Credit Card Processing Blog

Visa and MasterCard require both merchants and member banks to follow specific procedures for recovering and returning counterfeit cards or cards that are not used by the authorized cardholder. This post will detail MasterCard’s procedures.

Card recovery at the point-of-sale (POS). MasterCard requires that processing banks and their merchants recover a card, if possible by reasonable and peaceful means, when:

• The card issuer advises the merchant to recover the card in response to an authorization request or a Code 10 call.
• The Electronic Warning Bulletin file or an effective regional Warning Notice lists the account number.

After recovering a card, the merchant must notify its processor’s authorization center and receive instructions for returning the card. If mailing the card, the merchant should first cut the card in half through the magnetic stripe.

Returning recovered cards. The processor must follow these procedures when returning a recovered card to the issuer:

• If the merchant has not already done so, the processor must cut the card in half vertically through the magnetic stripe.
• The processor must forward the recovered card to the issuer within five calendar days of receiving the card along with the first copy (white) of the Interchange Card Recovery Form (ICA-6). The additional copies are file copies for the processor’s records. A recovered card must be returned to the security contact of the issuer.

Returning counterfeit cards.The processor or merchant must return counterfeit cards to the issuer by following the instructions provided by the authorization center. The following information identifies an issuer:

• The issuers bank identification number (BIN) embossed on the front of the card.
• The member ID imprinted in the Card Source Identification area on the back of the card.

MasterCard rewards for retained cards. The processor may pay the merchant reward for capturing a MasterCard card in accordance with local practices. The processor must follow these standards when paying a reward:

• Pay no less than $50 to the merchant capturing a card listed on the Electronic Warning Bulletin file or in the Warning Notice.
• Pay the merchant $100, if a merchant initiates an authorization call because of a suspicious transaction or captures a card not listed in the Electronic Warning Bulletin file or in the Warning Notice.
• Pay a reward to a financial institution for the capture of another issuer’s card if it is the processor’s practice to pay its tellers rewards for picking up its own cards. The amount of the reward should be the same amount paid for the capture of the processor’s own cards.
• Charge the issuer for reimbursement of the reward paid when each captured card is sent. The Fee Collection / 1740 message with an IPM message reason code equal to 7601 will settle the reward.

Reward Amounts. The processor should follow these guidelines for determining reward amounts.

The recovering bank may collect an administrative fee of $15 for expenses incurred in processing the captured card. The capturing member may add this fee to the amount of the reward reimbursement or collect the fee independently, using the Fee Collection / 1740 message.

Reimbursement of rewards. The following requirements should be followed when a reward is reimbursed:

• When returning the card to the issuer, the processor will obtain reimbursement for the reward paid and the $15 fee by processing the Fee Collection / 1740 message.
• If an processor returns a card to an issuer and a reward is not paid, the acquirer may collect a $15 fee by processing a Fee Collection / 1740 message record.
• Upon receipt of the Interchange Card Recovery Form (ICA-6), the issuer should match it to the Fee Collection / 1740 message record based on the acquirer member ID, account number, and recovery date comparisons.
• If an exempt member has an electronic reward payment processed, clearing receives the record by an information slip. The transaction is part of the Net Settlement System for settlement purposes.

Credit card industry regulations require merchants to ensure that cards used for payments at the point of sale (POS) are valid and that their customers are authorized to use them. It is also in the merchant’s own best interest to ensure that card transactions are genuine, because otherwise they will most likely result in costly chargebacks.

The following situations typically provide sufficient grounds for card recovery:

• Account number does not match the one stored in the card’s magnetic stripe. When a card is swiped through a POS terminal, the information stored in the magnetic stripe is “read” and compared to the information printed on the card. The procedures vary by terminal type, so that the magnetic stripe number can be displayed on the terminal or printed on the sales receipt, while other terminals may be programmed to check the numbers electronically. If the numbers don’t match, you will receive a “No Match” message. In such instances, you should make a Code 10 call.
• Account is listed in the Electronic Warning Bulletin or International Warning Notices.
• The four-digit truncated account number imprinted in the signature panel on the back of the card does not match the last four digits of the account number on the face of the card.
• If a photograph of the cardholder is present on the card, it does not match the person presenting the card.

If you have sufficient reasons to believe that your customer is committing fraud and that a card recovery is warranted, you should:

• Only attempt to recover the card if you can do so safely. Never take unnecessary risks.
• Tell the cardholder that you have been instructed to keep the card, and that he or she may call the card issuer for more information.
• Remain calm and courteous. If the cardholder behaves in a threatening manner, return the card immediately and complete the transaction.
• Once you have successfully recovered the card, call your processor and ask for further instructions.
• Cut the recovered card in half lengthwise, being careful not to damage the hologram, the embossed account number, or the magnetic stripe.
• Send the card pieces directly to your processor.

You should not attempt a card recovery if you feel threatened by the customer or feel otherwise uncomfortable to follow the procedure while the customer is present. If that is the case, you should complete the transaction and wait for the customer to leave the store. Then you should contact your processor’s voice authorization center and report the incident. Even though it is too late at this point to prevent a fraudulent transaction from taking place, the criminal will not be able to use the card in the future, and possibly at your store.

Credit card companies have made available to merchants cash rewards for recovering altered and counterfeit cards or for information that can lead to the arrest and conviction of any person involved in a counterfeit operation. These rewards vary and you should contact your processor for additional details.