n a previous article, I wrote that in order to support its Re-engineering Disputes (RED) Project, Visa U.S.A. revised its operating regulations, effective Oct. 2, 2004 ("Visa's Recent Chargeback Reason Code Changes," The Green Sheet, Nov. 8, 2004, issue 04:11:01). The article listed Visa's new chargeback reason codes and how the new chargeback process works.

Visa also published another useful manual in 2004: "Card Acceptance and Chargeback Management Guide for Visa Merchants." As an ISO/merchant level salesperson (MLS), obtain a copy of this guide for your own review and also distribute copies to merchants with chargeback problems or potential chargeback problems.

The "Card Acceptance and Chargeback Management Guide for Visa Merchants" is a 123-page comprehensive manual that provides merchants with accurate, up-to-date information on processing Visa transactions, while also informing them how to minimize the risk of loss from fraud and chargebacks.

Materials include card-present and card-not-present processes and requirements and best practices for doing business on the Web. The manual also contains detailed information on the most common types of chargebacks that merchants receive, and it describes what merchants can do to remedy or prevent them.

The guide lists each chargeback reason code. It provides information that defines each chargeback type and the most common causes of them. It also lists merchant actions for the back-office staff to re-present chargebacks to the issuing bank.

Visa's manual contains tips for a merchant's POS staff and owner/manager to avoid each chargeback type as well as risk management tools for preventing them.

For example, for Chargeback Reason Code 83: Fraudulent Transaction - Card Absent Environment, the guide lists the following merchant actions for re-presenting the chargeback:

Authorization Was Obtained and AVS or CVV2 Used

If the transaction was a MO/TO or Internet transaction, and you obtained an authorization approval and verified AVS or CVV2, inform your merchant bank. If you received an authori- zation approval and an exact match to the AVS query (that is, a match on the cardholder's street number and ZIP code), and have proof that the merchandise was delivered to the AVS address, send a copy of the transaction invoice, proof of delivery and any other information pertaining to the transaction to your merchant bank so it may attempt a re-presentment.

Authorization Obtained, AVS or CVV2 Not Used

If you did not use AVS, and the item has been charged back to you, send a copy of the transaction invoice, proof of delivery and any other information you may have pertaining to it to your merchant bank so it may attempt a re-presentment.

Was a Card-Present Transaction

If the transaction was face-to-face and the card was present, the chargeback is invalid. To prove the cardholder participated in the transaction, provide your merchant bank either with a copy of the sales receipt bearing the card imprint and signature of the customer or with an authorization record proving the magnetic stripe was read ...

The guide also includes information on Visa's Chargeback Monitoring Programs. Visa monitors all merchant chargeback activity on a monthly basis and alerts merchant banks when any one of their merchants has excessive chargebacks. In most instances, Visa considers merchants with a chargeback rate of 1% or greater as having excessive chargebacks.

Once notified of a merchant with excessive chargebacks, Visa expects merchant banks to take appropriate steps to reduce the merchant's chargeback rate. Remedial action will depend on merchant type, sales volume, geographic location and other risk factors.

In some cases, as the ISO/MLS, you might need to provide sales staff with additional training or review sessions on card acceptance procedures. In others, you might be required to work with your merchant bank to develop a detailed chargeback-reduction plan. Visa may impose financial penalties on merchant banks that fail to reduce excessive merchant chargeback rates.

The two Visa Chargeback Monitoring Programs are:

• Merchant Chargeback Monitoring Program

  Visa's Merchant Chargeback Monitoring Program (MCMP) monitors chargeback rates for all merchant banks and merchants on a monthly basis. If a merchant has excessive chargebacks, 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 1% or greater.

  Visa considers the first notification of excessive chargebacks for a specific merchant a warning; Visa's banks impose fines only to merchants who do not take action within an appropriate period of time to return chargeback rates to acceptable levels.

• High Risk Chargeback Monitoring Program

  Visa specifically targets the High Risk Chargeback Monitoring Program (HRCMP) to reduce excessive chargebacks by high-risk merchants. As defined by Visa, 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 1% or greater.

  Under HRCMP, Visa provides no warning period; instead, its banks immediately impose fines of $100 per chargeback if a merchant has an excessive chargeback rate.

We should commend Visa for publishing this information and making it available to the ISO community and merchants. Use this manual as a reference guide. By reviewing it, you can help merchants determine the cause of their chargebacks.

Also use this guide to determine if Visa has made a change to a process or if it has made an additional tool such as AVS, CVV2 and CVC2, or Verified by Visa available that could help merchants lower their chargebacks. These efforts will reduce your overall risk exposure and allow merchants to continue to process with you.

David H. Press is Principal and President of Integrity Bankcard Consultants. Phone him at 630-637-4010, e-mail dhp@integritybankcard.com or visit www.integritybankcard.com .