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Chargeback Time Limit

Chargeback Time Limit

Reviewing the Chargeback Time Limit for Cardholders & Merchants

The chargeback time limit refers to the specific time window allowed for parties to respond to each phase of a chargeback dispute. Cardholders, banks, and merchants each need to keep to the deadlines imposed by the card networks or risk losing a claim.

Restricting the time-frame for all responses keeps the process from dragging out and helps ensure that both cardholders’ and merchants’ rights are upheld. Time limits, however, are just one of the many inherent regulations that make fighting chargebacks a complicated and stressful process. Plus, time limits are not standardized across card networks; they can vary by as much as two months, depending on the chargeback type.

To demonstrate how the requirements can deviate between schemes, we take a look at the two largest networks, Mastercard and Visa.

Visa Claims Resolution & Chargeback Time Limits
Chargeback timelimit fine money

Until recently, the chargeback time limits for Mastercard and Visa had only minor differences. The new Visa Claims Resolution (VCR) initiative, however, made the differences much more distinct.

VCR was implemented, in part, to speed up the overall chargeback dispute process. That includes cutting the allowable times for responses, as well as equalizing response windows across all parties.

Visa also removed the "timing out" option: under the legacy system, merchants had the option of simply ignoring a request for response until the allowable time ran out, effectively accepting the chargeback by default. Now, Visa imposes a fine on merchants who don't respond in a timely manner--even if that response is an acceptance of the chargeback.

Mastercard Chargeback Terminology & Stipulations

Mastercard uses specific terms for each phase of the chargeback process. Understanding these terms will help anticipate the appropriate chargeback time limit for a transaction.

  • First Presentment: the merchant processes the original transaction.
  • First Chargeback: the issuer or cardholder disputes the transaction.
  • Second Presentment: the merchant “re-presents” the transaction, accompanied by supporting evidence that contradicts the chargeback.
  • Pre-Arbitration Chargeback: the issuer disputes the merchant’s chargeback representment.
  • Chargeback Arbitration: the merchant, cardholder and issuer are unable to resolve the case, forcing Mastercard to intervene and make a final decision.

Keep in mind that not all of these steps will apply to every chargeback. Some cases won't proceed beyond the initial chargeback; most won't see the pre-arbitration stage, and very few will last all the way to arbitration.

The majority of Mastercard chargeback time limits are based on the Central Site Business Date, which is considered "Day One" for that phase. Subsequent deadlines start at that date, then go until the phase is completed. The day of phase completion becomes the new Central Site Business Date for the next phase.

The system becomes clearer when put into context. Each specific date depends on the stage of the chargeback process:

  • When filing a first chargeback, the Central Site Business Date is the day the original transaction was processed, so the deadline is a fixed number of days from that event.
  • If filing a second presentment, the Central Site Business Date for the entire phase is the day the first chargeback is processed.
  • When filing an arbitration chargeback, the Central Site Business Date is the day the second presentment is processed.
  • If the case continues to arbitration, the Central Site Business Date is the day the arbitration chargeback is processed.
An issuer may file only one chargeback per transaction within the applicable time frame for the given chargeback reason code. However, the process can be expedited in certain situations. For example, if the necessary supporting documentation isn’t provided within eight calendar days of the second presentment, the issuer can submit an arbitration chargeback after the ninth day.

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Mastercard Mastercard Chargeback Time Limits That Apply to the Issuer/Cardholder

The deadlines for chargeback responses are imposed by Mastercard and based on the case's assigned reason code. The issuer has leeway in some cases to alter the time limits offered to the cardholder, but the customer must act within that predetermined time limit.

In most cases, cardholders may only file a chargeback within 120 calendar days of the Central Site Business Date, with some codes requiring shorter timeframes. Note that these limits apply only to the issuer and/or cardholder; acquiring banks and merchants have a set time limit of 45 days to respond to each phase.

Chargeback Reason Code Time Limit in Calendar Days
4808 - Authorization Related Chargeback 90 Days
4831 - Transaction Amount Differs 120 Days
4834 - Duplicate Processing 120 Days
4837 - No Cardholder Authorization 120 Days
4840 - Fraudulent Processing of Transactions 120 Days
4841 - Canceled Recurring Transaction 120 Days
4842 - Late Presentment 120 Days
4846 - Correct Transaction Currency Code Not Provided 120 Days
4849 - Questionable Merchant Activity 120 Days
4850 - Installment Billing Dispute 60 or 120 Days
4853 - Cardholder Dispute, Defective/Not as Described 120 Days
4854 - Cardholder Dispute, Not Elsewhere Classified (U.S. Region Only) 60 or 120 Days
4855 - Goods or Services Not Provided 120 Days
4859 - Addendum, No-show, or ATM Dispute 120 Days
4860 - Credit Not Processed 120 Days
4863 - Cardholder Does Not Recognize, Potential Fraud 120 Days
4870 - Chip Liability Shift 120 Days
4871 - Chip/PIN Liability Shift 120 Days

Mastercard Chargeback Time Limits: Exceptions

Having different chargeback time limits for different reason codes is confusing enough, but unfortunately, it gets even more convoluted. Although Mastercard's chargeback time limits are fairly strict, there are some exceptions or conditions that can alter that timeframe. Specifically, the codes 4850, 4854, 4855, and 4860 offer varying time limits.

