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4854- Cardholder Dispute Not Elsewhere Classified (US Only)

4854- Cardholder Dispute Not Elsewhere Classified (US Only)

Master Reason Code 4854: Cardholder Dispute Not Elsewhere Classified (US Only)

Chargeback reason code 4854: Cardholder Dispute Not Elsewhere Classified refers to situations where customers are unhappy with a purchase or transaction, but do not feel the situation can be resolved through the merchant. In these cases, Mastercard may allow consumers to reverse the transaction by filing a chargeback.

To simplify this process, the situations that may qualify for a chargeback are broken down into designated “reason codes.” Banks assign the appropriate code to each case so everyone knows the given reason for the chargeback.

We say the given reason because it may or may not reflect the true reason. Even if they suspect the cardholder is making an invalid claim, however, merchants must respond to the reason code presented by the bank.

The situation is further complicated by the fact that each card network has its own set of reason codes. While most of the same scenarios are covered, the designations can vary considerably. Understanding which code is which can be challenging, so we’ve created guides to help merchants know how best to fight or prevent the different chargeback types.

With that in mind, let’s take a look at Chargeback Reason Code 4854: Cardholder Dispute Not Classified Elsewhere.

Should Merchants Worry About Reason Code 4854 Chargebacks?

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What Is a 4854 Chargeback?

Mastercard chargeback reason code 4854: Cardholder Dispute Not Elsewhere Classified, sounds like an open-ended “catch-all” for just about  anything. However, most chargeback reasons do fall into standard classifications, leaving only a few situations where reason code 4854 would apply.

A better subtitle for this reason code might be something like “Cardholder/Merchant Resolutions That Failed.” The code typically designates a situation in which the following apply:

  • The cardholder is unhappy with the goods or services provided;
  • The cardholder contacts the merchant in good faith, and they come to an agreement; and
  • The proposed resolution—while agreed to by both parties—fails at some point in the execution.

This still leaves room for interpretation, but the category was created for specific situations. Note that reason code 4854 only applies to transactions in the United States.

Unclassified Cardholder Disputes: Causes and Conditions

So what would cause a 4854 reason code chargeback? Here’s an example: let’s say a cardholder purchases a sweater from an online merchant operating in the US. The customer receives exactly what was ordered, meaning the transaction was concluded; both parties fulfilled their end of the contract.

But upon receiving the order, the customer doesn’t like the feel of the sweater, and calls the merchant to request a refund (adhering to the business’s posted return policy guidelines). The merchant provides return shipping information, stating that the customer’s card will be reimbursed once the returned item is received.

So far, the process has gone smoothly. But what if, for whatever reason, the merchant does not receive the return, and therefore refuses to issue the refund? The cardholder can’t legitimately file a chargeback claiming the purchase was unauthorized, or that the goods were defective. In this situation, the cardholder may be justified in filing a chargeback under reason code 4854: Cardholder Dispute Not Elsewhere Classified.

Besides being limited to use in the US, there are other conditions that must exist before reason code 4854 can be used. Both the issuer and the acquirer must both operate from the US region, and the original transaction must have originated within 100 miles of the cardholder’s billing address (except for card-not-present transactions). The transaction amount in question must be $50 or more, and again, the cardholder must have made a good-faith effort to resolve the issue with the merchant.

Unclassified Cardholder Dispute Chargebacks and Fraud

It’s natural to assume that most chargebacks are the result of criminal activities like identity theft or account takeover. In reality, though, reason 4834 chargebacks more commonly result from missteps or errors in merchant policies or practices.

It’s important to understand that many reason code 4834 chargebacks arise due to merchant errors. That said, some may occur when customers attempt to force an unearned payment reversal through the bank. This is called friendly fraud, and merchants have the right to challenge it through the representment process.

Let’s look at an example: instead of shopping online, suppose a cardholder purchased three sweaters from a local merchant, then decided to return one to the store. The clerk informs the customer that the return has been set in motion, but the funds may take up to five days to appear in the cardholder’s account. Nevertheless, the customer contacts the issuing bank to file a chargeback with a 4854 reason code. The intent here is to get a double refund—one from the merchant and one from the bank—without either party being the wiser.

Responding to Mastercard Reason Code 4854 Chargebacks

In our last example, the customer is quite simply stealing from the merchant, who will end up paying for both refunds as well as chargeback fees. Thus, the merchant can try to recover their funds through representment.

The initial refund and any chargeback costs are unavoidable, in this case. However, merchants should almost always challenge this type of illegitimate chargeback and try to at least recover the cost of the second (bank-issued) refund.

The response must be made within 60 calendar days after first learning about the dispute from the cardholder, and no more than 120 calendar days from the transaction date.

Can Mastercard 4854 Chargebacks Be Prevented?

Legitimate disputes with a 4854 reason code are often preventable on the merchant side. Care must be taken to follow up promptly on returns, ensuring that the customer is kept in the loop and the agreed-upon resolution is completed.

Of course, unexpected issues can arise in the refund process. This makes it crucial for merchants to keep careful record of all emails, letters, and phone conversations with the customer regarding the return and refund. Mailed returns should require tracking numbers; better yet, merchants can supply postage-paid return labels.

This information can also be useful if the cardholder attempts to file an invalid 4854 chargeback. Documentation demonstrating that the merchant has lived up to the terms of the agreement may help prevent a chargeback from being filed; at the very least, it can be used as evidence in disputing the chargebacks.

Unfortunately, there’s no sure way to identify friendly fraud before it happens. Merchants can do everything “right” yet still have an unclassified cardholder dispute chargeback filed against them.

That’s why it’s generally more efficient to take a proactive stance with all aspects of chargeback management. A truly effective strategy must encompass prevention, but it is equally important to dispute cases of friendly fraud.

Chargebacks911® can help manage all aspects of every chargeback reason code, with proprietary technologies, experience-based expertise, and the industry’s only performance-based ROI guarantee. Contact us today for a free analysis to learn how much more you could save.

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