American Express Chargebacks- How They Are Different, and How to Handle Them Effectively.

Chargeback Management can be confusing.

The lack of consistency in how they are managed and ruled is one of the most difficult facets of handling your Chargebacks. This is because the process is drastically different depending on the Issuing card used. Knowing the differences in the Chargeback process of American Express, Visa, Mastercard, and Discover is vital to understanding and managing your chargebacks, and can even help you avoid them altogether.

Here I will go over the policies of American Express, how they are different from the other card brands, and full lists of Chargeback codes and reasons for Inquiry .

Understanding American Express

Unlike Visa and Mastercard- who rely on external Card Issuers such as Bank of America, Capital One, and Chase-  American Express functions as a Card Issuer and  Network which means they don’t have anyone contact the merchant on their behalf.

Chargeback Process

There are a few things unique to American Express in the way they handle the chargeback process:

  • They do almost everything internally. Since they don't provide services through card issuers there's no go between with the issuer and they are much more involved handling everything directly
  • American Express will sometimes send an "inquiry" to get more information before escalating to a chargeback. this can give you a better chance of avoiding an unneccessary chargeback

When American Express receives a chargeback from a cardholder they will:

Usually, American Express is able to settle all transaction disputes based on the in-house information. In the rare situations where the financial institution doesn’t have the necessary information, an inquiry will be issued to the merchant.

The merchant can respond in one of four ways:

  1. Authorize the chargeback.
  2. Issue a credit or supply evidence of a previously-issued credit.
  3. Issue a partial credit (and evidence to support the reduced refund amount).
  4. Provide sufficient evidence to validate the original charge.To validate the charge, the merchant will need to provide sufficient evidence.

There are several reasons why American Express might send an inquiry. The following table lists the inquiry reasons and the suggested documents you should send in response.

Four outcomes are possible when merchants are issued inquiries:

  1. The inquiry response successfully settles the dispute in the merchant’s favor.
  2. A chargeback is issued because the merchant failed to respond to the inquiry or didn’t reply within the time limit.
  3. A chargeback is issued because the merchant replied to the inquiry with inaccurate or insufficient documentation.
  4. A chargeback is issued because the merchant authorized it.

If American Express does not need to gather more information in most cases they will issue an Immediate Chargeback.

generally speaking, a Chargeback is a final ruling and there are no chances to remove it unless you submit a “Chargeback Reversal”

If you submit a reversal and your reasoning is compelling, American express may opt to remove it on your behalf. This is not generally the case, so it’s very important to PREVENT the Chargeback from happening at all.

American Express Chargeback reason codes

Here is a complete list of the reason codes that a cardholder can use when disputing a charge.

American Express chargeback reason codes are divided into four main categories and always include a class letter, plus a two-digit number (e.g. C03):

    Issues in this category: when the charged amount is larger than the authorization amount on a card, when there is no valid authorization or when the authorization approval has expired.

    Issues in this category: when a card number hasn’t been assigned, issues with a credit being processed as a charge (or a charge being processed as a credit), when the wrong amount is charged or when there is an inconsistency in the currencies used.

    Issues in this category: cards not being processed, merchandise or services being returned, refused, not as described, damaged, canceled or partially received.

     Issues in this category: missing imprints, missing signatures, expired or invalid cards, when cards aren’t present during a purchase or when there is no cardholder authorization.

    Preventing chargebacks

    Here are four tips straight from American Express you can take to help lower the number of Inquiries you receive and reduce the number of chargebacks:   

    1. Always get an authorization approval code      
         a. Without it, it is very difficult to support your position if a Cardmember claims a transaction is fraudulent.  

    2. Respond to Inquiry letters on time      
         a. If you wish to contest a Cardmember claim, you must send us supporting material that resolves the dispute by the date displayed on the enquiry letter.  

    3. Follow Card acceptance procedures accurately      
         a. Always get the Cardmembers name as it appears on the Card, the Card number, and expiry date. If the Cardmember is not present, verify the address with American Express.    

    4. Pay special attention when taking orders by telephone, mail order or the internet     

                  a. If you accept such charges, the precise procedures outlined in the Merchant Agreement should be followed and a greater degree of caution should be exercised.

     

    What I learned Working With Underwriting About Getting Fast Approvals

    The quicker you learn how to work with a banks underwriting team, the quicker your approval will come.
    Below are a few things to be prepared for before submitting your application to the bank.

    You will want to have a complete package before submitting

    • Make sure you know exactly what they’re going to ask for and include it in the original submission package.For more information on this read our Checklist for Submitting to a Merchant processing bank. 
    • If you submit an Incomplete package it will end up at the bottom of the pile for that bank, and will take a lot longer to get approved.

    Transparent explanations are necessary when requests are made

    • At the time Underwriters request forms of verification to back up your application, each request will need to be fulfilled to the best of your ability as quickly as possible.
    • If something negative about the submission is brought to our attention a true and full explanation to the Underwriter about the situation is the best course of action.

    Customer Service number needs to be new

    • When applying for a merchant account you never want to reuse a Customer Service Number.
    • If you have multiple DBA’s each one needs a unique Customer Service Number.
    • If you purchase your CS numbers from another business, BE SURE it’s never been used before.

    The contact info and addresses on all documents need to match

    • All of your documents need to have the same business address including EIN, Articles of Incorporation, business bank account, and anything else the bank will ask for
    • If your business is located at your place of residence the address on your ID needs to match the business address on all of your documents.
    • In the case of a home-run business, a recent utility bill may be requested to verify proof of residence.
    • Please note: Virtual offices are no longer widely accepted as business addresses, and add much difficulty to the submission process, as well as drastically lowers your options for getting approved

    These small steps can make a big difference in working with a banks Underwriting team,  and getting you fast approvals every time.

