Visa Issues New Travel Industry Chargeback Guidelines for the COVID-19 Era
Few industries are feeling the pain from the COVID-19 outbreak as acutely as the travel and entertainment space. With popular destinations closed, millions of people under lockdown, and global travel restricted, merchants in this tumultuous space are fighting just to stay afloat through the crisis.
To make matters worse, many of these businesses face the prospect of billions of dollars in refund requests over the coming weeks and months. The situation has led some to ask us whether they should temporarily block refunds entirely. So, is that the right strategy to take?
The short answer: absolutely not. For merchants facing known delays, postponements, or cancellations, we strongly recommend working to refund all customers in accordance with best practices. We understand that this is a demanding prospect, but it’s still better than the potential alternative.
If a merchant is unable to provide service to customers on the agreed-upon dates, those customers may be entitled to file a dispute. There could be other problems that arise as well; for instance, the merchant may face bad PR from confused customers who believe they’re being abused.
Of course, it’s not entirely a black-and-white issue. In some cases, the customer may not be eligible for a dispute under card network rules.
Visa Guidelines for Travel & Entertainment Disputes
As we covered in a recent blog post, Visa issued new chargeback guidelines and procedures for verticals heavily-impacted by the COVID-19 outbreak.
In many cases, cardholders may have purchased goods or services like airline tickets, hotel stays, event passes, etc., but are now unable to use those purchases due to coronavirus-related restrictions. According to the updated Visa guidelines, cardholders and issuers do not necessarily have the right to pursue chargebacks filed under Dispute Condition 13.1 (Merchandise/Services Not Received) in all cases.
eCommerce, Fraud & Chargebacks in the Age of COVID-19
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Free DownloadSo long as the merchant is “willing and able” to provide the goods and services purchased, the customer is not entitled to file a dispute. The same is true for pre-arbitration in any situation in which the seller is restricted from providing goods or services due to government action. It’s important to note, however, that this applies only if the merchant can provide a reasonable alternative to the goods and services in question.
Are Merchants Immune to Disputes?
Again: Absolutely not.
Cardholders still have dispute rights in numerous different situations. It’s vital that travel merchants understand this point, and work to cover their bases to prevent disputes wherever possible.
If the merchant’s cancellation policy was never properly disclosed at the time of the original transaction, the cardholder still has the right to file a dispute using reason code 13.1. The same is true if the merchant chooses to cancel goods or services for other reasons not directly related to COVID-19. For instance, if the cancellation is not directly tied to a government mandate, then the customer still has the right to dispute the charge.
Also, a cardholder is still allowed to file a dispute even if the merchant’s location has been closed for business due to government prohibition or and regulation. Thus, even if the merchant is forced to close their office space, they’re still liable for potential chargebacks if they’re unable to issue refunds upon request.
Cardholders also have the right to file disputes if the merchant becomes insolvent and is unable to make good on credit vouchers or other substitutions offered. In that case, the acquirer could end up being liable for the disputes if the merchant does not have sufficient funds in reserve.
How Can Merchants & Acquirers Stop Chargebacks?
We have a variety of circumstances in which travel and entertainment merchants could be liable for a dispute, and others in which they can’t. Determining when one or the other applies hinges on one key idea: government prohibition.
Let’s assume an issuer files a Visa dispute using reason code 13.1. The key to stopping that dispute and recovering the funds is to prove that the merchant is willing to provide services, but unable to do so because of government action, according to the standards presented by Visa.
Again the merchant must first be able to provide a reasonable alternative like a credit voucher to compensate the cardholder. If so, the acquirer must provide proof that one or both of the following is true:
- An action taken by the government explicitly prohibits the merchant from offering the service due to COVID-19.
- An action taken by government negates the right to a refund, using an express reference to card network dispute rules.
This demands careful documentation of all merchant processes and procedures, as well as close monitoring of any new announcements from the government. While a case may seem airtight to the merchant, the issuer is the party who provides initial decisioning in a dispute.
When Buyers Panic, Merchants Lose.
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A Customer-First Stance is Best
These practices apply in the short term, but remember: as we mentioned in our previous blog post, these measures are only temporary. Now is a good time to start strategizing for the future and applying the lessons being learned right now.
One of the most important ideas to internalize here is the concept of active acceptance. You can take an in-depth approach, requiring customers to read and agree to your terms before checkout. This will create friction and potentially drive away customers, though. Instead, deploying active acceptance can be as simple as providing a checkbox at the time of booking, requiring customers to actively acknowledge their booking is nonrefundable.
Visa considers active acceptance a valid reason to reject a cardholder’s dispute. Generally, though, merchants should rely on a more comprehensive and customer-focused approach to prevent disputes.
Beyond standard chargeback mitigation practices, the COVID-19 crisis places extra significance on issuing prompt refunds. Merchants should try to understand the situation from a customer’s perspective; they’re apprehensive, with thousands of dollars stuck in limbo due to travel plans that may not materialize. The vast majority are not filing chargebacks maliciously. Instead, they’re doing so out of panic.
Providing quick refunds with responsive service and fast communication can alleviate the problem for most of these customers. Those experiencing trouble fulfilling refunds may try issuing rewards or bonuses for accepting future credits in place of a cash refund. This will be an effective method of resolving the problem, while also retaining customers.
Of course, if you’re unsure how best to proceed with your approach to chargeback mitigation, the experts at Chargebacks911® are happy to help. Click below and speak to one of our dedicated professionals today.
