4854 – Other Cardholder Dispute – USA

DESCRIPTION

Why did I receive a chargeback with reason code 4854?

You received this chargeback because the cardholder has an argument that doesn’t fit into any of Mastercard’s other categories.

To use this reason code, the issuer has to make sure certain conditions are met:

• The cardholder has to try — and fail — to resolve the dispute with you, the merchant. The cardholder has to have documentation to prove this effort.
• Both the issuer and acquirer have to be located in the U.S. region.
• The original transaction amount must be more than $50 USD.

This reason code is most commonly used to shift liability to the merchant when the issuer would otherwise be responsible for the financial losses because of federal, state, or local truth-in-lending laws.

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CLASSIFICATION

How does Mastercard classify this dispute?

Mastercard has four classifications for chargeback reason codes:

1. Authorisation-related chargebacks
2. Cardholder dispute chargebacks
3. Point-of-interaction error chargebacks
4. Fraud chargebacks

Mastercard reason code 4854 (Cardholder Dispute – Not Elsewhere Classified – United States Domestic) is in the cardholder dispute category.

Cardholder disputes are typically the result of mistakes or misunderstandings. Either you made a mistake and didn’t fulfil expectations or the cardholder misunderstood what was supposed to happen.

Mastercard has two transaction processing workflows: dual message and single message. Reason code 4854 is for the dual message workflow. The single message equivalent is 54. While the codes are different, the rules and processes are generally the same for both dual message and single message.

ISSUER TIME LIMIT

How long can the issuer wait to file a Not Elsewhere Classified chargeback?

A chargeback must be filed within 120 days of the transaction processing date or within 60 days of the cardholder’s complaint to the issuer.

If the cardholder returned merchandise, the issuer must wait 15 days to file the chargeback. This waiting period gives you, the merchant, time to process a refund.

SECOND PRESENTMENT

Can I fight a chargeback with reason code 4854?

Yes. You can fight this chargeback — a process called representment or second presentment — in the following situations.

• You applied a surcharge and it was correctly processed.
• The issuer was right to dispute the surcharge, but the pro-rated amount was incorrectly calculated.
• You corrected the deficiency that led to the chargeback or otherwise resolved the complaint.
• The cardholder’s supporting documentation is suspected to be partially altered or completely falsified.
• You have already refunded the transaction.
• The chargeback was invalid.

There are a couple of reasons why this chargeback might be invalid.

• The chargeback does not meet Mastercard’s filing requirements.
• The chargeback was processed after the time limit.
• A single transaction had more than one chargeback.
• The primary account number (PAN) and acquirer reference data used in the chargeback does not match what was sent in the original transaction record.
• The cardholder did not provide the required supporting documentation.
• The cardholder’s supporting documentation was illegible or incomplete.

SUPPORTING DOCUMENTATION

What supporting documents are needed for a Not Elsewhere Classified chargeback?

If an issuer inaccurately files a cardholder dispute chargeback and it can be challenged, your acquirer’s chargeback technology may automatically catch the error and respond on your behalf.

If your acquirer doesn’t automatically respond and you receive a chargeback notice, you can challenge the chargeback yourself. Here’s how.

Create a chargeback rebuttal letter and explain why the chargeback should be reversed. Include information that supports your case and is relevant to the reason for fighting the chargeback. If you want to be extra helpful, you could also provide the acquirer with Mastercard’s required message code.

• If you are disputing a chargeback because the issuer didn’t follow Mastercard’s rules, explain why the chargeback was invalid in your rebuttal letter. The message code is 2713 (Invalid Chargeback).
• If you are disputing a chargeback because it was filed after the time limit, share the transaction processing date and the chargeback processing date. The message code is 2702 (Past Chargeback Time Limit).
• If you are disputing a chargeback because the issuer had previously filed a chargeback for the same transaction, provide the processing date and the reference number for the first chargeback. The message code is 2701 (Duplicate Chargeback).
• If you are disputing a chargeback because the cardholder didn’t provide supporting documents, you can simply reply with the message code: 2002 (Non-receipt of Required Documentation to Support Chargeback).
• If you are disputing a chargeback because the cardholder’s supporting documents are illegible or incomplete, you can simply reply with the relevant message code: 2709 (Documentation Received was Illegible) or 2710 (Scanning Error-Unrelated Documents or Partial Scan).

