Effective April 15, 2018, there is a new protocol to dispute Visa chargebacks and high risk merchant processors should particularly take note. It is common knowledge that many high risk industries – tech support, online dating, travel or anything subscription billing-related – are labeled that way because of a typically high rate of chargebacks.
Visa’s new chargeback process is now two-pronged: Allocation, or the assignment of liability; and collaboration, where the focus is on communication between all parties and finding resolution. For the purposes of this piece, the focus will be on the allocation system.
Why Visa is amending its chargeback dispute process
Mostly, Visa is trying to streamline the chargeback process to reduce the considerable amount of time that it takes to settle disputes (sometimes, due to the back-and-forth nature, chargeback disputes can go as long as 180 days).
- Under the Allocation dispute model, Visa is aiming to halve that amount of time, using 30 days maximum for a dispute response and another 30 days for a pre-arbitration response, then 10 days for the acquirer’s arbitration response.
- The Collaboration model is similar to the legacy model that was just amended: The issuer, acting on behalf of the consumer files the dispute with the acquirer (acting on behalf the merchant), which has 30 days to respond. The issuer then has 30 days to decide on pre-arbitration, followed by a 30-day response time for the acquirer. The issuer then has 10 days to bring the dispute to arbitration, followed by a ruling from Visa.
One important fact to consider: Though Visa hasn’t announced an ‘effective’ date, it has indicated the aforementioned 30-day response windows will be reduced to 20 days. Thus, it is good practice for high risk merchant processors, merchants and all parties involved to act thoroughly and quickly.
The allocation process: Where Visa assigns liability
- Determining validity of the dispute: The Visa Claims Resolution system will examine all available information within the dispute and, through automation, will either reject the chargeback claim or decide, based on the information it has, to go forward with the dispute. In this step alone, Visa is hoping to reduce chargeback disputes by 14 percent.
- Pre-arbitration: Should Visa determine the dispute go forward, the acquirer (acting on behalf of the merchant) now has 30 days to respond, deciding to either accept the chargeback or continue to dispute it through pre-arbitration.
- Issuer responds to pre-arbitration: At this stage, the credit card issuer has 30 days to either accept or deny the acquiring bank’s motion for arbitration. In an acceptance, the issuer acknowledges the acquirer/merchant is not liable for the chargeback.
- Issuer, acquirer go to arbitration: In a denial, the acquirer has 10 days to decide whether to escalate the dispute to arbitration.
- Visa issues final ruling: The issuer and acquirer await Visa’s resolution.
How allocation process affects high risk merchant processors
With the new Visa Claims Resolution, the overall goal is to reduce the time it takes to settle chargeback disputes. Visa’s allocation system is expected to support that goal by reducing the number of claims that reach arbitration by deciding straightaway on the validity of the chargeback claim. Thus, high risk merchant processors need to collaborate with their merchant and acquiring banking partners to gather all supporting information, enabling the merchant to present the best case.
Why Instabill cares about chargebacks
A quick scan of the blog topics on our website reveals quite a few articles on chargebacks, as many as two or three per month. We are a high risk merchant processor, not a chargeback/fraud mitigation firm, though we feel we offer valuable guidance and advice on chargeback prevention best practices and policies.
That our network of merchants consistently, seamlessly processes payments is of the utmost importance to us. When they do so, everybody wins. Out merchant account experts are always up for a conversation about how we can get you processing payments online and keep you processing. We encourage merchants to contact us at 1-800-530-2444 to discuss our solutions for high risk merchants.
What is your strategy for preventing chargebacks? Leave us a comment below.