program: Chargeback Handling
- authority: Mastercard SPME §10.1 and §11.5
+ authority: Mastercard SPME §10.1, §10.6.5, and §11.5
acknowledgement_business_days: 1
lifecycle_states:
  - first_presentment
  - chargeback
  - second_presentment
  - pre_arbitration
  - arbitration
evidence_requirements:
  first_presentment:
    - transaction_receipt
    - authorization_record
  chargeback:
    - merchant_rebuttal_letter
    - delivery_confirmation
    - customer_communication
  second_presentment:
    - compelling_evidence
    - signed_cardholder_agreement
  pre_arbitration:
    - full_dispute_record
    - prior_correspondence
  arbitration:
    - full_dispute_record
    - arbitration_filing
agent_owner: chargeback_agent
 
- # Updated to reflect refined definitions and thresholds relating to laundering, excessive chargebacks, fraudulent transactions, and bankruptcy as defined in Mastercard SPME §11.5 (2023 edition).
- # These criteria impact evaluation triggers and risk assessment during chargeback handling.
+ # Revised authority to include Mastercard SPME §10.6.5 update regarding Fraud Recovery assessment exceptions for U.S. Merchants using Hybrid POS Terminals.
+ # This impacts the evaluation of whether Fraud Recovery is applicable during chargeback handling.
+ 
+ # The policy reflects criteria that Mastercard uses to determine when Fraud Recovery will not be assessed,
+ # specifically incorporating the condition that U.S. Acquirer Merchants with at least 95% of annual and event-related
+ # transaction volume processed through Hybrid POS Terminals and no prior ADC Event within 12 months, and not storing
+ # Sensitive Authentication Data, are exempt from Fraud Recovery assessment.
+ 

Chargeback Handling

Chargebacks are cardholder-initiated disputes against a transaction. Halyard Pay, as the acquirer, manages the entire dispute lifecycle for its merchants, from initial first presentment through arbitration, in compliance with Mastercard's requirements.

Lifecycle overview

Disputes move through defined stages: first presentment, chargeback, second presentment (re-presentment), pre-arbitration, and arbitration. Adherence to strict evidence requirements and deadlines at each stage is critical to avoid automatic rulings against the acquirer.

Required actions

1. Acknowledge each incoming chargeback within one business day.

2. Collect the necessary evidence based on the current lifecycle stage.

3. Submit second presentments when merchant liability is disputable, providing strong supporting evidence.

4. Only escalate to pre-arbitration and arbitration after issuer rejection of the second presentment.

5. Maintain full case documentation for audits and reporting.

Monitoring and Risk Factors

Halyard Pay monitors merchant risk factors including chargeback ratios, fraud rates, and financial stability. Updated Mastercard MATCH Listing Reason Codes define specific grounds for elevated scrutiny or match listing, including but not limited to laundering (presentation of invalid transaction records), excessive chargebacks (over 1% chargeback-to-sales ratio with minimum USD 5,000 monthly), excessive fraud (fraud-to-sales ratio of 8% or more including at least 10 fraudulent transactions totaling USD 5,000 or more), questionable merchant classification, and bankruptcy.

Regarding Fraud Recovery (FR) assessments for merchants involved in Account Data Compromise (ADC) events, Mastercard has clarified that merchants in the U.S. using Hybrid POS Terminals meeting specified criteria—such as at least 95% of their transactions acquired through such terminals and no prior ADC events in the preceding 12 months—may not be assessed FR. This affects the handling and evaluation of fraud-related chargebacks and the associated recovery processes.

These refined definitions and conditions inform Halyard Pay's chargeback and risk management policies to ensure compliance and mitigate risk exposure.

Source authority: Mastercard SPME §§10.1, 10.6.5, 11.5.