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What is the Mastercard Dispute Resolution Initiative?

  • Max Jones
  • April 1, 2019
  • 6 minutes

The new Mastercard Dispute Resolution Initiative is changing the way chargebacks and payment disputes are managed.

Here’s what Mastercard has planned and how the card network envisions these changes will unfold.

Stay up-to-date!

The Mastercard Dispute Resolution Initiative will be implemented in various stages over the next several years. Mastercard has already altered several of the initial timelines, and details about some future stages have yet to be determined. You’ll want to carefully monitor these regulations as they unfold to ensure compliance.

 

Midigator will share new insight as it becomes available. We encourage you to bookmark this page and check back often.

 

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Objectives of the Mastercard Dispute
Resolution Initiative

Mastercard has launched this new plan with the intention of improving compliance, reducing chargebacks, and ensuring prompt, efficient dispute resolution.

There are four components that will help the card network reach those goals.

Provide a single dispute management portal for issuers and acquirers. Centralizing all processes and data into just one platform will streamline workflows.

Update rules to ensure greater compliance. Rule and procedural changes will improve balance and integrity.

Use technology to auto validate dispute requests and prevent improper dispute activity. Enable timely insights for more effective collaboration.

Incorporate merchant involvement. Open new channels of communication between cardholders and merchants.

Essentially, the card network has recognized that the legacy chargeback process is outdated. New rules, technologies, and procedures will help ensure the Mastercard Dispute Resolution Initiative aligns with the more modern payment processing environment.

Rule Changes

Mastercard Dispute Resolution Initiative will include several rule changes implemented in six-month intervals over a two-year period.

Jump to a specific date or read all the updates below:

OCT 2018     APRIL 2019     JULY – OCT 2019      APRIL 2020    •   AFTER APRIL 2020
STAGE #1

October 2018

The following updates went into effect on October 12, 2018. They were the first phase of changes associated with the Mastercard Dispute Resolution Initiative.

Update:

Discontinued Reason Code

Applicable to:

Issuers, acquirers, and merchants

Reason code 4837 – No Cardholder Authorization has been discontinued. Acquirers will no longer be able to respond with the merchant’s name, location, or date when there is a mismatch between authorization and clearing.

Update:

Supporting Documentation

Applicable to:

Cardholders and issuers

The issuer must obtain supporting documentation from the cardholder before initiating the following chargebacks:

  • Disputes with reason code 4863 – Cardholder Does Not Recognize must be accompanied by a cardholder letter or email.
  • Disputes with reason code  4834 – Point of Interaction Error (Transaction Amount Differs subcategory) must be accompanied by the cardholder’s final bill or receipt.
  • Disputes involving digital goods must be accompanied by a cardholder letter, email, or expedited dispute form.
  • Disputes involving recurring transactions must be accompanied by a cardholder letter, email, or expedited dispute form.
Update:

Discontinued Compliance Categories

Applicable to:

Issuers and acquirers

The following pre-compliance and compliance subcategories have been discontinued:

  • SecurityCode (outside of a rejected chargeback)
  • Counterfeit Goods
  • Timeframe extension
Update:

Pre-Compliance Requirement

Applicable to:

Issuers and acquirers

A pre-compliance case must be filed before any issue can escalate to a compliance case (excluding fee collection dispute situations).

Update:

Time Frame Reduction

Applicable to:

Issuers and acquirers

Pre-compliance and compliance timeframes have been reduced from 180 days to:

  • 120 days from the processing or violation date. Or…
  • 45 days from the chargeback rejection date or fee collection date.
STAGE #2

April 2019

More rule changes associated with Mastercard Dispute Resolution Initiative will follow on April 12, 2019.

Update:

Time Frame Reduction

Applicable to:

Issuers, acquirers, and merchants

The time limit for disputes with reason code 4834 – Point of Interaction Error will be reduced from 120 days to 90 days. This excludes ATM transactions with this reason code.

Update:

Duplicate Refund Procedures

Applicable to:

Acquirers

If credit is issued for a transaction that is also disputed, the acquirer may not use a pre-compliance case filing to reverse the second refund. The acquirer may recover the funds with a second presentment (if the time limit hasn’t expired), a pre-arbitration case filing (if the credit was issued after the second presentment), or through a collections agency.

STAGE #3

Between July 2019 and October 2019

Mastercard estimates that this update will take place in either Q3 or Q4 of 2019. It is part of a broader initiative to introduce merchant-cardholder collaboration and improve data transparency.

Update:

Discontinued Reason Code

Applicable to:

Issuers, acquirers, and merchants

Reason code 4863 – Cardholder Does Not Recognize will be discontinued.

STAGE #4

April 2020

Mastercard has reschedule several April 2019 updates, postponing the changes until 2020.

Update:

Discontinued Chargeback Cycle

Applicable to:

Issuers, acquirers, and merchants

The arbitration chargeback cycle will be discontinued. If an issuer wishes to challenge a merchant’s second presentment, the dispute will no longer be handled with the chargeback process. Instead, it will escalate to a pre-arbitration case filing (learn more here).

Update:

Pre-Arbitration Requirements

Applicable to:

Issuers, acquirers, and merchants

A pre-arbitration case must be filed before any issue can escalate to an arbitration case except for the following reason code:

STAGE #5

April 2020 or Later

The final phase of rule changes for the Mastercard Dispute Resolution Initiative is tentatively scheduled to take effect in 2020.

Update:

Merging Message Systems

Applicable to:

Issuers, acquirers, and merchants

Mastercard will consolidate dual message system and single message system rules to create a single set of chargeback regulations.

Stay Up-to-Date on the Mastercard Dispute Resolution Initiative

The Mastercard Dispute Resolution Initiative will likely undergo various updates as the industry transitions to the new chargeback management style. It is important that everyone involved—issuers, acquirers, processors, and merchants—be on the lookout for policy updates and make necessary changes promptly.

Midigator aims to remove complexities for the entire payment ecosystem. If you have questions about these new Mastercard rules or want help making necessary changes, don’t hesitate to contact our team of payment experts.

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