BIN Sponsorship - Issuing Dispute Procedure for Program Managers

I. INTRODUCTION

The purpose of this document is to introduce dispute processes and procedures in Paynetics to Program Managers. The document provides some basic guidelines on the dispute cycles and how to work with disputed transaction.

Disputes may arise for many reasons, primary among which are customer dissatisfaction, fraud, processing errors, etc. When a transaction is disputed, both the Issuing and the Acquiring banks operate according to clearly defined and well-established procedures from card schemes Visa and Mastercard to resolve the dispute.

II. DISPUTE PHASES

1. WHAT IS A CHARGEBACK?

A chargeback (CHB) is a transaction that a card issuer returns to an acquirer as a financial liability and which, in turn, an acquirer may return to a Merchant. In essence, it reverses a sales transaction.

1.1 WHY DOES CHARGEBACKS OCCUR?

Each chargeback has a specific code which denotes the reason it was issued. The reasons for chargebacks can be due to errors made by the merchants in the submission of credit card transactions, non-authorized (fraud) transactions and Cardholder disputes. When some of these issues occur, the cardholder must contact his Program Manager /PM/.

The most common reasons for a chargeback are:

• When the cardholder states that he did not authorize or participate in a transaction, or it is recognized as a fraudulent transaction

• When the cardholder cannot recognize the transaction in his statement, such as billed as, amount or Merchant name.

• When the service is not rendered, or merchandise has not been delivered

• When the merchandise is defective or not as described

• When the service has not been cancelled after cardholder notification

• When Refund has not been processed after Merchant's commitment to do so

• When the Merchant refuses to allow the Cardholder to withdraw available balances from his investment account

1.2 CHARGEBACK TIME FRAME

From administrative point of view, the main interaction in a chargeback is between a Card Issuer-Bank and an Acquirer-Bank. The Card issuer sends the chargeback to the acquirer, which may or may not need to involve the merchant who submitted the original transaction.

This processing cycle does not release merchants from taking actions to remedy and prevent chargebacks.

2. WHAT IS PRE-ARBITRATION/ ARBITRATION?

Pre-Arbitration is the second chargeback phase in VISA and Mastercard dispute cycle. If the cardholder and the Card Issuer respectively believe that the Representment does not remedy the chargeback, and still there is a dispute rights, there are 2 options after the Representment:

• To make a pre-arbitration attempt

• To file direct Arbitration Case

Pre-Arbitration is not causing financial movement of funds and by its form, it is a notification letter.

By sending a Pre-arbitration, the Issuing bank makes another attempt to resolve the dispute with the acquiring bank. If new documentation or information has been provided to the opposing member – the pre-arbitration stage is mandatory, because such cannot be provided when Arbitration case is filed.

3. DISPUTE CYCLES

VISA and Mastercard chargeback flow is the following: the Issuer always files a Dispute and the Acquirer can reply with Representment response (decline the chargeback).

1. Acquirer presents First presentment (Presentment). First presentment is a clearing record that an Acquirer presents to an Issuer.

2. Issuer initiates Chargeback and the financial transaction is then returned to the Acquirer. The merchant is debited with the amount of the disputed transaction.- approx. SLA 120 days from the transaction date

3. Representment - Clearing Record that the Acquirer presents to the Issuer. The merchant is credited with disputed amount. – SLA 30-45 days from chargeback date

4. Issuer initiates Pre-Arbitration, non - financial message. – SLA 30 days from Representment date

5. Acquirer initiates Pre-Arbitration response: SLA 15-30 days from Pre-Arbitration date

   • If the Acquirer accepts Pre-Arbitration from Issuer, Visa/Mastercard performs debiting of the Acquirer. The merchant is debited with the amount of the disputed transaction.

   • If the Acquirer declines Pre-Arbitration from Issuer, Visa/Mastercard does not perform any funds movement.

   • If the Acquirer takes no action, Visa/Mastercard performs debiting of the Acquirer. The merchant is debited with the amount of the disputed transaction.

6. Issuer has an option to file an Arbitration case for the Dispute. – SLA 7-10 days from Pre-Arb response date

This is a process where Visa/Mastercard determines financial liability between both Members for disputed transactions who have completed all Dispute cycle. The Visa/Mastercard Arbitration committee are reviewing all documents very deeply and take the final ruling .

The Losing party is charged by Visa/Mastercard with an extra administrative fees in addition to the disputed amount:

The Filing Member has the rights to withdraw its Arbitration request within 7-10 calendar days from the Visa/Mastercard acknowledgement date and in this case, to him will be assigned the financial liability for the disputed transaction. If a case is withdrawn, Visa/Mastercard will debit or credit based on the Member accepting responsibility.