The majority of the time, your acquirer probably won’t catch the issue and you’ll be responsible for challenging the chargeback yourself.

There are a couple situations that don’t require supporting documents — just specific data elements included in the rebuttal letter.

• If you are disputing a chargeback because a refund has already been issued to the cardholder’s Mastercard account, provide the date and acquirer reference data (ARD) for the refund. The message code is 2011 (Credit Previously Issued).
• If you are disputing a chargeback because you suspect the cardholder altered or falsified documents, you need to clearly explain what has been manipulated. The message code is 2001 (Suspected Altered or Falsified Documentation).

The remainder of the time, your second presentment package does need documents to support the claims you made in your rebuttal letter.

If you are disputing a chargeback because you have already issued a refund — but it was not to the cardholder’s Mastercard account — you need to prove where and how you returned the funds to the cardholder. For example, store credit, check, cash, prepaid card, etc.

If you are disputing a chargeback because you already resolved the complaint, provide proof of how you solved the problem. For example, documentation that shows you repaired or replaced the merchandise.

If you are disputing a chargeback because the surcharge was correctly processed, provide documentation that justifies your actions — such as an explanation of how much you charged, why you charged that amount, where you disclose surcharge amounts in your terms and conditions, etc.

If you are disputing a chargeback because the issuer miscalculated the pro-rated surcharge amount, provide documentation that explains why the amount is incorrect.

NOTE: This information applies to chargebacks processed with the dual message system (which nearly all card-not-present transactions use). Chargebacks for single message transactions use a slightly different process.

ACQUIRER TIME LIMIT

How quickly do I need to file a chargeback response?

A second presentment (also referred to as a representment or chargeback response) must be submitted to the issuer within 45 calendar days of the chargeback processing date.

NOTE: These time limits are for the acquirer — not you, the merchant. Merchant time limits are usually much shorter. Review your chargeback notice or check with your acquirer to find out how long you have to respond.

ADVANCING THE CASE

Are pre-arbitration and arbitration an option for a 4854 chargeback?

Yes, an issuer can advance the dispute after completing the chargeback and second-presentment stages of the dispute lifecycle.

An issuer can file pre-arbitration if the original chargeback was valid and one of the following happens after the second presentment:

• Your second presentment doesn’t resolve the dispute.
• The cardholder reviews your second presentment case and reasserts that the transaction should be disputed.
• The cardholder refutes your claim that the supporting documents were altered or falsified.
• The issuer claims the supporting documents weren’t legible or weren’t submitted within the time frame.

If the issuer escalates the case to pre-arbitration, you — the merchant — have the chance to respond. You can either accept or reject liability. If you reject the pre-arbitration case, the issuer will likely proceed to arbitration. If that happens, you could be responsible for paying the expensive filing fees.

Check our Mastercard pre-arbitration and arbitration guide to learn more.

PREVENT

How can I avoid chargebacks like this in the future?

Preventing a 4854 chargeback can be difficult since there aren’t hard and fast rules for what can trigger it. It’s a fall-back option for situations that don’t neatly fit into other reason codes. Therefore, there aren’t specific steps you can take to avoid this type of chargeback in the future.

But, if you abide by chargeback prevention best practices, you should be able to reduce your risk for all future disputes — including this unconventional one.

Check our chargeback reduction guide to learn more about building a comprehensive, well-rounded prevention strategy.

NOTE

Mastercard chargeback rules are complex. The guide is over 1,500 pages long — compared to 67 pages for Visa — and contains detailed rules for both issuers and acquirers.

In an attempt to simplify the complex, we are only sharing information that is most relevant to merchants. If you are an acquirer and in need of more details, reach out to our team. We’d be happy to walk through the specifics with you.