program: Chargeback Handling
authority: Mastercard SPME §10.1, §10.3, §10.4, 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
 
- # Added explicit reference to ongoing customer submission responsibilities during investigations and appeals
- # per Mastercard SPME §10.7 update, incorporating continuing obligations under sections 10.3 and 10.4.
+ # Note: The previous requirement mandating use of specific reason codes for coerced transactions under
+ # section 8.6.5 has been removed from Mastercard SPME. Chargebacks related to such transactions
+ # are now governed broadly under the Interchange Recovery rules (section 8.7.5.3) and subject to Mastercard's
+ # enforcement discretion as outlined in updated section 8.6.5. Accordingly, this policy no longer
+ # specifies mandatory reason codes for coerced transaction chargebacks.

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.

6. Continuously provide required documentation and information to Mastercard throughout any investigation or appeal process as mandated by sections 10.3 and 10.4 of the Mastercard SPME.

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.

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

## Changes to Chargeback Reason Codes for Coerced Transactions

The previous explicit mandate to use reason codes 4849 for Dual Message System transactions and 49 for Debit Mastercard Single Message System transactions in cases of coerced transactions has been removed. Mastercard now emphasizes Interchange Recovery programs, currently limited to Brazil Domestic Transactions processed through the Global Clearing Management System (GCMS), and retains discretion over interpretation and enforcement of MCC Performance Program Standards (SPME §8.6.5).

Halyard Pay will adjust operational procedures accordingly, focusing on compliance with the broader Interchange Recovery framework and Mastercard's enforcement discretion rather than fixed reason codes for coerced transaction chargebacks.

Source authority: Mastercard SPME §§10.1, §§8.6.5, 10.1, 10.3, 10.4, 10.7, 11.5.