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Chargebacks 101

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Late Presentment

Late Presentment Chargeback

Why Did I Get a Late Presentment Chargeback?

A late presentment chargeback can throw you for a loop. For one thing, it doesn’t start with a customer dispute. Rather, this type of chargeback comes directly from the issuer, who claims that you missed a deadline for submitting transactions for processing.

Contesting a late presentment chargeback is typically a bad idea. You need irrefutable evidence that a mistake was made. In some instances, trying to correct the mistake could leave you with an additional chargeback.

Fortunately, late presentment chargebacks are most often the result of an error on your end. That means they are almost 100% avoidable with a little vigilance on your part.

Late Presentment: Understanding the Process

Obviously, late presentment refers to missing a deadline. In this instance, the deadline to present credit card transactions for processing. Before we get too far into late presentment, it will be helpful to review the stages of credit card processing.

The diagram above is a simplified outline. Every credit card purchase from your business involves multiple entities, with more moving parts at play during different stages. Before you get paid, the transaction must go through four distinct stages:

Stage #1: Authorizing

You must request authorization prior to completing a transaction. This is to ensure the card hasn’t been reported lost or stolen, the cardholder’s account is in good standing, and there are sufficient funds or credit available to cover the transaction. If the authorization request is approved, the transaction can be completed, and the act of processing will advance to the next stage.

Stage #2: Batching

You later review that day’s sales, making sure each one was authorized and signed off on by the cardholder. After doing this, you “batch” all the sales together and submit them to the acquirer in one large group.

Stage #3: Clearing

After the acquirer receives the batch, each sale is routed to the appropriate issuing bank. Transactions are routed from the acquiring bank to the issuing bank, then back to the acquirer via the card networks.

Stage #4: Funding

Funding is the final stage in processing a credit card transaction. After the acquirer receives payment from the issuer, the funds (minus all the various interchange fees) get deposited in your account, and the cardholder is billed.

What Is Late Presentment?

Presentment occurs at stage two of the process outlined above when you submit transactions for clearing.

You have a limited time frame in which to present the transaction to the bank. Issuers and card networks want to be sure you submit transactions quickly so that processing and customer account billing happens in a timely manner.

There are specific reasons for this. The bank authorized the transaction based on the cardholder’s status at the time authorization was requested. If you wait days or weeks to present a transaction, the cardholder’s account status might change; they may no longer have the funds by the time you finally submit the transaction.

Also, there’s a good chance the cardholder won’t remember the transaction at all. That could lead to a customer dispute. The card networks impose strict deadlines for presentment to help prevent this. Submit too late, and the transaction will probably be returned…along with a late presentment chargeback.

Like most chargeback reason codes, late presentment is not as simple as it seems on the surface. Visa and Mastercard, for example, have different approaches, conditions, and timelines relating to late presentment chargebacks. So, let’s break down late presentment meanings by card brand.

Late Presentment Rules: Visa

Visa uses reason code 12.1 for late presentment chargebacks. According to Visa, any transaction not sent to within the timeframe required will be considered a late presentment, meaning you will be liable for the amount involved.

 Visa Presentment Timeframes

Visa Electron and ATM Within 5 calendar days of the transaction date*
Visa Prepaid Load Service (Visa ReadyLink) Within 2 calendar days of the transaction date
Merchandise Returns and Credits Within 5 calendar days of the transaction date
All Other Transactions Within 8 calendar days of the transaction date*

*Exceptions apply in various countries in the Asia-Pacific region. See the Visa Core Rules for more information.

So, what would keep a merchant from presenting a transaction within the right timeframe? They could have forgotten, but that seems unlikely to cause most late presentment reason code cases.

One of the most common mistakes involves submitting a transaction with the wrong account number. If you do this, it may result in a late presentment dispute.

Because the initial chargeback process takes so long, there’s little chance you’ll be able to resubmit within 120 days of the transaction. Not only would the original chargeback stand, you could also receive a late presentment chargeback from the resubmission.

Visa Representment Options

Representment options are quite limited for Visa late presentment chargebacks. If you failed to process the transaction in a timely fashion, the chargeback must be accepted. If the chargeback was a mistake, though, the acquirer can dispute the chargeback on your behalf by sharing the correct transaction date with the issuer.

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Late Presentment Rules: Mastercard

Mastercard uses reason code 4842 for late presentment chargebacks, but the conditions are considerably more complex. For a Mastercard late presentment chargeback to be valid, all the following conditions must apply:

  • The cardholder’s account must be permanently closed.
  • The issuer used good-faith efforts to collect the transaction amount from the cardholder.
  • The transaction was not presented within one of the stated time frames.

The timeframes themselves are even more complicated. The acquirer has a certain number of days after the transaction in which to present the transaction to the issuer. The exact timeframe can vary considerably, though, depending on the conditions of the situation. Extenuating circumstances apply if the transaction in question was:

  • Completed with electronically-recorded card information.
  • Completed with manually-recorded card information.
  • A payment transaction.
  • A contactless transit aggregated transaction.
Late Presentment

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 Mastercard Presentment Timeframes

All electronic card transactions Within 7 calendar days of the transaction date
Manually-recorded card transactions Within 30 calendar days of the transaction date**
Contactless transit aggregated transactions Within 14 calendar days of the transaction date

**For manually-recorded card transactions involving both a US-based merchant and payment card issued in the US region, the time limit for presentment is 14 calendar days from the transaction date.

This is still not an exhaustive list, though. An acqurier has a maximum of 30 calendar days from the Central Site Business Date to present a transaction if they were forced to delay presentment for any of the following reasons:

In addition, a standard payment transaction must be presented in clearing within one business day of the authorization date to avoid a late presentment chargeback.

Mastercard Representment Options

If a mistake was made and the Mastercard transaction actually was presented late, the merchant will need to accept the chargeback. However, if the chargeback was issued in error, there are representment options you can take advantage of:

  • An acquirer can re-present with documentation that proves the correct transaction date (if recorded incorrectly) and that the applicable clearing deadlines were met.
  • You can dispute a chargeback if the cardholder’s account wasn’t permanently closed after the chargeback was filed.
  • If the task of processing the transaction was delayed because of approved exceptions to the clearing deadlines, you can dispute the chargeback.

Prevention is Key

Prevention is essential because there are so few representment options available. Fortunately, by paying careful attention to detail and adhering to business best practices, you can easily avoid late presentment chargebacks.

According to Visa, the best way to avoid late presentment chargebacks is to send your completed and reviewed transactions to your processor quickly; ideally, the same day as the sale.

Unfortunately, not all chargebacks are so easy to prevent. Merchants tend to rely on reason codes, which seldom tell the whole story. That’s why Chargebacks911® created Intelligent Source Detection™, a proprietary system that can determine the true cause of chargebacks. Once you know the true source, you can deploy the right tools.

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FAQs

What is credit card presentment?

Presentment refers to the act of presenting a transaction to the bank for processing.

What is late presentment?

Presentment refers to the act of submitting your sales transactions for clearing. You have a limited amount of time to present the transaction before the transactions are considered late. These will result in a late presentment chargeback.

What does representment mean?

Representment is a process that allows you to literally “re-present” a transaction to the bank, along with compelling evidence, in the event of a chargeback.

Can I prevent late presentment chargebacks?

Yes. Most are the result of simple merchant errors. Double checking all transactions prior to batching can help eliminate these errors.


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