Merchants are beginning to fight back, primarily through Chargeback Companies and lawsuits against the Cardholders, Issuing banks and even the Visa and MasterCard branded networks. One such lawsuit claims that “major credit card companies and the nation’s largest banks conspired to shift liability for fraudulent credit card transactions in the U.S. to merchants. The complaint claims that the move to cards that include electronic chips designed to be more secure—so-called EMV chips—has been plagued by technical glitches and used as cover to illegally shift fraud-protection costs.”

1. A Guideline
of Visa
Chargeback
Policy
Changes
Chargeback Expertz

2. Introduction
Every Merchant is talking about Chargebacks today. It’s the
latest hot topic of late and for good reasons. According to a
recent report by First Annapolis Consulting, chargebacks for
card-present transactions increased 50% following the
October 1 EMV liability shift. While this took merchants by
surprise, it did not surprise issuers who, until the October 2015
liability shift for chip cards processed at card-present non-
chip terminals, were absorbing the cost of fraud for
counterfeit cards. Issuing Banks and Financial Institutes are
allowed to chargeback and/or pass back the fraud to the
merchants who were not processing chip cards.

3. This last point is important, as the data shows
that there are two drivers of the high
chargebacks –
• According to Merchant Stronghold Merchant Services, hackers and criminals
are avoiding businesses that are processing chip cards and merchants
processing mag stripe only are bearing the brunt of chargebacks. For
example, a small gym chain in south Florida was hit with $10,000 in
chargebacks from October 2015 through March 2016; in the same period in
the prior year they had just $89 in chargebacks.
• A new trend has been created, dubbed “friendly fraud” or in simple words
“online shoplifter”, when the cardholder disputes a charge knowing that
the merchant did not read the chip on the card. Cardholders disputes a
charge with an intent to miss use the merchant’s terms and conditions and
policies. Friendly fraud is especially difficult to detect and stop because it
essentially pits a cardholder’s word against the merchant and bank,
according to Apoorv Joshi ChargebackSecurity.com.

4. Merchants fight back
Merchants are beginning to fight
back, primarily through Chargeback
Companies and lawsuits against the
Cardholders, Issuing banks and even
the Visa and MasterCard branded
networks. One such lawsuit claims
that “major credit card companies
and the nation’s largest banks
conspired to shift liability for
fraudulent credit card transactions in
the U.S. to merchants. The complaint
claims that the move to cards that
include electronic chips designed to
be more secure—so-called EMV
chips—has been plagued by
technical glitches and used as cover
to illegally shift fraud-protection
costs.”

5. Visa chargeback changes
• Visa went first, announcing several
merchant-friendly changes. Visa also laid
out two major changes to chargebacks.
The goal was to reign in the friendly fraud
and the volume of chargebacks merchants
have to deal with. Beginning July 22, 2016,
chargebacks for counterfeit fraud for
transactions under $25 will be blocked –
meaning issuers will have the liability for this
fraud and have to credit the Cardholder.
This is a temporary change though that is
said to expire in April 2018.

6. Visa chargeback changes
Another change is that the
merchant is now only liable for the
first ten chargebacks on any given
card, as of October 2016. After that,
the issuer takes responsibility for
fraud. This is an interesting one. This is
to limit serial chargebacks abusers of
the whole payment process. Visa
estimates these last two changes will
cause merchants to see up to 40
percent fewer counterfeit
chargebacks and a 15 percent
reduction in U.S. counterfeit fraud
dollars being charged back each
year.

7. Visa chargeback changes
This was not it, Visa’s announced changes to its
chargeback policy, limiting issuers to
chargebacks over $25, and no more than 10
per account!
American Express likewise followed suit in
making similar changes to its chargeback
policies. Similarly, MasterCard announced
policy changes too. MasterCard also added
that “The MasterCard network system will now
prevent invalid chargebacks for fraud
occurring at ATMs and automated fuel
dispensers where liability shifts do not go into
effect until October 2016 and October 2017,
respectively.”

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