On April 15, 2018, Visa’s new rules on chargebacks, called Visa Claims Resolution or
VCR will come into effect. This new program has already gone live in Hong Kong and New Zealand in October 2017. Now these new rules will be migrated to all the remaining countries.
It is not clear at this point if MasterCard also plans to introduce new chargeback rules.
The main reason for Visa to change the existing chargeback rules was to simplify the
dispute process whilst reducing not only the overall number of chargebacks but also
the time to resolve these chargebacks.
Visa new Chargeback Rules
Visa Claims Resolution was designed to change the process from a litigation-based model to a liability-assessment model – according to a DIMOCO White Paper.
- Visa consolidated the existing 22 chargeback reason codes into four new groups,
namely: Glancing at the four new groups, it turns out that one of the most used chargeback
reason codes, ‘RC 75 – Transaction not recognized’, will be discontinued. Visa now requires the issuers to use the existing data in the Visa portal to assist the cardholder to recognize the transaction instead of disputing the transaction immediately. This represents a clear advantage for the merchant but could probably lead to increased chargebacks in the new fraud group. One key message for merchants to avoid disputes would be to communicate with the end-customers before issues arise.
- Visa will be stricter on chargebacks from the same credit card. For Card-Not-Present
transactions, Visa will now only allow 35 fraud chargebacks from the same credit
card within 120 days.
- A big change for merchants is the reduced timeframe for their response to disputes. Instead of the current response time limit of 45 days, Visa cuts this dispute-window by one-third to only 30 days and in 2019 Visa plans to reduce the 30-day window to 20 days. Merchants should be aware that the response time limit includes the reaction time of both the acquirer and the merchant, this could result in the merchant having a limited timeframe to response appropriately to the chargeback.
- Two new workflows were created to process disputes with reduced communication
between end-customers, issuers, acquirers and merchants.
Fraud and authorisation disputes will be processed via the allocation workflow. Automated
checks on Visa’s side will ensure the rejection of invalid disputes. Invalid disputes
could be disputes on transactions that have already been refunded or transactions with
expired timeframes that are automatically invalid. Visa will block these disputes from
becoming a chargeback. On the other hand, all disputes which are accepted by VCR will be the merchant’s liability. In that scenario, pre-arbitration is the only possibility for the merchant to object the chargeback.
Processing errors and consumer disputes will be processed via the collaboration workflow.
Both processing errors and the consumer disputes categories imply collaboration
and interaction between all involved parties and there is no change from the current
handling of such issues.