Chargeback Reason Code

4850

Installment Billing Dispute

Time Limit in Calendar Days
  • Within 120 days from when the ongoing services were stopped, with a maximum of 540 calendar days from the transaction settlement date
  • Between 15 and 120 calendar dates from the transaction settlement date
  • Between 15 and 120 calendar dates from the delivery/cancellation date of goods / services
  • For payments of interrupted, ongoing services, the maximum time limit is 540 days after the Central Site Business Date

Chargeback Reason Code

4854

Cardholder Dispute, Not Elsewhere Classified

Time Limit in Calendar Days
  • 60 calendar days after the cardholder reports the issue
  • 120 calendar days after the Central Site Business Date

Chargeback Reason Code

4855

Goods or Services Not Provided

Time Limit in Calendar Days
  • 120 calendar days after the Central Site Business Date when goods or services were provided
  • 120 calendar days after the latest anticipated delivery date when the provision of goods or services was delayed
  • 120 calendar days after the cardholder’s realization that interrupted services have ceased, but not to exceed 540 calendar days of the Central Site Business Date

Chargeback Reason Code

4860

Credit Not Processed

Time Limit in Calendar Days
  • 120 calendar days after the service was cancelled or the goods were returned
  •  120 days after credit documentation is issued (day zero is the date published on the document, the date of the merchant’s letter, or the date the issuer received the letter)
  • The issuer must wait to process the chargeback until 15 calendar days have passed from:
    • The date on the credit document
    • The date the merchandise was returned
    • The date services were terminated
  • The 15-day time limit can be waived if:
    • The merchant sends the issuer a letter stating a chargeback can be used to provide credit
    • The issuer has proof of an improperly disclosed in-store credit
    •  The TID is voided by the merchant

Mastercard Chargeback Time Limits That Apply to the Acquirers and Merchants

While they have chargeback rights allowing them to dispute the cardholders’ claims, merchants and their acquirers are bound by much more stringent time limits:

  • The acquiring bank must submit the second presentment within 45 calendar days of the Central Site Business Date (in this case, the day the bank receives the chargeback).
  • The issuing bank must initiate an arbitration chargeback within 45 calendar days of the Central Site Business Date (the day the bank received the second presentment).
  • Either party must seek arbitration within 45 calendar days of the Central Site Business Date (the day the arbitration chargeback is presented).
  • The bank must provide the necessary documentation within eight calendar days of submitting the chargeback, second presentment, or arbitration chargeback.

Visa Dispute (Chargeback) Time Limits

As noted earlier, Visa has predetermined chargeback time limits much like Mastercard. However, under the new VCR initiative, the company consolidated reason codes and recalculated the various time limits to better methodize the system. If you don't feel comfortable with VCR yet, here's a good place to start:

Visa Claims Resolution:
What Merchants Need to Know

The new Visa Claims Resolution (VCR) can make chargeback resolution faster and easier--but the changes can be confusing at first. To help merchants get started, we created this handy guide full of explanations and actionable advice.

FREE DOWNLOAD

Visa's post-VCR terminology differs from Mastercard's as well:

Mastercard Term Visa Term
Chargeback Dispute (Chargeback Dispute)
Second Presentment (Chargeback Representment) Dispute Response/Pre-Arbitration
Arbitration Chargeback (Pre-arbitration Chargeback) Dispute Response Reversal

Most of the new time limits for chargebacks--or disputes, as Visa now labels them--are set at 30 days for merchants, and that is scheduled to be made even shorter in 2019. Businesses will need to respond within that time window in order to challenge the dispute.

Visa would like to have all disputes resolved within 31 days, if possible. All responses are tracked through Visa Response Online (VROL).

Visa Chargeback Time Limits That Apply to the Issuer/Cardholder

Under VCR, chargeback disputes are tracked through one of two workflows. While the chargeback time limits for merchants and acquirers has seen a mandatory reduction, the limits for cardholders can vary from one issuer to another. Visa has established core rules--that's what we show below--but individual issuers have some freedom in setting limits, as well.

Again, these are time limits for cardholders and/or issuers only; acquirers and merchants must respond within 30 days for each phase.

