Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 62, which indicates an improperly authorized transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback may be true fraud, friendly fraud, or merchant error. Merchants who believe they have received an invalid chargeback under reason code 62 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 62?
Visa chargeback reason code 62 falls under the “Fraud” category. The shorthand description is “Counterfeit Transaction.” This reason code is used when a cardholder reports a fraudulent, unauthorized transaction and the issuing bank has reason to believe that a counterfeit credit card was used in a card-present transaction environment.
Counterfeit cards have long been a problem for brick-and-mortar merchants who process card-present transactions. Fraudsters often use a device called a “skimmer,” which they can conceal in unattended card-swiping slots at ATMs and fuel station pumps, to surreptitiously read and copy the magnetic stripe data on payment cards, allowing them to create counterfeit copies of those cards.
Proper use of EMV chips can greatly reduce instances of counterfeit card fraud, but careless payment processing practices and outdated terminals may allow this type of fraud to slip through, resulting in chargebacks with this reason code.
What Scenarios Might Lead to This Chargeback?
This chargeback may be applied under either of the following circumstances:
- The transaction was reported to VisaNet as counterfeit fraud by the issuing bank, and the merchant obtained authorization without submitting either the full set of unaltered data on either the EMV chip or tracks 1 or 2 of the card’s magnetic stripe.
- The cardholder claims not to have participated in or authorized a transaction with an EMV chip card where the first digit of the service code is 2 or 6.
Some additional conditions apply for this chargeback:
- The transaction was not processed at a terminal capable of reading EMV chips. EMV-enabled terminals will return a terminal capability code of 5.
- The transaction utilized the EMV chip, the acquirer did not send the full set of EMV chip data to Visa when authorization was requested online, and the cardholder resides in Europe.
Note as well that some cardholders may attempt to engage in friendly fraud by falsely claiming that their card was counterfeited.
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 documented proof that at least one of the following conditions is true:
- The issuer did not list the account number correctly on the Exception File.
- The issuer did not report fraudulent activity on the card.
- The issuer did not close the account.
How Can Merchants Prevent this Chargeback Code?
The EMV chip standard is designed to prevent counterfeit fraud. Merchants can protect themselves by detecting and rejecting counterfeit card transactions through the use of EMV-chip enabled payment terminals.
Understanding how to process chip card transactions, and how the liability shift affects your vulnerability to chargebacks, is extremely important for card-present merchants.
The following best practices can help you avoid this kind of chargeback:
- Upgrade or replace all of your payment terminals for EMV capability.
- Always follow the recommended procedures for processing EMV chip transactions.
- When processing cards without an EMV chip, obtain proper authorization, a manual or electronic imprint of the card, and the cardholder’s signature on the sales receipt.
- Train your staff on how to process card-present transactions correctly.
- Make sure your payment processing system is working correctly and configured to submit the full set of required data for all authorization approval requests.
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.