13.7 – Cancelled Merchandise/Services

DESCRIPTION

Why did I receive a chargeback with reason code 13.7?

The cardholder claims to have returned merchandise, cancelled services, cancelled a timeshare, or cancelled a reservation, and you did not issue a credit as required.

Or, the cardholder attempted to return merchandise or cancel services, but wasn’t able to because:

• Your policy doesn’t allow it — but you didn’t disclose that information at the time of the purchase.
• You aren’t abiding by the EU directive that requires a 14-day cancellation period.

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CLASSIFICATION

How does Visa classify this 13.7 dispute?

Visa reason codes are organised with four categories: fraud, authorisation errors, processing errors, and consumer disputes.

Reason codes that start with 13 relate to consumer disputes.

ISSUER TIME LIMIT

How long can the issuer wait to file a chargeback with reason code 13.7?

Before the issuer can initiate a chargeback, the cardholder must return — or attempt to return — the merchandise. If services are involved, the cardholder must contact you to cancel them.

Visa recognizes that you need time to receive the merchandise or cancel services and issue a refund, so the issuer must pause the dispute process for 15 days after the merchandise return or services cancellation date. But if you haven’t resolved the customer’s complaint in that time period, the issuer can proceed with a chargeback.

Chargebacks must be filed within 120 days of either the transaction processing date or the date the cardholder received (or expected to receive) the merchandise or services.

However, none of these delays can push the chargeback time limit beyond 540 days of the original transaction processing date.

VALIDITY

What would make a 13.7 chargeback invalid?

An issuer is not allowed to use reason code 13.7 in the following situations.

• The transaction was an ATM cash disbursement.
• The transaction used straight-through processing.
• The dispute relates to the quality of the goods or services and a credit receipt hasn’t been issued.
• The dispute relates to the value-added tax (VAT) and a credit receipt hasn’t been issued.
• The returned merchandise is being held by a customs agency outside your own country.
• You are only liable for merchandise held by a customs agency in your country (unless you sell in the European region).
• The transaction was initiated at an automated fuel dispenser (AFD).
• The dispute is for the cash-back portion of a transaction.
• The cardholder claims the transaction was fraudulent.

SUPPORTING DOCUMENTS

Can I fight a 13.7 chargeback?

Yes. You can fight a chargeback with this reason code as long as you have at lease one of the following supporting documents.

• Evidence that the chargeback is invalid. (Note: Your acquirer’s technology should catch these errors and automatically respond on your behalf. If your acquirer doesn’t automatically respond and you receive a chargeback notice, you can challenge the chargeback yourself.)
• Evidence that you refunded the transaction before the chargeback was filed.
• Evidence that the cardholder no longer disputes the transaction.
• A copy of the transaction receipt or other document that proves you properly disclosed your limited return or cancellation policy at the time of checkout.
• Evidence that proves the cardholder agreed to your cancellation or return policy but did not adhere to your policy.

WORKFLOW

What process do I use to respond to a chargeback with reason code 13.7?

Visa reason code 13.7 is managed with the collaboration workflow.

If you want to fight a 13.7 chargeback, you can submit a chargeback response package. Gather your supporting documents, write a rebuttal letter, and submit the package to your acquirer before the response deadline.

ACQUIRER TIME LIMIT

How quickly do I need to file a chargeback response?

Your acquirer must submit your chargeback response within 30 calendar days of the chargeback filing date.

NOTE: There is a difference between acquirer time limits and merchant time limits. Merchant time limits are usually 3-20 days. Your acquirer will use the remainder of the allotted time to complete administrative tasks before notifying you of the chargeback and after receiving your response. Check your chargeback notice for the exact due date.

ADVANCING THE CASE

Can the issuer file pre-arbitration after a 13.7 dispute response?

Yes. An issuer can file pre-arbitration for any collaboration dispute — including disputes with reason code 13.7.

Pre-arbitration allows the issuer to address information or evidence provided in your dispute response.

After receiving a collaboration dispute response, the issuer can make a pre-arbitration attempt for any of the following reasons.

• The issuer can provide new documents or information about the original dispute.
• The issuer changes the reason code because of information or documents provided in the dispute response. (The issuer can only change the reason code if the original chargeback was valid.)
• If your dispute response included a claim that the cardholder no longer wants to dispute the transaction, the issuer must prove that the cardholder does, in fact, want to continue the dispute.
• If you provided the required supporting documents and disputed the cardholder’s claim, the issuer must review the evidence with the cardholder and provide an explanation of why the cardholder continues to dispute the transaction.
• If you refunded the cardholder after the chargeback was filed, but the issuer suffered a financial loss because of the exchange rate, the issuer can advance the case to pre-arbitration.

While the above are general pre-arbitration options for issuers, Visa’s regulations outline one additional situation where issuers could file pre-arbitration for a 13.7 chargeback.

• If you claim that services were rendered, the issuer must provide proof that the services were not received. For example, if you provide a receipt saying the cardholder stayed at your hotel on the night in question, the issuer could provide documents that showed the cardholder stayed at a different hotel.

PREVENT

How can I avoid chargebacks like this in the future?

Want to prevent Visa 13.7 chargebacks in the future? Here are some suggestions.

• Write clear, easy-to-understand cancellation or refund policies.
• For card-present transactions, clearly disclose the cancellation or return policy on the transaction receipt. If the policy is on the front of the receipt, it should be near the customer signature line. If it is printed on the back, the cardholder must sign the front and initial the back near the policy disclosure.
• For card-present transactions, print the words “no returns” on all copies of the transaction receipt if you do not allow returns or have a limited return policy.
• For online transactions, clearly disclose the cancellation or return policy, either on the checkout page that contains the final purchase amount or on the checkout page near the submit button. Require customers to select a “click to accept” box or acknowledge the policy in some other way before completing the purchase. Visit our website requirements guide to learn more about creating a compliant checkout experience.
• Don’t accept delivery of returned merchandise if it doesn’t comply with your policy.
• Fulfill all qualified cancellations or refund requests promptly so the credit will be applied to the cardholder’s account before the chargeback filing deadline.
• Send a refund or cancellation confirmation email. Explain how long it will take to credit the cardholder’s account.
• Make sure you understand region-specific requirements for refunds and cancellations.

Click here to learn more about preventing chargebacks.