Rules for Visa Merchants Card Acceptance and Chargeback Management Guidelines Rules for Visa Merchants Card Acceptance and Chargeback Management Guidelines C hapter X TTeaxbtle of Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Purpose and Audience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Section 1: Getting Down to Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Visa Transaction Processing—From Start to Finish . . . . . . . . . . . . . . . . . . .6 Visa Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Visa Rules for Returns and Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Visa Rules for PIN-less Payment Brand Acceptance . . . . . . . . . . . . . . . . . .15 Dynamic Currency Conversion (DCC) Compliance at the Point of Sale . .16 Section 2: Card–Present Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Doing It Right at the Point of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Visa Card Features and Security Elements . . . . . . . . . . . . . . . . . . . . . . . 23 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Signature and Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Suspicious Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Skimming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Code 10 Calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Recovered Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Electron Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Visa Travelers Cheques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 3: Card-Not-Present Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 39 Fraud Prevention Guidelines for Card-Not-Present Transactions . . . . . . 40 Additional Fraud-Prevention Tools for the Internet . . . . . . . . . . . . . . . . . . 45 Suspicious Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Recurring Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Section 4: Visa Cardholder Information Security Program . . . . . . . . . . . . 55 CISP Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Security Breach Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Additional Data Security Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 5: Copy Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Transaction Receipt Requirements—Card-Present Merchants . . . . . . . . 62 Transaction Receipt Requirements—Card-Not-Present Merchants . . . . . 63 Responding to Copy Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 How to Minimize Copy Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines I © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for acceptance of Visa payment products. ➔ TABLE OF CONTENTS Section 6: Chargebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Why Chargebacks Occur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Customer Dispute Chargebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Invalid Chargebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Chargeback Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74 Avoiding Chargebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76 Chargeback Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 When Chargeback Rights Do Not Apply . . . . . . . . . . . . . . . . . . . . . . . . . . .81 Section 7: Chargeback Reason Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Non-Receipt of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Reason Code 60: Request Copy Illegible or Invalid . . . . . . . . . . . . . . . . . 86 Reason Code 75: Cardholder Does Not Recognize Transaction . . . . . . . 88 Fraud Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Reason Code 57: Fraudulent Multiple Transactions . . . . . . . . . . . . . . . . 89 Reason Code 62: Counterfeit Transaction . . . . . . . . . . . . . . . . . . . . . . . . 90 Reason Code 81: Fraudulent Transaction—Card-Present Environment . .91 Reason Code 83: Fraudulent Transaction—Card Absent Environment . 94 Authorization Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Reason Code 70: Account Number on Exception File . . . . . . . . . . . . . . . 97 Reason Code 71: Declined Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 99 Reason Code 72: No Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Reason Code 73: Expired Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Reason Code 76: Incorrect Transaction Code . . . . . . . . . . . . . . . . . . . . 105 Reason Code 77: Non-Matching Account Number . . . . . . . . . . . . . . . . . 106 Processing Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Reason Code 74: Late Presentment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Reason Code 80: Incorrect Transaction Amount or Account Number . 110 Reason Code 82: Duplicate Processing . . . . . . . . . . . . . . . . . . . . . . . . . 111 Reason Code 86: Paid by Other Means . . . . . . . . . . . . . . . . . . . . . . . . . 113 Cancelled or Returned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Reason Code 41: Cancelled Recurring Transaction . . . . . . . . . . . . . . . . 114 Reason Code 53: Not as Described or Defective Merchandise . . . . . 116 Reason Code 85: Credit Not Processed . . . . . . . . . . . . . . . . . . . . . . . . . 118 Non-Receipt of Goods or Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Reason Code 30: Services Not Provided or Merchandise Not Received 121 Appendix 1: Training Your Troops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Training Materials for Card-Present Merchants . . . . . . . . . . . . . . . . . . . 124 Training Materials for Card-Not-Present Merchants . . . . . . . . . . . . . . . . 126 Training Materials on Cardholder Information Security Program . . . . . 127 Appendix 2: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 II Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for accep- tance of Visa payment products. C hapter X TInetxrtoduction WHAT’S COVERED ✔ Purpose and Audience ✔ Contents Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines 1 © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for acceptance of Visa payment products. ➔ SECTION ONE: INTRODUCTION Purpose and Audience For today’s Visa® merchant, accepting Visa payment cards has become simultaneously easier and more complex. Electronic terminals and card acceptance devices make transaction processing automatic and seemingly effortless, raising potential profitability. However, they also create increased possibilities for processing mistakes and fraudulent transactions that can result in copy requests and chargebacks. In addition, the walls between card-present and card-not-present transactions have become less obvious as growing numbers of traditional “brick and mortar” merchants launch e-commerce web sites, transforming themselves into “click and mortar” businesses. Such merchants must, in effect, be “bilingual,” familiar with both card-present and card-not-present procedures. Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines is a comprehensive manual for all businesses that accept Visa transactions. The purpose of this guide is to provide merchants and their sales staffs with accurate, up-to-date information on processing Visa transactions, while minimizing risk of loss from fraud and chargebacks. The book is targeted at both card-present and card-not-present merchants and their employees, and includes requirements and best practices for doing business on the Internet. It also contains detailed information on the most common types of chargebacks merchants receive and what you can do to remedy or prevent them. 2 Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for accep- tance of Visa payment products. ➔ SECTION ONE: INTRODUCTION Contents Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines is organized to allow users to find the information they need quickly and easily. The table of contents serves as an index of the topics and material covered. Topics covered include: ✔ Section 1: Getting Down to Basics: An overview of the how Visa transac- tions are processed, from point of transaction to clearing and settlement. A list of key Visa policies for merchants is also included. ✔ Section 2: Card-Present Transactions: Requirements and best practices for processing card-present transactions at the point of sale, including how to minimize key-entered transactions and ensure legible sales receipts. Suspicious transactions, Code 10 calls, and card recovery procedures are also discussed. ✔ Section 3: Card-Not-Present Transactions: Requirements and best practices for processing card-not-present transactions, including mail order, telephone order, and Internet sales. Visa fraud prevention tools, like the Address Verification Service, and Card Verification Value 2 (CVV2); requirements for e-commerce web sites; and procedures for recurring transactions are also covered. ✔ Section 4: Visa Cardholder Information Security Program (CISP): The Payment Card Industry (PCI) Data Security Standard that Visa requires merchants and their service providers to implement to ensure the security of confidential cardholder account information. ✔ Section 5: Copy Requests: Requirements and best practices for respond- ing to a request for a copy of a sales receipt to resolve a cardholder dis- pute. Information on minimizing copy requests, ensuring legible receipts, and meeting sales draft requirements are also covered. ✔ Section 6: Chargebacks: Requirements and best practices for processing transactions that are charged back to you by your merchant bank, from the card issuer. This section includes strategies for chargeback prevention, as well as information on how and when to resubmit a charged-back transac- tion to your merchant bank. A brief compliance process overview is also included. ✔ Section 7: Chargeback Reason Codes: Detailed information on the reason codes for the most common types of chargebacks that merchants receive. For each reason code, a definition is given, along with the merchant actions—or failure to act—that may have caused the chargeback, and recommendations for resubmitting the transaction and preventing similar chargebacks in the future. Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines 3 © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for accep- tance of Visa payment products. ➔ SECTION ONE: INTRODUCTION ✔ Appendix 1: Training Your Troops: A comprehensive list of Visa print and multimedia materials that merchants can use for training their employees on card acceptance and fraud prevention procedures. ✔ Appendix 2: Glossary: A list of terms used in the book. Disclaimer The information in this guide is current as of the date of printing. However, card acceptance, processing, and chargeback procedures are subject to change. This guide contains information based on the current Visa U.S.A. Inc. Operating Regulations. If there are any technical differences between the Visa U.S.A. Inc. Operating Regulations and this guide, the Visa U.S.A. Inc. Operating Regulations will prevail in every instance. Your merchant agreement and the Visa U.S.A. Inc. Operating Regulations take precedence over this guide or any updates to its information. For further information about the rules or practices covered in this guide, contact your merchant bank. 4 Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for accep- tance of Visa payment products. Section 1: Getting Down to Basics WHAT’S COVERED ✔ Visa Transaction Processing—From Start to Finish ✔ Visa Rules ✔ Merchant Rules for Returns and Exchanges ✔ Visa Rules for PIN-less Payment Brand Acceptance ✔ Dynamic Currency Conversion (DCC) Compliance at the Point of Sale Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines 5 © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for acceptance of Visa payment products. ➔ SECTION ONE: GETTING DOWN TO BASICS Visa Transaction Processing—From Start to Finish By accepting Visa cards at your point of sale, you become an integral part of the Visa payment system. That’s why it’s important that you start with a clear picture of the Visa card transaction process: what it is, how it works, and who’s involved. This basic knowledge will provide you with a conceptual framework for the poli- cies and procedures covered in this guide. It will also help you to understand the major components of payment processing and how they affect the way you do business. Who Does Besides you and your customers, several other parties are involved in every What— Visa transaction. The following summary will help you and your sales staff to better understand who does what. Parties to Visa Transactions A cardholder is an authorized user of Visa payment cards or other Visa payment products. A merchant is any business entity that is authorized to accept Visa cards for the payment of goods and services. A merchant bank is a financial institution that contracts with merchants to accept Visa cards for payment of good and services. A merchant bank may also contract with third-party processors to provide many of these services. A card issuer is a financial institution that maintains the Visa cardholder rela- tionship. It issues Visa cards and contracts with its cardholders for billing and payment of transactions. Visa is a membership corporation of financial institutions that issue Visa cards and/or sign merchants to accept Visa cards for payment of goods and services. Visa provides card products, promotes the Visa brand, and establishes the rules and regulations governing member participation in Visa programs. Visa also operates the world’s largest consumer payment system to facilitate the flow of transactions between members. 6 Rules for Visa Merchants—Card Acceptance and Chargeback Management Guidelines © 2005 Visa U.S.A. Inc. Notice: The information herein by Visa is CONFIDENTIAL and may not be disclosed or published without the prior written permission of Visa. Information is to be used solely for acceptance of Visa payment products.