Credit Card Processing Blog

Discover’s ticket retrieval process is equivalent to what Visa calls copy requests: requests for information regarding a particular card transaction. These requests are typically initiated by cardholders who contact Discover to dispute or request clarification on a particular charge on their card accounts. Discover then contacts the merchant in writing and requests documentation regarding the transaction.

Once a request is received, the merchant has 20 business days to provide Discover with a copy of the sales receipt or a refund check. Discover can send the request by mail, email or by other electronic means. If the merchant does not respond within 20 business days, Discover may return the transaction to the merchant as a chargeback.

The sales receipt or a copy of it received by Discover is then sent to the cardholder for review or for identification of the card account number. Merchants can also provide a substitute transaction slip for some transactions, which needs to include the following information:

• The card account number.
• The cardholder name.
• The card expiration date.
• The transaction amount.
• The transaction date.
• The authorization code.
• The merchant name and location.
• A description of the merchandise / services.


For Mail Order / Telephone Order (MO / TO):

• The shipping address.


For transaction completed at self service terminals:

• The self service terminal locations code or city and state.


For transactions completed at an automated fuel dispenser:

• The service station identification number.
• The invoice number.

If any of the above items is missing, Discover can file a dispute, which can lead to a chargeback. A dispute can also be filed if the submitted copy of a sales receipt is illegible or incomplete. Such chargebacks are designated with code IC: “Requested Item Illegible Copy” and are equivalent to Visa’s Reason Code 60: “Requested Copy Illegible or Invalid.” Most of these chargebacks can be prevented by implementing the following simple measures:

• Do not reduce the size of the copies. All copies you make of transaction receipts should be the same size as the originals. Reduced size can produce images that are hard to read.
• Place your company’s logo where it will not obstruct the information. Make sure your company’s logo is printed on the sales receipt in a way that does not obstruct the transaction information.
• Change the printer’s ribbon regularly. Replacing the printer’s ribbon regularly will eliminate faded, hard-to-read sales receipts.
• Keep the top copy of the receipt. Keeping the top (white) copy of the sales receipt ensures better quality copies in the future. Give the colored copy to your customer.

For more on managing copy requests, review our previous article on the topic. Although it was written to address specifically Visa and MasterCard requests for information, the same general rules apply to Discover’s ticket retrievals.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Both Visa and MasterCard use special Reason Codes to designate chargebacks resulting when a card issuer receives a complaint from a cardholder stating that a merchant did not issue a refund when a purchased product was returned or services canceled, or a refund was issued but for a reduced amount, without proper disclosure. Visa uses Reason Code 85 and its MasterCard’s equivalent is 4860.

What causes these chargebacks? Chargeback Reason Codes 85 and 4860 may be caused because the merchant:

• Did not issue a credit.
• Issued the credit but did not deposit it with its processing bank in time for it to appear on the cardholder’s next statement.
• Did not issue a credit, because it does not accept returns, but did not properly disclose its return policy.

How to manage such chargebacks? The time frame to respond to Reason Codes 85 and 4860 is 120 days. Your response will depend on the particular transaction circumstances and the actions you have taken (or not) so far:

• Returned product or cancellation was not received. If you never received the returned merchandise or the service was not canceled, contact your processor immediately and explain the situation.
• Product was returned contrary to the disclosed policy. If the merchandise was returned not in the manner described in your return policy, provide your processor with documentation proving that the customer did agree with it and signed it. Keep in mind that, if your return policy is located on the back of the sales receipt, you will have to obtain your customer’s initials there, in addition to the signature on the front. When providing supporting evidence, you must send copies of both the front and the back of the receipt.
• Credit was issued. If you did issue a credit for the returned merchandise at issue, contact your processor and provide them with the date and amount of the credit.
• Credit is not yet issued. If you did not issue a credit for product that was returned according to your return policy, there is no remedy and you should accept the chargeback. Do not process the credit now, as the chargeback has already done that for you.

How to prevent chargeback Reason Codes 85 and 4860? Many of these chargebacks can be prevented by implementing the following best practices:

• Issue credits promptly and as agreed. If merchandise is returned according to your return policy, make sure to promptly issue a credit and to immediately notify your customer that it has been issued.
• Only issue credit to the card used in the sale transaction. Credit for returned merchandise should only be issued to the same card that was used in the original transaction. Ask your customers to retain the credit receipt until they see the credit posted on their accounts.
• Gift returns. If product was returned by a gift recipient and not by the cardholder, the credit to the gift recipient must be in the form of cash, check or a store credit. Be advised that, if the credit is to be issued to a bank card, it can only be issued to the one used in the transaction.
• Return policy disclosure. Make sure that your return policy is posted on the sales receipt. If not and until you do that, present an additional document (an invoice or contract) to your customer to sign. If the return policy is on the back of the receipt, make sure the customer initials it.
• No-return policy disclosure. If your organization does not accept returns, your policy should be clearly posted on the sales receipt and at checkout, for both virtual and physical stores.
• Obtain customer signature. Customer signature should always be obtained on your return policy; a verbal disclosure is not enough.

