1. Chargebacks and Retrievals - General Overview

2. Agenda Retrieval Requests/Copy Requests Process Overview
Chargeback Basics
Arbitration Overview
Pre-Compliance & Compliance Overview
Good Faith Collection Overview
Retrieval/Chargeback Statistical Volume
ADRP – Automated Dispute Resolution Processing
Four Top Chargeback Reason Codes – Conditions to Raise and Representment Chargebacks
Best Operating Practices to Reduce Chargebacks

3. Retrieval Requests/Copy Requests Overview
Why are copy requests initiated?
Usually the issuer will raise a copy request to help their cardholder identify a transaction that has appeared on the cardholder’s bill that they do not recognize. There are a few other reasons that are common as well. Sometimes the cardholder needs a physical copy of the voucher for tax or other identification purposes. Many times, the issuer is satisfying a requirement that comes with raising a chargeback later, especially if they suspect fraud. Regardless of the reason it is initiated, it’s important for merchants to respond to all retrieval requests.

4. Retrieval Requests/Copy Requests Overview
How are copy requests different from chargebacks?
Copy requests are non-financial and chargebacks are financial: that is the biggest difference. When a chargeback is initiated, it comes with an automatic debit from the issuer to the acquirer that must be passed to the merchant. When a copy request is initiated, it does not have an accompanying debit – it is a request for information only.
It should be noted that non-response to a copy request grants the issuing bank a chargeback right that they would not have available if the copy request was answered within appropriate timeframes with required information.

5. Chargeback Process Flow

6. Chargebacks Basics Where exactly do chargebacks come from?
The cardholder’s issuing bank initiates a chargeback or copy request by keying information through their system and attaching supporting documentation (if required), which in turn is passed through the card association to the merchant’s bank/processor. The merchant’s bank/processor reviews the incoming chargeback to ensure rule-compliance, then passes it on to the merchant if all requirements have been met.

7. Chargeback Basics Why are they initiated?
There are a variety of reasons that chargebacks are initiated. The primary reasons are cardholder-based, and include claims of fraud, that they are due a credit, they are dissatisfied with the quality of services or merchandise, they didn’t receive merchandise, they don’t recognize the transaction or for cancellation of recurring transactions.
There are also issuer-based disputes that can be initiated, primarily for technical reasons when the issuer is in a position to take a loss on the transaction. For example, the cardholder’s account is in a collection status, and the merchant did not obtain a valid authorization when processing the transaction.
Processing issues are also a common reason why chargebacks are initiated. These problems can occur from either the merchant’s end or on the acquirer’s end.

8. Chargeback Basics What are the chargeback cycles?
The first incoming cycle for Visa and MC is the chargeback dispute initiated by the issuer/cardholder.
If the item is invalid on the part of the issuer, or if the merchant provides a valid response to the chargeback, then it can be represented back to the issuing bank.
The next level of dispute for MC is called a second-cycle chargeback, and means that the issuer/cardholder did not agree with the representment. If the merchant chooses to continue disputing the issuer/cardholder claims, the case is sent pre-arbitration to the issuing bank notifying them of our intention to file the case with MasterCard’s arbitration committee should they not accept our pre-arbitration attempt.
The next level of dispute for Visa is actually an incoming pre-arbitration. The issuer is notifying our center of it’s intention to file the case with Visa’s arbitration committee if we do not accept their pre-arbitration attempt.

9. Arbitration Overview
Arbitration is used when the issuer/cardholder and the acquirer/merchant cannot agree about which party should be financially liable for a transaction during the pre-arbitration stage.
Visa - the issuers file the arbitration cases against the acquirer/merchant.
MasterCard - the acquirer files the arbitration case against the issuer on behalf of the merchant.
Visa and MasterCard rule on the case filings. The losing member is responsible for any filing fees
Technical fees can also be assessed during this stage.

10. Pre-Compliance &Compliance Overview
Pre-Compliance can be initiated by the issuer or the acquirer, but is most commonly raised by the issuer.
Pre-Compliance is a part of the dispute process available when either member claims that the other member violated card association regulations however they do not have a chargeback right available to shift financial liability per their claim.
The issuer and/or the acquirer can choose to accept or decline an incoming pre- compliance case.
If pre-compliance is declined, it can be filed as a compliance by either the issuer or the acquirer.
Cases filed compliance are sent to the associations for ruling.
The association will rule in favor of either the issuer or the acquirer.
The member that is deemed responsible for the case is required to pay the compliance fees for both parties and any technical fees that pertain to the case.

11. Good Faith Collection Overview
A good faith collection case can be initiated by the issuer or the acquirer.
Good Faith Collection is a level of the dispute process that is used when no other avenue is available (chargeback, representment, or pre-compliance) to try and resolve a claim for financial liability of a transaction, and is essentially “asking” the other party to consider acceptance of that liability.
The issuer and/or the acquirer can choose to accept or deny an incoming good faith collection case.
There are no definitive time frames surrounding the good faith/collection process.
We will contact the issuer with a good faith collection letter and reminder letters at 30, 60, and 90 days.
If there is no response from the issuer after 120 days, the case is closed.

