Understanding Visa's New Chargeback Rules

In 2017, Visa^® began rolling out a new chargeback procedure designed to simplify the process and, in April of this year, the new rules were enforced. With the new rules having now been in place for several months, we thought it would be a good time to revisit the Visa chargeback changes.

Known as Visa Claims Resolution (VCR), the new system places less emphasis on traditional litigation (i.e., back-and-forth disputes) and more emphasis on liability. Due to consumer protection laws, starting the chargeback process is very easy for customers. A quick call to the bank or a simple click of the mouse is really all it takes, and the customer’s work is finished. However, for you the merchant, the action is only starting when the consumer initiates the process.

Previously, once the chargeback was initiated, the merchant could expect a lengthy process during which the burden was on the merchant to prove the sale was legitimate. This involves phone calls, emails, forms and documentations - spread over many months.

So, even if the merchant won the case, it often was an expensive win due to the time and effort spent. Worse still is the fact that the arduous process had to be repeated time and time again for every new chargeback. To help combat some of the frivolous chargebacks, often called “friendly fraud”, Visa has introduced new chargeback rules.

Every card brand, issuer, processor and country handles chargebacks a little differently. In 2017, Visa began rolling out a new chargeback system designed to simplify the process. Known as Visa Claims Resolution (VCR), this system places less emphasis on traditional litigation and more emphasis on liability. The official rules themselves are complex (and you can read them here).

One way in which VCR could help improve the system is through automation. Visa will use rules and workflows to screen chargebacks before they move onto the next stage. Automation will help the company weed out weak cases that consume resources. This is a win for merchants, since merchants will only need to actively dispute chargebacks that pass a certain validation threshold.

Another benefit to the updated Visa policies is shorter response times. Under the old rules, merchants had 45 days during which to respond to new chargebacks. That number is now 30 days. Additionally, disputes used to last up to 150 days (sometimes longer). But with these rule changes, all cases will be closed within 70 to 100 days — depending on the chargeback code involved.

The shorter response times and automations are not the only rule changes, just a couple we chose to highlight here. It’s important that merchants understand the chargeback procedure for all the card brands they accept. Being well-informed and well-versed in the chargeback procedures that could affect your business is a great way to prepare and protect it from frivolous chargebacks.