My Merchant Account Blog

Visa Chargeback Reason Code 41 - Cancelled Recurring Transaction

Wednesday, November 30, 2011

The card issuer received a claim by a cardholder that:

• The merchant was notified to cancel the recurring transaction or that the cardholder’s account was closed but has since billed the customer.
• The transaction amount exceeds the pre-authorized dollar amount range, or the merchant was supposed to notify the cardholder prior to processing each recurring transaction, but has not done so.

Most Common Causes

The cardholder:

• Withdrew permission to charge the account.
• Cancelled payment of a membership fee.
• Cancelled the card account.

The card issuer:

• Charged back a previous recurring transaction.
• Cancelled the card account.

The merchant:

• Received notice before the transaction was processed that the cardholder’s account was closed.
• Exceeded the pre-authorized dollar amount range and did not notify the cardholder in writing within ten days prior to the transaction date.
• Notified the cardholder in writing within ten days of processing the recurring transaction, but cardholder did not consent to the charge.

Possible Remedies

Transaction Cancelled and Credit Issued

If the cardholder claimed to have cancelled the recurring transaction, inform your acquirer of the date that the credit was issued.

Transaction Cancelled—Services Used

If the customer claimed they were billed for the service after they cancelled, you may need to supply proof to your acquirer that the bill in question covered services used by the customer between the date of the customer’s prior billing statement and the date the customer requested cancellation.

Cardholder Expressly Renews

If the customer expressly renewed their contract for services, inform your acquirer.

Transaction Exceeds Pre-authorized Amount Ranges

Flag transactions that exceed pre-authorized amount ranges; notify customers of this amount at least ten days in advance of submitting the recurring transaction billing. If the customer disputes the amount after the billing, send evidence of the notification to your acquirer.

No Remedies

Transaction Cancelled and Credit Not Yet Processed

If a credit has not yet been processed to correct the error, accept the chargeback. Do not process a credit; the chargeback has already performed this function.

Preventative Measures

Final Billing

If the customer has cancelled the recurring payment transaction and there is a final payment still to be charged, contact the cardholder directly for payment.

Customer Cancellation Requests

Always respond in a timely manner to customer requests relating to renewal or cancellation of recurring transactions. Check customer logs daily for cancellation or non renewal requests; take appropriate action to comply with them in a timely manner. Send notification to the customer that his or her recurring payment account has been closed. If any amount is owed for services up to the date of cancellation, seek another form of payment if necessary.

Credit Cardholder Account

Ensure credits are processed promptly. When cancellation requests are received too late to prevent the most recent recurring charge from posting to the customer’s account, process the credit and notify the cardholder.

Transaction Exceeds Pre-authorized Amount Ranges

Flag transactions that exceed pre-authorized amount ranges; notify customers of this amount at least ten days in advance of submitting the recurring transaction billing. If the customer disputes the amount after the billing, send evidence of the notification to your acquirer.

Train Staff on Proper Procedures

Train your sales and customer service staff on the proper procedures for processing recurring transactions as these transactions are particularly susceptible to cardholder disputes.

To minimize the risk associated with all recurring transactions, merchants should participate in Visa Account Updater (VAU) to verify that on file information, including account number and expiration date, is correct. VAU is a Visa service that allows merchants, acquirers, and card issuers to exchange electronic updates of cardholder account information.

Source: Chargeback Management Guidelines for Visa Merchants

For More Information, please see our archived documents.

Comments

Name
URL
Email	Email address is not published
Remember Me
Comments