

  • The merchant agreed to notify the cardholder prior to processing each recurring transaction, but either failed to notify them at least 10 calendar days prior to the transaction date, or went ahead and processed the transaction even though the cardholder withdrew their consent for the transaction after being notified.

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.

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

What are the Important Timeframes?

For most disputes, Visa recommends 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 service was never cancelled in accordance with the terms and conditions the cardholder agreed to.
  • Evidence showing that neither you nor your acquirer were ever notified that the cardholder’s account was closed.
  • Proof that the transaction was not previously charged back (not applicable in Visa’s Europe Region).

How Can Merchants Prevent this Chargeback Code?

Two things can go a long way toward preventing chargebacks like this: transparent and proactive communication about recurring charges, and an easy-to-find, easy-to-use link for cancelling recurring billings with no hassle.

The following advice can also help you avoid this kind of chargeback:

  • When a customer cancels their recurring billings, process the request immediately and do not charge them again.
  • Offer a no-strings-attached cancellation policy.
  • When you must raise the price of a subscription or any other recurring payments, notify the customer ahead of time in accordance with the operating rules of the card network.
  • Don’t process recurring payments prematurely.
  • Send advance notice and reminders of any upcoming billings via the customer’s preferred contact method.

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.