program: Chargeback Handling
- authority: Mastercard SPME §10.1, §10.3, §10.4, and §11.5
+ authority: Mastercard SPME 34.7.5.1, 
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.
+ # Added reference to new Issuer Filing Fee for unsubstantiated claims per Mastercard SPME §8.7.5.1 update,
+ # ensuring policy coverage includes financial obligations and procedural handling of both substantiated
+ # and unsubstantiated claims in chargeback management.

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.

## Financial Assessments Related to Chargebacks and Claims

Mastercard may impose financial assessments on Halyard Pay as the acquirer arising from improperly coded merchant category codes (MCC) in Brazil, through non-performance assessments escalating with repeated violations within a 12-month period and subject to transaction volume tiers. These assessments may be mitigated if remedial MCC recoding occurs timely after Mastercard notification.

Additionally, Mastercard introduced an issuer filing fee of BRL 25,000 per merchant or payment entity for claims determined to be unsubstantiated, underscoring the importance of rigorous validation before claim filing.

Interchange recovery fees may also be levied by Mastercard for substantiated claims involving MCC discrepancies, with adjustments calculated based on interchange rate differentials, again varying by violation severity and volume.

Halyard Pay's chargeback handling processes incorporate diligent MCC coding controls and dispute validations to minimize exposure to these financial penalties.

Source authority: Mastercard SPME §§10.1, §§8.7.5, 10.1, 10.3, 10.4, 10.7, 11.5.