Mastercard Chargeback Process News Dispute Resolution Management During COVID-19
The new coronavirus (or COVID-19) has influenced our lives significantly. Not only has it changed the way we live and interact; it has also impacted the way we shop, pay, and accept payments. Not all goods and services could have been received and enjoyed by us. We are all facing the situation when we have to apply for refunds or substitution of the services we had paid for beforehand.
The Impact of COVID-19 on the Payment Ecosystem
Also, Mastercard is closely monitoring the impact of COVID-19 on the payment ecosystem. The card scheme recognizes the challenges this may have on all participants, particularly when it comes to dispute resolution management. Issuers are strongly recommended to have cardholders attempt to resolve disputes with merchants before processing a chargeback.
On the other hand, acquirers are encouraged to ask their merchants to offer alternatives to the goods or services that cannot be provided, such as vouchers or credits.
Chargeback message reason code 4853 (Cardholder Dispute) governs dispute resolution for most scenarios that will arise from COVID-19-related disputes. This includes, but is not limited to:
- Goods or Services Not Provided
- Goods or Services Were Either Not as Described or Defective
- Credit Not Processed
- Failed Travel Merchant – Intra-EEA and Domestic European Transactions Only
Suggested Best Practices To Merchants
The following are the best practices that TrustPay suggests to its merchants. Please, read carefully the following advice:
First and foremost, we recommend that you attempt to resolve the disputes in a friendly and flexible manner. The main reason is to minimize the financial impact of this new and challenging situation.
- We recommend to proactively engage with cardholders who will not receive services and provide cardholders with refunds or reasonable alternatives for future services in order to prevent chargebacks.
- Where possible TrustPay will take advantage of Mastercard Collaboration pre-chargeback dispute resolution services to enable our merchants to proactively provide a refund to resolve the consumer’s reason for dispute/complaint before the formal chargeback cycle.
- To pre-empt chargebacks, merchants should consider processing refunds promptly after a cardholder declines a merchant offer for reasonable alternatives.
Please consider that while you may offer reasonable alternatives for future service when the service has been cancelled, such reasonable alternatives cannot be imposed on cardholders unless properly disclosed in the terms and conditions of purchase.
- In the case, a cardholder is credited twice (once by the issuer as a result of a chargeback and again through a refund or reasonable alternative), TrustPay will process a second presentment which identifies the refund or reasonable alternative accepted by the cardholder.
The cardholder purchased goods/services and the merchant will not be able to provide the goods/services. Does an issuer have chargeback rights?
Yes. There is a chargeback right when goods/services are not provided, including when they are cancelled due to government restrictions, insolvency or other exceptional circumstances.
The date of an event (e.g. concert, sports event) was changed or postponed due to COVID-19 restrictions; however, the cardholder cannot or does not want to attend on the new date. Does an issuer have chargeback rights?
Yes. There is a chargeback right when services are changed or postponed and this is not accepted by the cardholder. Cardholders are not obligated to accept reasonable alternative services unless required by the merchant terms and conditions properly disclosed to the cardholder at the time of the purchase.
The merchant declines to process a refund for cancelled services citing a “Force Majeure” clause in the merchant terms and conditions properly disclosed to the cardholder at the time of purchase. Does an issuer have chargeback rights?
Mastercard will honor merchant terms and conditions properly disclosed to the cardholder at the time of the purchase. Due to the complexity of contractual disputes including the applicability of clauses like “Force Majeure” to COVID-19, Mastercard’s review and ultimate determination of these disputes will be fact-specific.
The cardholder has ordered goods to be delivered but they have not arrived by the scheduled or mutually acceptable extended delivery date. For example, the merchant has shipped the goods but due to quarantines or travel delays, the package has not arrived. Does the issuer have chargeback rights?
Yes. As always, the merchant is responsible for ensuring the goods reach the cardholder by the latest expected delivery date. If the goods are expected to arrive late, issuers are encouraged to ask the cardholder for patience and flexibility to avoid the need for a chargeback.
Reasonable Alternatives for Future Services
The merchant has cancelled services and offered the cardholder a reasonable alternative for future service. Does Mastercard prohibit this?
Mastercard is supportive of these efforts and encourages acquirers to recommend such practices to their merchants. Ultimately, if an amicable resolution can be reached between the cardholder and the merchant, this will be beneficial to the entire payment ecosystem during this difficult situation.
The merchant has cancelled services and offered the cardholder a reasonable alternative for future service. The cardholder declines this reasonable alternative but the merchant refuses to process a refund. Does an issuer have chargeback rights?
Yes. Reasonable alternatives for future services cannot be imposed on the cardholder in lieu of a refund unless the merchant has a right to provide the cardholder with such reasonable alternatives based on the terms and conditions properly disclosed to the cardholder at the of the purchase, or based on applicable legislation or government regulations that should be provided in the dispute documentation.
The merchant has cancelled services and offered the cardholder a reasonable alternative for future service. The cardholder does not want this reasonable alternative but the merchant refuses to process a refund citing legislation or government regulation. Does an issuer have chargeback rights?
Mastercard will review and factor in relevant and applicable legislation or government regulation aimed at addressing COVID-19 disputes. For example, the cardholder may need to accept a voucher in lieu of a refund if a government.
The merchant has cancelled services and the cardholder has accepted a reasonable alternative for future service from the merchant. Does an issuer have chargeback rights if the merchant later becomes insolvent and the reasonable alternative cannot be used?
Yes. By accepting the reasonable alternative for future service, the cardholder and merchant have agreed to new terms and conditions for the same purchase transaction, which is still considered a Mastercard transaction.
In any case and scenario, should you have any further inquiries, do not hesitate to contact your Account Manager.