Visa defines four Dispute categories: Fraud, Authorization, Processing errors, Consumer Disputes. Each category has several Dispute conditions. Here is a list of all Dispute reason codes which are defined by the Issuer bank when Chargeback (Dispute) is initiated:

Dispute conditions under four VCR categories

There are four Chargeback categories in Mastercard:

• Authorization related Chargebacks 4808 (former reason codes: 4808, 4807, 4812)

• Cardholder disputes 4853 (former reason codes: 4853, 4841, 4855,4860)

• Fraud related chargebacks 4837, 4840, 4870, 4871

• Point-of-Interaction Error chargeback 4834 (former reason codes: 4834, 4831, 4242, 4846, 4859).

III.    DISPUTE PROCESS FLOW BY PAYNETICS

1. Submitting a claim from cardholder

   Customer Request for dispute should contain the obligatory requisites, specified in the Request according to the form including documents, supporting the Request. /Cardholder Dispute Resolution Form/

   The Dispute is written objection for disagreement with a completed transaction, reflected in the statement, shall be submitted by the Client by the end of the current month following the month for which the statement is issue period.

   Customer who wants to submit request for dispute of transaction should contact its Program Manager /PM/.

   PM should raise a Jira ticket to Paynetics via Jira Service Desk, using the respective category selecting the sub-category for Dispute.

   PM should attach to the Jira ticket the filled in Dispute Resolution form, along with any supporting documents provided by the cardholder. If the PM has further knowledge of the case, this should be shared also via the ticket.

   

   

2.    Handling client request for dispute (chargeback)

2.1 Verifying of client request for dispute (chargeback)

Paynetics Chargeback specialist must review the Dispute Resolution form and all information and documents provided by PM in Jira ticket.

Chargeback specialist must provide feedback to PM in Jira ticket for accepting the chargeback (dispute) request – SLA 2 business days.

In this feedback Chargeback specialist can request more information or more documentation related to client requests for dispute (chargeback).

More information and documents are required and determinate by Card Scheme rules for issuing a chargeback for a particular reason.

2.2 Sending feedback to PM for chargeback – SLA 4 business days

Within 4 business days (from the above SLA for feedback) the Chargeback Specialist must provide confirmation for raised chargeback by Paynetics and give approximately SLA for expiration due date of the chargeback (approx. 45 days). This SLA for expiration due date of the chargeback is determinate by the card scheme rules of Visa and Mastercard.

Paynetics reserves the right to refuse to consider the request for Dispute, if there is a conflict with this procedure or to request additional documentation if during the review it finds that the submitted one is insufficient.

2.3 Sending and requesting feedback to/from PM during chargeback cycle

Paynetics should inform PM, respectively the client on every steps taken during the chargeback cycle via same Jira ticket.

If the chargeback was rejected by the acquiring bank, then information and documents must be sent via Jira ticket to PM - SLA 4 business days

Requesting PM to contact with the client (cardholder) and provide his feedback to Paynetics – SLA 7 business days

These requests for feedback could be asking for feedback from the client (cardholder) if he wants to proceed with the chargeback cycle or just informing him that there are no further options for continuing the dispute.

2.4 Finalizing the client request for dispute (chargeback)

During the procedural review of the complaint, Paynetics does not credit the cardholder with the amount of the transaction until the completion of the dispute (chargeback) procedure. All fees related to the consideration and servicing of Disputes/Chargebacks are settled in accordance with the contract concluded between Paynetics, PMs and the clients.

Upon successful completion of the dispute procedure - Paynetics should refund the amount of the disputed transaction to client`s account via BA (Balance adjustment) and notify the client of the completion of the procedure.

In case of failure of the dispute procedure - Paynetics informs PM via same Jira ticket for final result of the dispute procedure and does not perform accounting operations. The related fee for the dispute is debited.

Full cycle of the client request for a dispute:

IV.    TYPE OF DISPUTES

There are two dispute types:

1. Unauthorized transaction by the cardholder:

   • If is related to unauthorized and unrecognized transaction by the client, the card must be blocked immediately. PM need to block the card immediately before send the documentation. Card may be block by the client if he has access to the application to do so. If no one neither client, nor PM blocked the card Paynetics employee need to do so.

   • The cardholder must fill in Dispute Resolution form with his personal data and transaction details. In this document he must state that he is denying authorization of or participation in the unauthorized transaction, to explain how he understood for this payment and where was his card during this transaction.

2. Transaction authorized by the cardholder, but one of the following issues occur:

   • Goods or services were not as described or defective,

   • Goods or services were not provided.

   • Terms of Sale were misrepresented during the transaction; cardholder withdraw request not accepted by merchant.

   • Merchant promise to refund, but Credit not processed.

   • Counterfeit goods were purchased.

   • Recurring transaction canceled prior to billing.

   Before to be raised a claim, the cardholder must try to resolve the issue first with merchant.

   The cardholder must fill in Cardholder Claim form, and provide additional documents related to his purchase: copy of cardholder`s order, detailed description of the service/merchandise purchased, copy of correspondence between cardholder and merchant if available, any other documentation related to cardholder purchase.