Background, Authorization, Settlement, Reconciliation, Chargebacks, Refunds

Visa/MasterCard Chargebacks

Dispute Resolution Process

The process for handling disputed transactions is stipulated by the Visa and MasterCard associations and was developed to comply with federal cardholder's rights legislation.  The typical steps in the Visa or MasterCard dispute resolution process is as follows:

1. A cardholder not  recognizing  a charge on their credit card statement contacts the bank that issued their card.
2. The issuing bank creates a retrieval request containing all the pertinent information related to the disputed transaction.
3. The retrieval request is sent to the applicable card association (i.e., Visa or MasterCard), which, in turn, sends the request to Global.
4. Global reviews the retrieval request to determine if the disputed transaction was valid and if Global has already responded to the request.  In some instances Global will respond directly to the retrieval request, otherwise the request is forwarded to the agency for response.  In forwarding a retrieval request to an agency, Global may include additional information to aid the agency in researching the dispute (see below for a sample of retrieval request forwarded from Global to an agency).  An agency may request whether they want to have retrieval requests mailed or faxed to them.  Global will also provide a timeframe for when a response is required back from the agency. 
5. The agency performs research to verify both that the transaction occurred and that it occurred for the appropriate amount and provides supporting documentation back to Global.  For point-of-sale programs, supporting documentation would be a copy of a signed sales receipt.  For automated programs (e.g., Internet applications) supporting documentation might be a reproduction of the electronic record of the disputed transactions.  Agencies should reply by fax whenever possible to expedite the process.
6. Global will image the documentation and will forward the data back to the issuing bank through the appropriate association.  Note: if responses to retrieval requests are not returned to the issuing bank in the specified timeframe, the dispute will automatically be found in favor of the cardholder or card issuer.  Response timeframes vary depending upon the reason for the dispute.
7. The issuing bank will make the determination as to whether the documentation has adequately substantiated the dispute.  If it has, the issuing bank will contact the cardholder with the necessary information. If the issuing bank rules that a chargeback is required, the issuing bank will deduct the reimbursement by netting the amount out of the next day’s settlement to Global.  At month-end, Global will invoice the agency for the chargeback.

Sample Retrieval Request Letter from Global

Fraud-related disputes

If the dispute is fraud-related, the issuing bank will not create a retrieval request but will send an affidavit to the cardholder who will document the circumstances, sign it and return the affidavit back to the issuing bank. If the dispute becomes a chargeback, the agency will receive a copy of the affidavit. 

It should be noted that fraud-related chargebacks have been historically low for government agencies. Low chargeback levels among agencies have been due to the nature of goods and services provided. Since licenses, tax payments, fees and fines are traceable, fraudulent use of someone else’s credit card for payment should be infrequent.

What Can You Do if You Disagree With a Chargeback Decision?

If an agency receives a chargeback but disagrees with the decision, they may:

1. Challenge the decision by re-submitting their response with additional information justifying a reversal of the decision (this action is referred to as representment).
2. Request arbitration, where for a fee that’s paid by the agency, a group of individuals will review the case.
3. Contact the cardholder directly.

Tools to Aid in Reducing and Responding to Retrieval Requests

The following Design Considerations will assist agencies in reducing the number of retrieval requests and in responding to retrieval requests.

Design Consideration For face-to-face and automated programs (e.g., Internet applications) clearly state your return policy and identify what the payment is for.  For example, is a license fee for the license itself or for processing the license and is the fee refundable if the license is denied.

Design Consideration For face-to-face programs, retain copies of sales drafts for at least three years (this is required by federal cardholder right's legislation).

Global's Access Advantage on-line reporting tool provides details and summary information regarding retrieval requests and chargebacks.  This information can be used to manage responses to retrieval requests to ensure timely responses.

Design Consideration Agencies should dedicate adequate resources to respond to retrieval requests in a timely manner.

A sample retrieval request summary screen follows:

1. What is a Chargeback?
2. Visa/MasterCard Chargebacks
3. American Express Chargebacks

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Last Modified February 25, 2002