Visa Chargeback Monitoring Programs

Visa monitors the chargeback activity of all merchants accepting their cards on a monthly basis and alerts acquirers when any one of their merchants reaches excessive chargeback levels. Typically, chargeback rates of 1% or greater are considered excessive. Once notified of a merchant with excessive chargeback rates, merchant banks (acquirers) are expected to take appropriate steps to reduce the merchant's chargebacks. Remedial actions depend on various factors, including merchant type, sales volume, geographic location, and other risk factors. Often merchants need to provide their sales staff with additional training on card acceptance procedures. Merchants may also be required to work with their merchant services providers to develop a detailed chargeback-reduction plan. Visa may impose financial penalties on acquirers that fail to reduce excessive merchant-chargeback rates. Visa has two chargeback monitoring programs:

• Merchant Chargeback Monitoring Program. The Merchant Chargeback Monitoring Program (MCMP) monitors chargeback rates for all acquirers and merchants on a monthly basis. If a merchant reaches excessive chargeback rates, Visa notifies its merchant bank in writing. MCMP applies to all merchants with more than 100 total transactions per month - sales, credits, etc. - more than 100 chargebacks, and an overall chargeback-to-transaction rate of one percent or greater. First notification of excessive chargebacks for a specific merchant is considered a warning. Visa imposes fines only if remedial actions are not taken within an appropriate period of time to return chargeback rates to acceptable levels.
• High-Risk Chargeback Monitoring Program. The High Risk Chargeback Monitoring Program (HRCMP) is specifically designed to reduce excessive chargebacks by high-risk merchants. High-risk merchants include direct marketers, travel services, outbound telemarketers, inbound teleservices, and betting establishments. HRCMP applies to all high-risk merchants with more than 100 total transactions per month - sales, credits, etc. - more than 100 chargebacks, and an overall chargeback-to-transaction rate of one percent or greater. Unlike the MCMP, under HRCMP, there is no warning period and fines of $100 per chargeback are imposed immediately if a merchant has an excessive chargeback rate.

Visa also monitors international sales and chargeback rates through its Global Merchant Chargeback Monitoring Program.