Fraud Dispute Reason Codes and What They Mean

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Fraud Dispute Reason Codes and What They Mean

Tracking reason codes and dispute categories can bring insights into what is causing a merchant’s disputes and how to prevent them. This post will break down the types of disputes, what fraud dispute can tell you about your company, and insights into all the card network's fraud reason codes.

Why Keep Track of Reason Codes and Dispute Types

Your company's unique dispute ecosystem provides valuable insights into the operational aspects of your business. Every dispute processed is categorized under an applicable reason code. Reason codes represent the grounds for the customer dispute while indicating the required compelling evidence to refute the dispute. Across all card networks, reason codes fall into one of four categories: Authorization, Consumer Disputes, Fraud, and Processing Errors.

Authorization: Disputes related to authorization issues. For example, transactions where authorization was required, but not obtained. Or, when authorization was declined but processed anyway.

Consumer Disputes: Disputes initiated by the cardholder in regards to product, service, or merchant issues. It's also referred to as Cardholder Disputes, Card Member Disputes, and Service Disputes.

Fraud: Disputes related to fraudulent transactions. No cardholder authorization, EMV liability, Card Present 's and Card Not Present fraud are all found within the Fraud category.

Processing Errors: Also referred to as Point-of-Interaction Errors, represents disputes like duplicate processing, late presentment, credit processed as charge, and addendum/"no show" disputes.

Keeping track of the types of disputes your company receives can lead to valuable insights. Every merchant will have a unique breakdown of reason codes it receives. Knowing and understanding your company's analysis allows you to identify anomalies and shifts in reason code volume by type. This matters because these shifts directly correlate to activities carried out by your company. Reason codes and win rates serve as powerful lagging indicators pertaining to business operations.

What Fraud Dispute Can Mean?

After tracking your company's dispute category and reason codes, you find that there are a lot of fraud disputes. Fraud disputes can mean a couple of things, but it may require a bit more digging to pinpoint the problem.

You are winning a lot of fraudulent and no cardholder authorization disputes. This could indicate that you are receiving friendly fraud and chargeback fraud disputes. Friendly fraud is when a cardholder disputes a charge because of forgetfulness or a miscommunication. There is no malicious intent behind the dispute. The cardholder may not recognize the purchase they made or just forgot they gave their credit card to their child to make a purchase.

The other type of fraud is chargeback fraud. Chargeback fraud is when a customer is taking advantage of the dispute process to try and get their money back while still retaining the merchandise or services they received. The chargeback fraudster can claim that the charge was fraudulent or they never approved the purchase to the issuing bank as a way to get their money back.

Both friendly fraud and chargeback fraud are not valid reasons to dispute a charge. So, with a well put together, dispute document merchants can win these disputes and regain the transaction amount. If your company is responding and winning to fraud dispute, this means that you have a friendly or chargeback fraud problem. A deeper dive into the disputed transaction will help reveal if which type it is.

You are losing a lot of fraudulent and no cardholder authorization disputes. On the other hand, if your company is unsuccessful at winning fraud dispute when you do respond, you may be facing true fraud disputes. True fraud is when a fraudster gets a hold of stolen card credentials and successfully uses them at a merchant's site or store. True fraud is also known as identity theft. It is the merchant's responsibility to prevent the acceptance of fraudulent purchases, so merchants are unable to win true fraud disputes. If your company is not winning fraud disputes, it means your front end fraud filters need to be adjusted to prevent fraudulent purchases.

You receive EMV liability disputes. The EMV liability shift took effect on October 1, 2015, in the United States. On this date, in-store counterfeit fraud liability shifted to the party who has not adopted chip technology. For merchants, this means it is vital to have chip reading terminals. If you do have EMV terminals and are still receiving EMV dispute make sure your payment processor is correctly transmitting the information.

Fraud Reason Codes

Visa Fraud Reason Codes 

Reason Code

Insights 

10.1 EMV Liability Shift Counterfeit Fraud

The cardholder claims they did not participate in the transaction. A counterfeit EMV-chip card was used in a card-present environment and one of two things occurred: The transaction did not take place in a chip-reading terminal; Or [online only] the transaction was chip-initiated, but your card processor didn’t transmit all of the chip data to Visa in the authorization request.

10.2 EMV Liability Shift Non-Counterfeit Fraud

The cardholder claims their EMV-chip card was stolen, and that it was used in a fraudulent transaction. The transaction happened in a card-present environment and one of three things has occurred: The transaction did not take place in a chip-reading terminal; Or a chip-initiated transaction took place in a chip-reading terminal, but the device was not EMV PIN-compliant; Or [online only] the transaction was chip-initiated but the card processor didn’t transmit all of the chip data to Visa in the authorization request.

10.3 Other Fraud – Card Present Environment

The cardholder did not authorize or participate in a card-present transaction. Or a fraudulent transaction was completed in a card-present environment using an account number for which no valid card was issued or is outstanding, and no authorization was obtained.