12. Chargeback and Retrieval Statistics
Approximately 58,000 incoming chargebacks per month
Approximately 50% auto decisioning percentage for incoming cases
Approximately 27% representment rate on first cycle chargebacks – 15% of which are auto-represented back to the issuer without financial impact to the merchant
Approximately 23,000 retrieval requests per month
99.5% retrieval fulfillment rate which has contributed to industry awards received

13. What a year’s worth looks like…
2007 Volumes:
275,153 retrieval cases (9% increase over 2006)
694,487 chargeback cases worth over $196 million (10% increase over 2006)
33,971 pre-arbitration cases worth over $18 million (37% increase over 2006)
7,944 good faith cases
3,947 pre-compliance cases
414,804 quality control cases
371,502 indexed documents
153,058 incoming merchant calls (10% increase over 2006)
The Chargeback team maintained an average of 1.8 days of inventory and worked all chargebacks on average within 4.7 days from the date it was received at NOVA

14. Automated Dispute Resolution Processing (ADRP)
Our proprietary system designed specifically for working chargebacks and retrievals with direct links to the card associations – updated regularly
Systematic chargeback edits for compliance of Visa and MasterCard operating regulations
Auto-decisioning logic is built into the system
The system will allow processing in 14 currencies settled throughout 8 portfolios worldwide
Systemic retrieval fulfillments with FSD (facsimile draft) when the retrieval is received based on Visa/MasterCard eligibility
25 Day FSD fulfillments on any retrieval request still pending a merchant response
System assigns chargeback and retrieval cases for manual work based on highest dollar amount and oldest item, insuring cases do not go past timeframes

15. ADRP Document Processing
System generated letters print with a barcode used for auto indexing
Autofax feature provides notification of Chargeback and Retrieval Requests the same day they are processed. This feature also provides a second notice on all retrieval requests faxed but not responded to within 15 days
Connectivity with Associations allows systematic processing of incoming cardholder documents
All chargeback letters to merchant include a Preventative Tips letter to educate merchants on avoiding chargebacks

16. No Cardholder Authorization Reason Code 4837
Chargeback Conditions:
The cardholder states in writing that neither he, she, or anyone authorized by him or her engaged in the transaction
A face-to-face or non-face-to-face transaction took place and the card was either not swiped or an imprint was not obtained at the time of the transaction

17. No Cardholder Authorization Reason Code 4837
Representment Conditions:
Chargeback is improper or invalid
Signed/swiped or imprinted sales draft showing cardholder participation. If cardholder-signed documentation cannot be provided, supply all compelling evidence supporting cardholder participation such as:
AVS (Address Verification Service) response code
CVC2 (Cardholder Verification Confirmation) response code
SecureCode transaction validation

18. Transaction Not Recognized/Cardholder Does Not Recognize Transaction 4863/75
Chargeback Conditions:
The cardholder does not recognize a transaction showing on their credit card statement

19. Transaction Not Recognized/Cardholder Does Not Recognize Transaction 4863/75
Representment Conditions:
Documentation to assist the cardholder in identifying the transaction such as:
A signed/swiped or imprinted sales draft
A signed contract with card imprint
An invoice
Signed POD

20. Fraud – Card-Not-Present Reason Code 83
Chargeback Conditions:
The cardholder states in writing that neither he, she, or anyone authorized by him or her engaged in the transaction
A non-face-to-face transaction took place and the card was not swiped or an imprint was not obtained at the time of the transaction

21. Fraud – Card Present Reason Code 83
Representment Conditions:
Chargeback is improper or invalid
Signed/swiped or imprinted sales draft showing cardholder participation. If cardholder-signed documentation cannot be provided, supply all compelling evidence supporting cardholder particiaption such as:
AVS (Address Verification Service) response code
CVV2 (Cardholder Verification Confirmation) response code
Verified by Visa transaction validation

22. Duplicate Processing Reason Code 82
Chargeback Conditions:
The cardholder was billed more than once for a single transaction in error
The transactions were processed by the same merchant location
The transaction amounts and transaction dates do not have to be the same

23. Duplicate Processing Reason Code 82
Representment Conditions:
Proof of two valid transactions authorized by the cardholder

24. Best Operating Practices to Reduce Chargebacks
Make sure cardholder statements reflect accurate transaction information including the contact phone number for the MID (for assistance with updates or issues on this point, contact MSP Support).
Secure an authorization code for every transaction.
Check point-of-sale devices before reprocessing transactions to help avoid duplication processing.
Respond to retrieval requests/copy requests in a timely manner.
Utilize fraud-prevention tools and process transactions correctly according to regulations.
If you have any questions in relation to a retrieval or chargeback notice you have received, please call the toll free number printed on the notice, or go through the MSP Channel at