My Merchant Account Blog

Fraud Codes for Chargebacks

Monday, October 23, 2006

Fraudulent transactions happen all the time via the Internet. People use various methods like MaxMind GeoIP, calling the customer, only shipping to he billing address.  The Quantum Gateway has this and more built into its system and does not cost the merchant anything.

Reason Code 57: Fraudulent Multiple Transactions

This is when the issuing bank is notified by the cardholder states he / she recognizes the transaction(s) but also states that he / she only authorized one of them.

This can happen if the merchant failed to void the other transactions or attempted to process transactions fraudulently.

If you are notified of this chargeback but have already issued a refund, notify your processor immediately with the transaction numbers. If there was actually a reason for multiple transactions, send a copy of all the sales receipts to the processor. If you have not issues the credit, accept the chargeback. Do not process a credit since the chargeback has already been done.

This type of chargeback could have a negative impact on your merchant account as it might indicate fraud at the point-of-sale. It could also just be a mistake. In either case though, most providers will do an investigation.

Reason Code 62: Counterfeit Transaction

This is when the issuing bank is notified by the cardholder claiming they were in possession of the credit card but did not authorize the transaction.

This might happen is the merchant failed to compare the first four digits of the embossed account number on the card with the pre-printed digits below the embossed number for a card-present transaction or you received authorization without transmission of the entire magnetic stripe.

If that card was swiped and you have a signature, provide a copy of that to your processor. If the transaction was fraudulent, accept the chargeback.

Check all card security features before completing the transaction to help prevent this type of chargeback. If the first 4-digits do not match, call your processor and tell them you have a possible Code 10. If you have to key-in the transaction because the card could not be read, be sure to get an imprint of the front of the card either on the printed sales receipt or a manual sales receipt form and get the customer to sign it.

Reason Code 81: Fraudulent Transaction - Card-Present Environment

This is when the issuing bank is notified that a sales receipt is missing required information, indicating a potentially fraudulent transaction. This could occur if the card issuer receives a sales receipt that has no imprint of the card's embossed or magnetic-stripe information or even the cardholder's signature the the cardholder certifies he / she neither authorized nor participated in the transaction.

This can happen if you do not swipe the card through a magnetic-swipe reader, you did not make a manual imprint of the card account information on the sales receipt for a key-entered transaction, you did not complete a card-present transaction without obtaining the cardholder's signature on the sales receipt or you completed a card-not-present transaction but did not identify the transaction as a mail-order / telephone-order or Internet purchase.

If account information was captured from the card's magnetic stripe, request that your processor send a copy of the authorization record to the issuing bank as proof that you swipe the card. You also should provide a copy of the sale receipt proving the cardholder's signature was obtained.

If the account number was manually imprinted on the sales receipt, send a copy of the sales receipt to the processor for documentation. The copy of the sales receipt must also contain the cardholder's signature to win the chargeback.

If the account number was not obtained from either swiping the card or manually, accept the chargeback.

If you did get the cardholder's signature on the sales receipt or a related document, send a copy of the document to the merchant account provider. You should also send evidence that that cardholder's card was present, specifically either a manually imprinted sales receipt or authorization record proving the card was swiped. You must be able to prove the sales receipt and other documentation are from the same transaction.

If you did not get a signature, accept the chargeback.

A high volume charge Chargeback Code 81 may also indicate a need for additional staff training in proper card acceptance procedures or better maintenance and cleaning of the magnetic-stripe readers in your terminals.

Reason Code 83: Fraudulent Transaction - Card-Absent Environment

If the issuing bank receives a complaint from the cardholder that he / she did not authorize or participate in the transaction or the transaction was charged to a fictitious account number for which authorization approval was not obtained, a chargeback could occur.

Usually this happens when the merchant processes a card-not-present transaction from a person who was fraudulently using an account number or the merchant processes a card-not-present transaction without submitting an authorization request.

The cardholder can cause this as well by not recognizing the card-not-present transaction on his / her statement due to an unclear or confusing merchant name or had his / her account number taken by fraudulent means.

If the transaction was a mail-order / telephone-order or Internet transaction and you received an authorization approval and an exact match to the AVS query and you have proof that the merchandise was delivered to said address, send a copy of the transaction invoice, proof of delivery, and any other information pertaining to the transaction to the merchant account provider.

If you did not use AVC and the item has been charged back to you, send a copy of the transaction invoice, proof of delivery, and any other information pertaining to the transaction to the merchant account provider.

All card-not-present transactions should be identified by the appropriate code for mail-order / telephone-order or Internet during both the authorization and settlement process. In most cases, this is automatically done by the transaction processing terminal or system, or electronic payment gateway. If not, be sure to write the appropriate code on the transaction receipt: "MO" for mail order; "TO" for telephone order; and "ECI" for Internet.

For card-not-present transactions, consider using AVS, Card Verification Value - Card Verification Code - Card Identification Number (CVV2, CVC2, CID, 4DBC) Verified by Visa / MasterCard Secure Code, to help reduce fraud. You will also want to make sure your merchant name will be recognized by the cardholder. You can reduce these chargebacks by sending out proper receipts.

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