How to Manage Chargebacks Issued when Ordered Goods Are not Received

How to Manage Chargebacks Issued when Ordered Goods Are not Received

In previous articles I’ve reviewed five groups of Visa chargebacks, which are categorized based on their underlying causes: non-receipt of information, fraud, authorization errors, processing errors and cancelled or returned merchandise. Today I will examine the last group of Visa chargebacks, which are issued when a customer does not receive the ordered (and paid for) goods and services. I think it should be obvious why such a thing might cause problems.

Visa maintains two separate reason codes which make up into this chargeback category:

  • Reason Code 30: Services Not Provided or Merchandise Not Received.
  • Reason Code 90: Services Not Rendered — ATM or Visa TravelMoney Program Transactions.

Today I will review the immediate causes for each of these reason codes and will offer suggestions on the actions you can take to manage them and prevent them from recurring in the future. Let’s get started.

Reason Code 30: Services Not Provided or Merchandise Not Received

This reason code is issued when a card issuer receives a claim from a cardholder that:

  • Merchandise or services she had ordered were not received or
  • The cardholder had cancelled the order as a result of not receiving the merchandise or services by the expected delivery date (or the merchandise was unavailable for pick-up).

1. Most common causes for Reason Code 30. The immediate cause for this chargeback could be that the merchant:

  • Did not provide the services.
  • Did not send the merchandise.
  • Billed for the transaction before shipping the merchandise.
  • Did not send the merchandise by the agreed-upon delivery date.
  • Did not make the merchandise available for pick-up.

2. Reason Code 30 rights and limitations. All of the following conditions apply to this reason code:

  • The chargeback amount is limited to the amount of the services or goods that are not received and may include:
    • Any shipping and handling fee that may be charged for an item that was not received.
    • Any convenience fee or surcharge in connection with the disputed transaction.
  • Before a Reason Code 30 can be initiated, the cardholder must have attempted to resolve the dispute with the merchant and is required to have stated to the issuer that she had done so.
  • For disputes involving merchandise:
    • If the item was received after the agreed-upon delivery date, the cardholder is required to attempt to return it, before a chargeback can be initiated.
    • If the item was returned due to late delivery, the issuer is required to wait at least 10 calendar days from the date of return (or attempted return) before initiating a chargeback.
  • A chargeback is invalid for the cash-back portion of a cash-back transaction.

3. Reason Code 30 processing requirements. The time limit for Reason Code 30 is 120 calendar days from one of the following dates:

  • When the transaction was posted.
  • The specified delivery date, if the merchant had agreed to provide services or merchandise after the transaction was posted.
  • 30 calendar days from the posting date, if no delivery date was specified.
  • When the cardholder received the item, if it was not delivered by the agreed-upon time.

4. Managing Reason Code 30 chargebacks. Your actions in response to this reason code will be determined by the chargeback’s immediate cause, as shown in the table below:

If: Then:
The merchandise was delivered by the agreed-upon delivery date. Send evidence of the delivery to your acquirer, such as a delivery receipt signed by the cardholder or a carrier’s delivery confirmation. If the merchandise was downloadable software, provide evidence that it was downloaded to or received by the cardholder.
No delivery date was specified and the issuer initiated a chargeback less than 15 days from the transaction date. Send a copy of the transaction receipt to your acquirer showing that 15 days had not yet elapsed. Make it a point of stating the expected delivery date to avoid such issues in the first place.
The specified delivery date has not yet passed. Return the chargeback to your acquirer with a copy of the documentation showing the expected delivery date. Do not deposit sales receipts until the product is shipped, except for custom-made merchandise where you can do so, as long as you notify the cardholder at the time of the transaction.
The item was shipped after the specified delivery date. Provide your acquirer with the dates of shipment and expected arrival, or with proof of delivery.
The contracted services were rendered. Provide your acquirer with the date the services were completed and any evidence available indicating that the customer acknowledged receipt.
The merchandise was available for pick-up. Provide the following information to your acquirer, as applicable:

  • The merchandise was available for pick up,
  • The chargeback was processed less than 15 days from the transaction date and no pick-up date was specified, and
  • The specified pick-up date had not yet passed, as noted on the invoice.

5. Preventing chargeback Reason Codes 30. As with all other chargebacks, your objective should be to deal with the root causes of Reason Code 30, rather than limiting the damage afterwards. Here are a couple of specific suggestions:

If: Then:
Delivery of the item will be delayed. Notify your customer in writing of the delay and the expected new delivery date. Give the customer the option of proceeding with the transaction or cancelling it.
You are shipping an item without requesting proof of delivery. Consider the costs and benefits of doing so, in relation to the value of the item you ship. Proof of delivery or pick-up will allow you to return the chargeback if the customer claims the product was not received.

There will always be customers who will attempt to game the system by claiming to have not received an order, which was actually delivered to them. There is absolutely nothing you can do to change that — it is a fact of life. However, what you can and should be doing is to focus on what you can control. If you follow my recommendations and respond quickly every time you receive a Reason Code 30, you will be helping your acquirer resolve the dispute, whether it was filed in good faith or not.

Reason Code 90: Services Not Rendered — ATM or Visa TravelMoney Program Transactions

As the name makes it explicit, this code is used when a cardholder participated in a transaction, but did not receive, or received only a portion of, the cash or load transaction value.

1. Most common causes for Reason Code 90. There can be only two causes for Reason Code 90: a cardholder participated in the transaction at issue, but did not receive the cash or load transaction value or received a partial amount.

The time limit for Reason Code 90 is 45 calendar days from the transaction processing date.

2. Reason Code 90 rights and limitations. The chargeback amount is limited to:

  • The amount that was not received.
  • For Canada Domestic Transactions, transactions over CAD $10 (this only applies to members that operate in the CAN region).

3. Reason Code 90 invalid chargebacks. This type of chargeback is invalid when:

  • The cardholder states that the transaction was fraudulent or
  • The transaction is posted twice.

4. Managing Reason Code 90 chargebacks. Here is what you should be doing in response to this reason code:

If: Then:
Credit or reversal was processed. Inform your acquirer — no documentation is needed.
Credit or reversal was not processed. Accept the chargeback, but do not process a credit at this time, as the chargeback has already done that for you.

Be advised that, if a chargeback is issued for a transaction that was in fact processed correctly and the cardholder did receive the full amount of the cash or load transaction, you would not be seeing the chargeback, as your acquirer would have dealt with it without your help. Furthermore, you would not be seeing chargebacks, for which the issuer did not meet the applicable conditions, for example chargebacks that were issued more than 45 calendar days from the transaction processing date.

5. Preventing chargeback Reason Codes 90. As these chargebacks can only take place at a self-service terminal, the only thing you need to do is to ensure that your terminals are working properly. As long as that is the case, you will be doing just fine. Yes, even the best maintained terminal can malfunction or go down, but you can’t do much about that.

Visa has established the Dispute Monitoring Program to ensure compliance with its fraud chargeback rules and Reason Code 90 is one of the five reason codes this program monitors. Visa monitoring activities include:

  • Identifying accounts that are placed on the exception file and those that are not.
  • Identifying accounts where any subsequent transactions are approved.

The objective is that, should an issuer process an excessive number of disputes that do not meet the conditions of the chargeback, the issuer will be placed into the dispute monitoring program and Visa may assess non-compliance fees where appropriate. The point is to minimize invalid chargebacks.

Image credit: Flickr / Josh Kenzer (changes were made to the original image).

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