Fraud Full Recourse ProgramOne Way That Amex Controls Fraud in Their Ecosystem

How Does the Fraud Full Recourse Program Impact Merchants?

American Express performs two key functions at once.

Unlike Visa and Mastercard, who operate solely as card networks, Amex works as both a card network and an issuing bank. That means they have a very intimate interest in protecting the integrity of the Amex ecosystem. At the end of the day, that’s the primary purpose of the Fraud Full Recourse Program.

The FFR program helps flag irresponsible merchant practices, keep cardholders safe, and protect the American Express brand. In today’s piece, we’re going to explore how the program works, the ramifications for merchants, and how to avoid getting flagged for inclusion.

What is the Fraud Full Recourse Program?

Fraud Full Recourse

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The Fraud Full Recourse program, or FFR, is a compliance program administered by American Express for the purpose of controlling merchant chargeback issuances. The program lets Amex expedite chargebacks filed using a “fraud” reason code, and to refuse merchants the right to request a reversal.

Let’s say one of your customers calls up Amex to dispute a charge. The cardholder claims that the purchase was not authorized; in other words, it was fraud.

Now, you disagree with the cardholder; you think the charge was valid, and that the chargeback never should’ve been filed. Under normal circumstances, you could respond with additional documentation to try and get Amex to reverse the chargeback. This is called represenment.

If you’re in the Fraud Full Recourse program, however, It means that you exceeded Amex’s limit for what’s considered an “acceptable” number of fraudulent transactions. As a result, Amex has taken away your right to submit a response to chargebacks with a “fraud” reason code. If they assign you liability for a fraud claim, you have no choice in the matter.

This is basically Amex’s version of a fraud monitoring program, like the Visa Fraud Monitoring Program or the Mastercard Excessive Fraud Merchant program.

Why Did I Get Added to the Fraud Full Recourse Program?

Like I alluded to a second ago, Amex put you in the Fraud Full Recourse program because of perceived fraud risk. It’s a bit more complicated than just processing too many “bad” transactions, though.

You have to meet a few criteria to be put in the FFR program. One of the following conditions has to apply:

We should point out that the FFR program does not apply globally. Specifically, the FFR applies to merchants operating in the following countries:

• Argentina
• Australia
• Belgium
• Canada
• Denmark
• Finland
• France
• Iceland
• India
• Italy
• Luxembourg
• Mexico
• Netherlands
• New Zealand
• Norway
• Singapore
• Spain
• Sweden
• Taiwan
• United Kingdom
• United States
• Hong Kong (Special Administrative Region of PRC)

That said, Amex specifies that the reasons outlined above are “not exhaustive.” They reserve the right to add merchants to the FFR at their discretion for other reasons. Being added to the program can happen when you first sign up with Amex, or at any other time. Amex will provide you with a notice if you’ve been added.

How to Calculate Your Amex Chargeback Rate

Like we mentioned above, Amex uses your fraud rate to figure out whether you’re compliant with allowable fraud limits. That’s why it’s important that you keep up-to-date information about the number of chargeback you get with a “fraud” reason code.

Amex calculates your fraud rate in the same way as Visa. You simply divide the value of your total monthly sales volume by the dollar value of all chargebacks issued during the same month.

What Does This Mean?

In short: American Express is watching you.

If you get added to the Fraud Full Recourse program, Amex will limit your options for responding to chargebacks. If you get hit with a fraud-related chargeback that you believe was invalid, but you’ve already been added to the program... there’s nothing you can really do about it.

If you’re in the FFR, you can still submit responses to non-fraud chargebacks. But, you have no right to respond to fraud chargebacks. This means you could lose thousands of dollars each month to invalid chargebacks, but you’d have no recourse to try and recover your money.

The program will apply to all fraud-related cardholder disputes including, “including disputed Transactions that precede the application date of the program.” So, you may be restricted from responding to a chargeback once you’re in the program, even if it’s in response to a transaction that took place before you entered the FFR.

How Can I Get Out of the FFR?

Amex rules are a bit vague on this point. In their Merchant Regulations, Amex says that a merchant may stay in the program for “up to one (1) year.” But, it’s not specified whether that period can be extended due to continued lack of compliance.

In general, we can say that inclusion in — and removal from — the Fraud Full Recourse program is at Amex’s discretion. While in the program, you’ll be expected to dedicate substantial effort and resources to get your fraud rate under that 0.9% threshold as quickly as possible. And, if you’re not able to bring your fraud rate within a compliant range quick enough, there’s a decent chance you may be disqualified from the Amex program entirely.

If you’re disqualified, you’d be barred from accepting Amex cards entirely. You could even lose your processing account, as your acquirer would regard you as too much of a liability. This could destroy your business.

How to Avoid the Fraud Full Recourse Program

The best way to avoid the Fraud Full Recourse program is to prevent fraud from happening in the first place. This calls for a comprehensive, multilayer approach.

Fraud is not a monolith. Scammers are constantly developing new tactics, or finding new vulnerabilities in widely used tech. You’ve gotta prioritize fraud detection; otherwise, a small problem could snowball out of control before you ever realize it.

I suggest that you:

By taking a multilayer approach, educating yourself, and seeking professional help when needed, you can better protect your business from the impact of the Fraud Full Recourse program.

Maybe you have additional questions about the FFR? Or, about getting our fraud exposure under control? Not to worry — we’ve got the info you need. Click below and find out how to lower your risk today.