Visa Claims Resolution and Merchant Liability

April always comes with anticipation, signaling an end to winter and warmer days ahead. Better weather motivates consumers to shop at outdoor markets, refresh their wardrobes, and spruce up their homes. This all points to good things for merchants.
However, April 2018 brings a level of uncertainty with the rollout of the new Visa Claims Resolution (VCR) program. VCR’s overarching goal is to reduce timelines and simplify the chargeback process. Visa expects VCR to reduce the number of chargebacks and their associated costs.
What Changes Does VCR Introduce?
The following is a brief overview of VCR changes:

  • Consolidated reason codes. VCR consolidates 22 chargeback reason codes into four dispute categories: Fraud, Authorization (Allocation workflow), Processing Errors, and Consumer Disputes (Collaboration workflow).
  • Reason code 75 is eliminated. Sometimes referred to as “Transaction Not Recognized,” this reason code is being retired. This may result in an increase of friendly fraud, underscoring the importance of maintaining detailed records on transactions and customer communications in case you need to conduct a dispute response.
  • Dispute process shifts from litigation to liability. VCR introduces two new methods of investigating disputed transactions: Allocation and Collaboration.
  • Shorter time frames. The chargeback dispute resolution timeframe is reduced from an average of 45 – 105 days to 31-70 days (Fraud and Authorization chargebacks) and 31 – 100 days (Customer Disputes and Process Error chargebacks).
  • Emphasis on the Visa Resolve Online dispute platform. The ultimate goal is for Visa Resolve Online (VROL) to be more effective with VCR.
  • New VCR terminology. Dispute replaces chargeback, and dispute response or pre-arbitration replaces representment.

Learn more about VCR changes:

What Is VCR Allocation?
The Allocation workflow will address the new fraud and authorization dispute categories. Visa automatically manages these disputes by conducting an initial review of the dispute and then determining how to proceed.
Under the Allocation workflow, Visa uses three key factors to determine how to process the dispute:

  • Is this disputed charge a 3D Secure authorized transaction?
  • Was the dispute filed within the dispute time frame?
  • Has the disputed transaction been refunded?

If any of the above questions are true, Visa blocks the dispute and prevents it from moving forward in the chargeback process. This new approach should result in fewer disputed transactions for merchants.
However, merchants need to understand their responsibility when Visa does not block the dispute and allows it to continue through the dispute process. Merchants will be liable for the disputed transaction and will not have automatic rights to proceed with the dispute response process.
Under VCR, merchants can only initiate a dispute response when they can provide compelling evidence that the dispute is invalid. This emphasizes the need for merchants to use an integrated payment solution that enables a quick and efficient response to disputes permitted to move forward.
Because of how fraud and authorization disputes are reviewed, merchants should use fraud detection technologies such as CVV, AVS, and 3D Secure during the payment authorization process. This makes it harder for automatic approval of fraud and authorization dispute categories, which will prevent the dispute from proceeding.
How to Prepare for a VCR Dispute Response
Shorter time frames, a new Allocation workflow, simplified reason codes, and the elimination of reason code 75 place new demands on merchants during the chargeback process. Proactive merchants can use VCR as the catalyst to review and improve how they manage cardholder interactions:

  • Be ready for friendly fraud disputes. With the removal of reason code 75, friendly fraud claims could increase. Merchants must be prepared to defend against friendly fraud disputes and review how easily they can collect key evidence, including delivery receipt, authorization confirmation, refund/review policy, etc.
  • Be ready to respond. The shortened time frame for a fraud or authorization dispute doesn’t leave much time to collect and review compelling evidence. Because the Allocation workflow places liability on the merchant, it’s important to be prepared to collect and provide this compelling evidence in advance.
  • Don’t forget customer service. Remember the customer service team is a merchant’s first line of protection against a dispute. Make sure your team follows recommended best practices to help prevent unnecessary disputes.
  • Focus on merchant-issuer communication. By using a payment solution that enables merchant-issuer collaboration, everyone wins. When merchants and issuers share data and collaborate to communicate quickly with the cardholder, discerning valid sales and true fraud claims will help to prevent unwarranted disputes from proceeding.

Contact us to learn how Verifi experts and payment solutions can ensure you’re ready for the new demands placed on your business by VCR.