Visa Chargeback Reason Code 10.5: Visa Fraud Monitoring Program
For the sake of simplicity and standardization, card networks like Visa have created a breakdown of the acceptable causes for a customer to dispute a credit card charge by filing a chargeback. Each of these causes has a designated “reason code,” and banks assign the appropriate code to each case to show the given reason for the chargeback.
That sounds simple enough, but the reality is, the given reason for a chargeback may or may not be the true reason. Plus, each card network has its own set of reason codes—which, while nearly the same in function, nevertheless differ from one another. Keeping track of all these codes, along with the best ways to either fight or prevent each one, is challenging.
With that in mind, let’s take a look at Visa Reason Code 10.5: Visa Fraud Monitoring Program.
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What is Visa Reason Code 10.5?
Chargeback reason code 10.5 is an updated version of legacy reason code 93, which was phased out under the Visa Claims Resolution initiative. This code applies when Visa notifies the issuer of a transaction that was identified by the Visa Fraud Monitoring Program (VFMP); one not successfully disputed under another reason code.
Reason code 10.5 chargebacks differ from most reason codes in that the disputes don’t originate with the issuer or the cardholder. Instead, they come from Visa.
As the name implies, the Visa Fraud Monitoring Program monitors fraud instances among merchants. The company tracks merchants’ chargeback cases overall. If a merchant reaches a certain threshold, Visa places them on the VFMP list…at which point the merchant is in danger of losing Visa processing privileges altogether.
If a merchant files a transaction without checking the VFMP, and that transaction goes through, Visa will contact the issuer and instruct them to file a chargeback. This happens regardless of whether the issuer or the cardholder intended to file a chargeback.
Merchant Errors, Rights & Limitations
Chargebacks of any kind are nothing but trouble for merchants…yet many chargebacks are the direct result of preventable merchant missteps. It’s crucial for businesses to recognize the common merchant errors that might trigger a chargeback.
That said, the best way to avoid these fraud monitoring program chargebacks is to not be listed on the VFMP in the first place. This means—among other things—eliminating as many merchant errors as possible, and fighting back against friendly fraud.
As mentioned earlier, the given reason for a chargeback may be far different from the actual reason. A cardholder who knowingly tries to file a chargeback under false pretenses commits friendly fraud. While banks try to investigate all claims thoroughly before processing a dispute, the meteoric rise in chargeback cases has made this extremely difficult. In many cases, it’s more efficient to simply take the customer’s claim at face value.
In the case of reason code 10.5, however, the responsibility is all on the merchant. It’s up to the business to stay out of the VFMP by keeping their fraud instances under the threshold allowed by Visa.
For the issuer, the only limitation here is the timeframe: a chargeback with a fraud management program reason code must be filed with a maximum of 120 days from the date the issuer learns the merchant is enrolled in the VFMP.
Preventing & Disputing Chargeback Reason Code 10.5 Claims
No matter how faithfully merchants follow the rules, there will always be people who attempt to take advantage of the system. Fraudsters may try to use a stolen credit card, but it is often the actual cardholder using a card they know is invalid, hoping it will go through. Luckily, however, chargebacks from reason code 10.5 are totally preventable if the merchant follows best practices:
- Always secure authorization for every transaction, prior to the transaction.
- Process the payment for the authorized amount only; for additional amounts, submit a second transaction
While preventative measures can significantly lower overall dispute volume, some illegitimate chargebacks may slip through the cracks. This is not the case with 10.5 chargebacks—at least in theory. Since Visa is the entity that identified the dispute in the first place, they wouldn’t have any reason to question the motivation behind the chargeback. For that reason, they don’t allow merchants to dispute chargebacks under this reason code.
Take a Wider View
The most efficient approach to chargebacks is to take a proactive stance. The same is true of all chargeback reason codes. A truly effective chargeback management strategy must encompass prevention as well as disputing cases of friendly fraud.
Chargebacks911® can help your business manage risk from Visa chargeback reason code 10.5, and all aspects of chargeback reason codes, with proprietary technologies and experience-based expertise. Contact us today for a free ROI analysis to learn how much more you could save.