    The secret to avoiding the risk department- It’s easier than you think.

    Keeping your account out of the Risk Department is easier than you might think.
    Below are a few tips on how to avoid drawing unneccessiory attention to your
    merchant account.

    Scale up to using your full approved processing amount over a period of a few months

    “Running Hot” is a term used when you don’t scale up to
    your approved volume amount and is something that
    the Risk Department notices.

    Putting thought into your price points is a necessary and important step

    The price points on your URL need to be easily
    understood through out the website as well as make
    sense based on type product and quantity of the product
    you are selling.

    Paying attention to your Chargeback percentages is very important in keeping your MID healthy.

    High chargeback percentages can draw the Risk Departments attention and get your account shut down, they can even put your business on the MATCH list as a high risk business. It is very important to keep your ratios below the regulated percentage provided by the bank.

    8 ways to make sure your website is always Merchant Account Ready

    WHAT IS WEB COMPLIANCE?

    The State of observing and following all Accessibility Laws and regulations that apply to your website. This should always be an overall goal for your organization to make sure you can acquire and maintain a merchant account.

    HOW TO HAVE A COMPLIANT WEBSITE

    1. Make sure the business address and phone number are accurate and brand
    new. Has not been used by any other business.

    2. Site should not have any product claims. For example “may help support”
    certain functions. It cannot claim to cure any diseases or improve specific body
    functions.

    3. The website must be consistent with the correct pricing, shipping details, and
    product details.

    4. Must have cancellation and contact us information on website.

    5. Accurate ingredients (for ingestible or supplements/creams only) , if site has
    multiple products, needs ingredients for each product.

    6. All links within website should function and redirect properly.

    7. Website should have all payment method logos on the site. Any method of
    payment wanted by the merchant must be visible.

    8. If the website offers a digital product or service, the merchant must provide a
    member login area with sample logins, or a sample link to the digital platform.

    Merchant processing MATCH list and what it really means

    Quite simply, there is little to no difference. The MATCH (Member Alert to Control High Risk Merchants) record was created by Mastercard as a way of compiling information on companies and their owners as to if their merchant accounts have been terminated. With the MATCH list, Mastercard combined a list with the TMF listing (Terminated Merchant File), so each list is used interchangeably. The Terminated Merchant File or TMF list is a list of business owners (merchants) whose accounts have been terminated in the past 5 years for any sort of activity that causes the account holder to appear to be a bad risk. This can include excessive chargebacks or excessive fraudulent transactions; noncompliance with PCI-DSS (payment card industry data security standards), the compromise of merchant account data; laundering, fraud, or collusion on the part of the account holder, or evidence that he was engaged in illegal transactions; an inability of the merchant to meet financial obligations due to bankruptcy or insolvency; or evidence that the account was opened fraudulently and that the identity on the account was stolen, lastly a merchant can be listed for violation of standards (agreement).

    When a merchant whose name appears on the MATCH file applies for a merchant account through a new financial institution, their application will be flagged, and it is likely that the new processing bank will turn down the application, deeming it too high-risk. The processing bank may choose to contact the institution that added the merchant’s name to the list and inquire about the circumstances that led to the account termination. Using that information, they may choose to accept the merchant’s application, reject it, or offer a conditional acceptance with restrictions.

    It can be hard for a merchant to get his or her name off the TMF list, depending on the reason he or she was listed initially. The only recourse is to contact the banking institution that listed you in the first place and try to resolve whatever issue led to the termination. It turns out that only the processing bank that placed you on the TMF has the power to remove your name. Lucky enough if you feel the TMF listing is unfair, there are lawyers who specialize in this niche. Otherwise, your listing will remain active for five years.

    TMF & MATCH Code Descriptions

    The secret to getting your Merchant Account approved quickly and easily

    The Standard Merchant Application Package requires documents that are referred to as “Know Your Customer documents”. These documents are used within the application process and are crucial for a business to receive a merchant account.

    Here are all the documents needed to get starting submitting for a payment processing account. for a functional checklist and printable PDF click Here

    • SS-4 form from the IRS that displays the company’s EIN.
    • The Articles of Organization
    • Bank Letter or Voided Check for the account receiving
      deposits.
    • Current Government Issued Photo ID
    • Signed W9
    • Proof of Where you will be selling your goods/services.
    • 3 consecutive months of most recent business bank statements
    • 3 consecutive months of the most recent processing statements

    For Brick and Mortar Shops, or if you work out of a Van or Trailer, especially if you don’t have a website you will need:

    • 3 “Site inspection” pictures showing the outside of the building and it’s address, and appropriate
      signage if the business isn’t located in a standalone building.

    If you use any 3rd parties for Customer Service, Dropshipping service or manufacturing, you will also need to provide:

    • Fully Executed Fulfillment agreement with dropshipping company.
    • Fully Executed Customer Service agreement Manufacturer’s Current GMP certificate

    For Telemarketing or Phone sales:

    • Phone scripts
    • Compliance call scripts
    • Proof of Purchase
    • Electronic agreement

    If you are requesting merchant processing for the first time, if you have an expensive “high-ticket.” or you are applying for over $10,000.00 in processing per month, Most acquiring banks will ask to see personal bank statements and 2 years of personal tax returns.