While it is not likely that you will ever be able to completely eliminate this type of chargebacks, developing a customer-friendly return policy will go a long way toward minimizing them. Customers expect that, if they are not satisfied with their purchase, a return will be accepted and a full refund issued. Otherwise, they will probably file a dispute with their credit card company. You will want to avoid such disputes, even if you believe you will win them, because customers are likely to broadcast them on the internet and damage your reputation. Customer disputes and resulting chargebacks are also closely monitored by processing banks that will promptly freeze your merchant account, if there is any uptick in such activities.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Whenever a cardholder does not recognize a particular transaction on her statement, she will typically call her card issuer and file a dispute. The issuer’s representative will ask questions to establish exactly what the cardholder is disputing: the transaction amount, or the validity of the entire transaction. The issuer may ask the cardholder to contact the merchant directly and try to work out the issue or may facilitate a conference call with the merchant and the cardholder. If a phone call cannot resolve the dispute, the issuer will request, on its cardholder’s behalf, that the merchant provide a copy of the transaction’s sales receipt as a proof of its validity.

The merchant typically has 30 days to provide it. The transaction receipt must provide the following information:

• Merchant name and location.
• Merchant online address (if applicable).
• Transaction date.
• Description of goods or services sold.
• Payment method used.
• Transaction type: purchase (sale) or credit.
• Authorization code.
• Transaction amount.
• Cardholder signature (if applicable).
• Return / refund policy (optional).

Merchants should respond to all transaction copy requests they receive in a timely manner. If you do not respond within the 30-day time frame you will lose the dispute, regardless of whether the transaction was valid or not.

Transaction copy requests are the first stage of the chargeback cycle and as such, you should keep them to a minimum.

Keeping copy requests to a minimum helps merchants lower their chargeback levels and achieve higher profitability. The following best practices will help you achieve this goal:

• Use the right billing descriptor. Billing descriptor is the way your company’s name appears on your customer’s credit card statement and we have written about it in detail in a separate article. Cardholders must be able to look at their statements and recognize transactions the participated in at your store. You will need to contact your merchant account provider and make sure that your billing descriptor is set up correctly.
• Make sure that your business name is legible on your sales receipts. You need to make sure that your company’s name, address and phone number are accurately and legibly printed on your transaction receipts. Your company’s information details should not obstruct the transaction details. For best results, you should keep the white copy of the sales receipts for you and give the customer the bottom one. Change the printer cartridges as soon as the ink begins to fade and the printer paper should be replaced as soon as the colored streak appears.
• Train your sales staff. Many transaction copy requests can be prevented if your sales staff is adequately trained on your payment processing procedures. Instruct your sales staff to:
  • Follow proper card acceptance procedures.
  • Review each transaction receipt for accuracy and completeness.
  • Ensure the transaction receipt is readable.
  • For card-present sales, give the cardholder the customer copy of the transaction receipt, and keep the original, signed copy.

    
    Staff should also understand that, in the event of a dispute, your store could lose both the merchandise and the transaction amount.

• Measure your copy request volume. Visa recommends in its “Rules for Visa Merchants” manual that “your monthly copy request volume should not exceed 0.16 percent of your total Visa sales.” You should aim to keep your copy request volume below that level for all of your credit card sales. To estimate this volume, you should divide the number of copy requests by the total credit card transactions minus returns and adjustments.

Typically, when a consumer contacts his or her credit card issuer to dispute a transaction, the bank first asks its cardholder to try and resolve the issue with the merchant. Some issuers, especially the larger ones, may assist you with your communications with the merchant. Often, bank representatives keep larger merchants’ customer service numbers readily available, so they can conference them in, when a cardholder calls with a dispute. When a dispute cannot be resolved, however, and if the issuer verifies that the complaint is not frivolous, a chargeback may be inevitable.

