For obvious reasons, the major credit card companies take fraud and excessive chargebacks very seriously, and companies like Visa and Mastercard have put forward thorough monitoring and tracking systems to try to prevent the losses associated with them. In October 2019, both companies made changes to their chargeback and fraud defense programs, and it’s important that merchants keep up on the details of those changes, as getting tied up in any of these programs can result in costly fines and burdensome assessments.
Updates to VISA Dispute and Fraud Monitoring
The first change is the nomenclature. VISA changed the name of the program from the Chargeback Monitoring Program to the Dispute Monitoring Program, and chargebacks are now referred to as disputes. The Visa Dispute Monitoring Program (VDMP) is designed to keep an eye on accounts whose chargeback rates get too high. As of October 1st, 2019, the new relevant rates will be 0.65%, 0.90%, and 1.80%, respectively, for the early-warning, standard, and excessive levels. Hard-counts of 75, 100, and 1,000 chargebacks will also result in enrollment at the same levels. Failure to work out the problems in a timely manner can result in enforcement actions of $50 fees on each and every chargeback, and assessments and reviews that can reach up to $25,000.
VISA’s Fraud Monitoring Program provides a similar function, tracking fraudulent transaction rates and utilizing the same percentage thresholds, with hard thresholds of $50,000, $75,000, and $250,000, respectively. Both of these programs offer early-warning notifications to give merchants the chance to plug their leaks prior to chargebacks or fraudulent transactions reaching the point where VISA feels the need to step in with remediation.
Updates to Mastercard Chargeback and Fraud Monitoring
Mastercard runs the Excessive Chargeback Program designed to monitor chargeback rates to minimize chargeback fraud and merchant issues. Under the ECP program, merchants exceeding a 1.0% chargeback to sales ratio, and who have 100 first-chargebacks in total in any given month are enrolled in the Chargeback Monitored Merchant program (CMM). Once the chargeback ratio hits 1.5% in consecutive months, the merchant is then escalated to the Excessive Chargeback Merchant (ECM) level. At the ECM level, Mastercard reserves the right to apply remedial fines as they see fit, although never exceeding the amount of the chargebacks incurred in the monitored timeframe.
As of October, Mastercard has also introduced a new program to help fight fraud called the Excessive Fraud Merchant Compliance Program, or EFM for short. To be enrolled in the EFM program, merchants must meet a number of criteria, including a minimum of 1,000 transactions, $50,000 in fraud chargebacks under specific reason codes, a high chargeback rate, and more. EFM merchants are subject to a schedule of significant fines based on how long they stay in the program, with the first fines being rolled out in March 2020. Those fines can reach as high as $100,000 for merchants that spend 19 or more months in EFM status, with smaller fines beginning at $500 at the two-month mark.
How to Avoid These Potentially Costly Programs
The best way merchants can avoid being lumped into one of these programs from either Visa or Mastercard is to simply avoid chargebacks altogether, but that isn’t realistic, especially for high-volume businesses. The next best thing merchants can do is to ensure they stay on top of every dispute that comes in, responding strongly with the relevant documentation and evidence necessary to fight back, and within the time frames set out by the card companies. BAMS merchants enjoy a full suite of tools designed to help ensure that they can do exactly that, including instant dispute notifications, online dispute management, cardholder authentication tools, and our partnership with Verifi, a leading chargeback defense network.
For more information on the BAMS chargeback defense program and how partnering with BAMS can ensure you’re fully prepared to steer clear of VISA and Mastercard’s chargeback and fraud programs.