10.4 Other Fraud – Card Absent Environment

The cardholder did not authorize or participate in a transaction conducted in a card not present environment. Or a fraudulent transaction was completed in a card not present environment using an account number for which no valid card was issued or is outstanding, and no authorization was obtained.

10.5 Visa Fraud Monitoring Program

Visa notified the issuer that the transaction was identified by the Visa Fraud Monitoring Program and the issuer has not successfully charged back the transaction under another reason code.

MasterCard Fraud Reason Codes 

Reason Code

Insights 

MasterCard Chargeback Reason Code 4837

The cardholder states that they did not authorize the transaction or approve anyone else to engage in the transaction.

MasterCard Chargeback Reason Code 4840

The cardholder or authorized user was still in possession and control of all valid cards at the time of the transaction, and the cardholder admits to at least one legitimate face-to-face transaction, on the same card at a given merchant location, but denies making one or more additional face-to-face transactions at that same merchant location.

MasterCard Chargeback Reason Code 4849

The acquirer processed a transaction for a merchant that later was listed in a MasterCard Global Security Bulletin for violating GMAP, QMAP, or reported to SAFE.

MasterCard Chargeback Reason Code 4863

The cardholder claims that they do not recognize the transaction and states that they did not authorize the charge to their credit card.

MasterCard Chargeback Reason Code 4870

The cardholder claims they were in possession of a valid card on the date of the transaction or they did not authorize or participate in the transaction. For counterfeit transactions only, the liability will remain with the party that does not invest in chip technology, regardless of the transaction amount.

MasterCard Chargeback Reason Code 4871

The cardholder claims they were in possession of a valid card on the date of the transaction or they did not authorize or participate in the transaction. For counterfeit transactions only, the liability will remain with the party that does not invest in chip technology, regardless of the transaction amount.

American Express Fraud Reason Codes 

Reason Code

Insights 

American Express Chargeback Reason Code F10

The cardholder claims they did not participate in this charge and the merchant has not provided a copy of an imprint of the card. Note: Not applicable to Card Not Present charges or charges that qualify under the Keyed No Imprint Program.

American Express Chargeback Reason Code F14

The cardholder claims they did not participate in this charge and the merchant has not provided a copy of the cardholder’s signature to support the charge. Note: Not applicable to Card Not Present charges, Digital Wallet application-initiated transactions, and Digital Wallet contactless-initiated transactions, charges at CATs or charges that qualify under the No Signature/ No PIN Program.

American Express Chargeback Reason Code F24

The cardholder denies participation in the charge submitted by the merchant and the merchant has failed to provide proof that the cardholder participated in the charge.

American Express Chargeback Reason Code F29

The cardholder denies participation in a mail order, telephone order, or internet transaction. Note: Not applicable to digital wallet application-initiated transactions.

American Express Chargeback Reason Code F30

The cardholder denies participation in the charge and a counterfeit chip card was used at a POS system where the transaction was not processed as a chip transaction because either: the POS system was not an enabled chip and-PIN POS system, or the transaction was manually keyed. Note: Not applicable for contactless transactions and digital wallet payments.

American Express Chargeback Reason Code F31

The cardholder denies participation in the charge and chip card with PIN capabilities was lost/stolen/non-received and was used at a POS system where the transaction was not processed as a chip card transaction with PIN validation because either: the POS system is not an enabled chip-and-PIN POS system, or the transaction was manually keyed. Note: Not applicable to contactless transactions and digital wallet payments, and charges that qualify under the No Signature/No PIN Program.

Discover Fraud Reason Codes 

Reason Code

Insights 

Discover Chargeback Reason Code UA01

The cardholder claims fraud in connection with a card-present card sale.

Discover Chargeback Reason Code UA02

The cardholder claims that they did not approve or participate in a card not present card sale.

Discover Chargeback Reason Code UA05

The cardholder alleges that a counterfeit card was used to conduct a card sale or cash advance and a Contact Chip Payment Device was issued.

Discover Chargeback Reason Code UA06

The cardholder alleges fraud relating to a card-present chip card transaction, including a cash advance, involving a card account on which a PIN-preferring Contact Chip Payment Device was issued, the card was reported as lost or stolen at the time of the card sale or cash advance, and the card transaction was conducted at a POS device that does not support chip card transactions with PIN-preferring Contact Chip Payment Devices.

View Your Dispute Landscape Like Never Before

The transaction and customer data related to any given dispute lives in disparate systems, including an ecommerce platform, CRM, ERP, fraud alert portals, shipping vendors and multiple payment service providers (gateways, processors, and networks). That makes the prospect of understanding the full dispute ecosystem impossible without intelligently aggregated data sources.

The Chargeback App records, segments and compiles all of your responses into easy-to-use reports. It allows your team to see an overview and advanced analytics based on the App’s intelligent database. With exported data, you can compare dispute volume by stage, by dispute amount, and more. Click here to get a live demo and ROI analysis today to find out more.