In order to initiate the chargeback process, the issuer will request that its cardholder provides the following types of documentation in support of his or her claim:

• Sales receipt. The card issuing bank is required by Visa and MasterCard rules to send to the processor the original or a legible photocopy of the actual sales receipt that was generated at the completion of the transaction. There are exceptions to this rule, however. For example, when the type of transaction allows the issuer to provide an electronic proof of the transaction or when the cardholder uses a personal identification number (PIN) to complete the transaction, instead of a signature.
• A written cardholder complaint (letter or form). Typically, the cardholder must produce a letter that provides specific information about his or her dispute of the transaction. Alternatively, the card issuer may provide an email message sent by the cardholder, instead of a written complaint generated by the cardholder. The written cardholder complaint certifies that the issuer has a relationship with the cardholder and that the message is a true, accurate, and complete message that the issuer received from the cardholder.
• A written complaint (letter, form, or email message) from a company or government agency representative on behalf of a corporate card cardholder for (1) non-fraudulent type of disputes and (2) no-cardholder-authorization types of chargebacks when the authorized cardholder no longer is employed by the company or government agency and the issuer has closed the account. This document provides specific information about the dispute of the transaction, including the cardholder’s name, account number, transaction date, transaction amount, disputed amount, and a statement that the complaint was written by a company or government agency representative on behalf of a corporate card cardholder.
• An Expedited Billing Dispute Resolution Process Form for non-fraudulent type disputes. This form is completed by the issuer’s customer service representative while on the telephone with the cardholder or a company or government agency representative on behalf of a corporate card cardholder. The Expedited Billing Dispute Resolution Process Form may be provided in place of a written complaint generated by or on behalf of the cardholder and may be used only for non-fraud-related chargebacks. The customer service representative signs the form or electronically prints his or her name on the form. A cardholder signature in documentation supporting these chargebacks is not required.
• Progressive cardholder documentation. This is a cardholder complaint (letter or form), created as described in the three preceding bullets of this section, that is sent as supporting documentation with an arbitration chargeback. The progressive cardholder documentation must specifically address new information or a merchant’s rebuttal that was provided with a second presentment. The progressive cardholder documentation must be dated after the issuer received the second presentment documentation.
• For chip-read transactions, the transaction certificate and related data.
• Any other documentation that may be appropriate to support a particular chargeback, second presentment, or arbitration chargeback, such as Electronic Data Capture (EDC) log, magnetic stripe-reading (MSR) terminal or hybrid terminal printer certification, merchant rebuttal, or the authorization log.

Travel agencies are infamous in the payment card industry for producing some of the highest levels of credit card fraud, especially in card-not-present transactions. So infamous in fact, that most U.S.-based payment processor will not provide merchant services to new travel agencies and will go into great lengths to ensure that applicants with processing history can actually be trusted to implement adequate risk management procedures to minimize fraud, customer disputes and chargebacks.

What exactly makes travel agencies so risky and unpalatable to processors? Well, the question is more like whether there is a high-risk transaction characteristic that is missing from their sales. Travel operations tend to involve high-ticket, high-volume sales, often exclusively conducted in a card-not-present environment. These are the classical high-risk features, but travel agencies go beyond that. In most of their transactions the service is provided weeks or months after the sales date, which leaves plenty of time for even perfectly legitimate sales to deteriorate into chargebacks. So if you bought a cruise package for the summer, but a family emergency prevented the trip, you would have to cancel the transaction. Yes, you would be allowed to do that, but you would have to pay a cancellation fee. True, the cancellation fee was prominently featured in the contract that you signed, but this doesn’t make it any more enjoyable. You would still go ahead and honor your contractual obligation, but many others would do their best to avoid it, including filing a dispute with their card issuer. And if legitimate transactions can be a source of disputes, what about the fraudulent ones?

Yes, the high levels of fraudulent transactions have not done much to improve the status of travel agencies as one of the highest risk credit card processing types of businesses in the U.S. Yet, many organizations have managed to develop risk management systems that have reduced their risk exposure and have improved their card processing credentials. Crucially, the successful travel agencies have trained their staff in the proper application of these card acceptance best practices on a consistent basis. The following procedures should be taken into consideration when developing your own set of best practices:

• Set aside large-value bookings for fraud review. Large-value transactions may increase your exposure to fraud and customer disputes. A careful review of such transactions before they are settled can mitigate risk and minimize potential fraud-related losses. For best results contact the cardholders involved in such transactions to verify the booking.
• Track key fraud characteristics. Track known fraud transactions and identify all key characteristics in these bookings. Then store the information in a database that you can use to make risk assessment. The following characteristics should be included:
  • Passenger name, address and telephone number.
  • Cardholder name, address and telephone number.
  • Email addresses, Internet Protocol (IP) addresses and Internet Service Providers (ISP).
  • Transaction times, amounts, airlines, classes of service and travel itineraries.
• Screen high-risk bookings. Screening high-risk bookings can help you detect and prevent fraud before it happens. Make sure that you screen bookings with the following characteristics:
  • Passenger name is different from cardholder name.
  • First or business class tickets.
  • Electronic tickets or tickets not delivered to the billing address.
  • Date of travel is less than six days after the date of purchase.