Chargeback Reason Code Time Limit in Calendar Days
10.1 EMV Liability Shift Counterfeit Fraud 120 Days
10.2 EMV Liability Shift Non-Counterfeit Fraud 120 Days
10.3 Other Fraud — Card Present Environment 120 Days
10.4 Other Fraud — Card Absent Environment 120 Days
10.5 Visa Fraud Monitoring Program 120 Days*
11.1 Card Recover Bulletin or Exception File 120 Days
11.2 Declined Authorization 120 Days
11.3 No Authorization 120 Days
12.1 Late Presentment 120 Days
12.2 Incorrect Transaction Code 120 Days
12.3 Incorrect Currency 120 Days
12.4 Incorrect Transaction Account Number 120 Days
12.5 Incorrect Transaction Amount 120 Days
12.6 Duplicate Processing or Paid by Other Means 120 Days
12.7 Invalid Data 120 Days
13.1 Services Not Provided or Goods Not Received 120 Days
13.2 Cancelled Recurring Transaction 120 Days
13.3 Not as Described or Defective Merchandise 120 Days
13.4 Counterfeit Merchandise 120 Days
13.5 Misrepresentation of goods and/or service 120 Days
13.6 Credit Not Processed 120 Days
13.7 Cancelled Merchandises/Services 120 Days
13.8 Original Credit Transaction Not Accepted 120 Days
13.9 Non-Receipt of Cash/ Transaction Value at ATM 120 Days

*Time limit begins on the day the fraud is identified by the Merchant Fraud Performance Program.

Another new element under VCR involves what is called pre-arbitration: issuing banks and cardholders will now have 30 days to respond to the merchant's rebuttal.

Learn how effective chargeback disputes can recover revenue and improve your business’s reputation.

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Visa Chargeback Time Limits: Exceptions

As with Mastercard, Visa has some exceptions or conditions that can change the amount of time allowed. The most significant time limit modifiers are attached to three specific codes, 13.1, 13.3 and 13.6.

13.1 Services Not Provided or Goods Not Received

Under this reason code, if the delivery of goods or services can reasonably be expected after the actual transaction date--buying concert tickets a month before the event date, for example--chargeback time limits are calculated based on multiple criteria. First, the issuing bank must wait 15 calendar days before initiating a dispute. This time period starts on either

  • The transaction date, if the date the expected goods/service delivery date was unspecified
  • The date the Cardholder returned or attempted to return the merchandise (if the merchandise was returned due to late delivery)

Additionally, the dispute must be processed either

  • Within 120 days of the last date the cardholder expects to receive the goods or services, not to exceed 540 calendar days from transaction; or
  • Within 120 days of the date the cardholder was informed that the goods/services would not be provided, not to exceed 540 calendar days from transaction

13.3 Not as Described or Defective Merchandise

Under this reason code, if the cardholder deems the goods or services defective or not as described, the chargeback time limit is calculated based on one of the following, depending on the situation:

Situation Start of Time Limit
Where the goods/services were purchased on or before the transaction processing date. 120 calendar days past the date the cardholder expected or was promised to receive goods or services
Where there is a delay in delivery of the goods or services 120 calendar days past the date the cardholder was told the goods/services would not be delivered/provided
Where goods or services were provided after the transaction processing date 120 calendar days past the date the cardholder received the goods or services

13.6 Credit Not Processed

Finally, this reason code deals with chargebacks stemming from a credit not being processed. Issuers must wait 15 calendar days from the Credit Transaction Receipt before initiating a dispute. This does not apply if the CTR is undated … or if doing so would cause the dispute to go beyond the time limit.

For filing, the dispute must be processed no later than 120 calendar days from either:

  • The Transaction Processing Date
  • The date on the Credit Transaction Receipt or--if the CTR is undated--the date the cardholder returned the merchandise or canceled services

Visa Chargeback Time Limits That Apply to the Acquirers and Merchants

Like Mastercard, all timeframes are measured from Day One of the applicable phase. However, where Mastercard counts days from the actual Central Site Business Date, Visa timeframes start on the day after.

Legacy Time Limit Current Time Limit
Dispute Response 45 days 30 days
Pre-Arbitration 30 days 30 days
Pre-Arbitration Response 30 days 30 days
Arbitration 60 days 10 days

Prospering Despite Strict Deadlines

Managing chargebacks is challenging under the best of circumstances, and while chargeback time limits certainly provide a benefit, they can make the process even more stressful for merchants. Visa's new simplified process should help with that in the long run, but having the two major card schemes handling chargeback disputes in significantly different manners makes things much more complicated in the meantime.

Having said that, not fighting illegitimate chargebacks is essentially throwing away profits. Each chargeback representment is a unique attempt to reclaim money that never should have been lost in the first place. This balancing act often leaves merchants feeling helpless.

Outsourcing the task of chargeback representment ensures a much higher win rate. In fact, Chargebacks911® offers a guaranteed ROI for all chargeback disputes we compile on your behalf. Contact us today; we’ll tell you more about ensuring representment success amid restrictive chargeback time limits and improving your business’s bottom line.


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