How to Manage Chargebacks Resulting from Multiple Fraudulent Transactions

Visa uses chargeback reason code 57 to designate chargebacks caused by multiple credit card transactions posted by a merchant on a single credit card account within a short period of time. MasterCard does not have an equivalent reason code.

Reason code 57 is issued when the card issuer receives a written claim from a cardholder, acknowledging participation in at least one credit card transaction at the merchant but disputing participation in the remaining transactions. The cardholder also states that the card was in his or her possession at the time of the disputed transactions.

What causes these chargebacks? Reason code 57 chargebacks typically occur when the merchant fails to void multiple transactions or processes transactions fraudulently. Code 57 only applies to card-present transactions and does not apply to e-commerce or MO / TO transactions.

How to manage this type of chargebacks? When you receive a reason code 57 chargeback, your response will depend on your particular circumstances. For example:

• You have already processed a credit for the disputed transaction. A possible solution, if you have already processed the appropriate credit to your customer’s card account, is to send to your processing bank evidence of the credit. Even if you do not have any documentation to prove that credits were issued, give your processor information on the credit transaction’s date and amount. They should be able to locate the transaction within their system’s history.
• The cardholder actually participated in multiple transactions. A possible remedy in cases where your customer actually participated in more than one valid transaction is to provide your processor with supporting evidence, such as:
  • Sales receipts.
  • Shipping invoice or delivery receipts.
  • Description of merchandise or service purchased.
• Credit was not processed on the disputed transaction. If you have not processed the credit, there is nothing you can and you should accept the chargeback. Do not process a credit now as the chargeback has already performed this function.

How to prevent chargeback reason codes 57? There are two major reasons for this type of chargeback — processing errors and fraud — and each should be addressed separately.

Above all, your payment processing system should be designed to recognize and warn you whenever a duplicate transaction is detected. You should review each batch of paper sales receipts prior to deposit to ensure that only bank copies – and not merchant copies – are included. If transactions are sent electronically for processing, make sure that each batch is sent only once and has a separate batch number.

Fraud, however, can be much more challenging to combat. We have discussed various fraud prevention strategies at length in other posts and encourage you to review them. There is no substitute for vigilance and management should investigate all potentially fraudulent transaction activities, both external and from within your organization. These types of chargebacks can have very serious consequences for your business. Whenever you receive a reason code 57, your goal should be to discover the root cause of the issue so that remedial actions can be applied.

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