Visa Reason Code 13.7: Cancelled Merchandise / Services
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 transaction 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 13.7: Cancelled Merchandise / Services.
What is Visa Reason Code 13.7?
Chargeback reason code 13.7 (previously legacy reason code 85, condition 2) is part of the updated version reason codes that were phased out under the Visa Claims Resolution initiative. This code applies when a cardholder claims to have returned merchandise or cancelled services, but the credit did not appear on the cardholder’s monthly statement.
This reason code is closely related to 13.6: Credit Not Processed. In both cases, cardholders were expecting a credit that did not show up on their Visa statement. Reason code 13.7, however, specifically refers to non-processed credits that were due from a cancelled service (including subscription services) or returned merchandise.
This can be the result of a merchant error. If a cardholder had a valid reason to request a credit, but didn’t receive one, then the merchant is liable for the chargeback. Of course, it’s also possible that this could be a case of friendly fraud.
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 chargebacks with a “cancelled merchandise or services” reason code:
- The merchant failed (to date) to issue a credit for cancelled services or returned merchandise.
- The merchant did not issue a credit because the business does not accept returns; however, this policy was not clearly or correctly explained to the cardholder.
- The merchant failed to process a cancellation for a timeshare within the allotted time frame (14 days of the contract or receipt date).
- The merchant failed to process a properly-cancelled, guaranteed reservation.
Taking care to avoid these mistakes can prevent disputes before they happen. Of course, those aren’t the only causes of reason code 13.7 chargebacks. As mentioned earlier, the given reason for a chargeback may be far different from the actual reason. The 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.
Fortunately for merchants, there are at least some time limitations placed on chargebacks filed under reason code 13.7. The dispute processing time limit is 120 calendar days from either:
- The day the transaction was processed; or
- The date the customer received the goods or services (not to exceed 540 days beyond the original transaction processing date).
Reason Code 13.7 Claims: Prevention & Response
No matter how faithfully merchants follow the rules, there will always be people who attempt to take advantage of the system. That said, cancelled merchandise chargebacks are preventable. There are certain steps merchants can take to mitigate the risk of this specific type of chargeback:
For card-present transactions:
- Be sure the return/cancellation policy is clearly visible near the customer signature line on transaction receipts or other transaction documents.
- If this disclosure is on the back of the transaction document, have the customer initial the back of the paper in addition to signing the front.
- If applicable, print the words “NO RETURNS” or similar disclosures on all copies of the transaction receipts; provide the customer with a copy to signing.
For card-not-present (online) transactions:
- The merchant must have a method for customers to acknowledge privacy issues by providing a “click to accept” button or check box, or a space for electronic signature.
- Be sure the terms and conditions of the purchase are displayed on the checkout screen where the order total is shown, near the “submit order” or “click to accept” button.
- The refund policy must be clearly communicated to the cardholder, preferably in multiple locations throughout your site and on any documentation.
Preventative measures can significantly lower overall chargeback volume. However, some illegitimate chargebacks will slip through the cracks. Merchants who have evidence that refutes a cardholder’s claim should definitely challenge the chargeback through Visa’s dispute process. Here are some steps merchants can take to make the representment process more successful:
|You never received, or accepted, the returned goods…||…provide evidence and explain why you refused the merchandise return.|
|Your policies were clearly disclosed…||…provide evidence to support that your policies were properly disclosed/agreed to at the time of sale.|
|The cancellation did not adhere to your disclosed policy…||…demonstrate that your policies were properly disclosed, and show how the cardholder did not adhere to the disclosed policy.|
|Cardholder has continued to use the services…||…provide documentation to support.|
|The cardholder’s complaint is valid…||…you must accept the dispute.|
|You’ve already processed a transaction credit…||…provide evidence of the credit or reversal,
including the amount and the date it was processed.
|The cardholder no longer disputes the transaction…||…provide a signed letter or statement from the cardholder which states they no longer dispute the transaction.|
Take a Wider View
Invalid chargebacks from Visa Reason Code 13.7 can be disputed, but it’s much more efficient to take a proactive stance. The same is true of the other chargeback reason codes, as well. A truly effective chargeback management strategy must encompass prevention as well as disputing cases of friendly fraud.
Chargebacks911® can help your business manage 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.