educational

MasterCard Revising Standards for Excessive Chargeback Program

Adam McDonald

Effective Aug. 15, MasterCard is changing the current Excessive Chargeback Program thresholds related to the identification of both Chargeback-Monitored Merchants and Excessive Chargeback Merchants.

The Excessive Chargeback Program identifies two types of merchants: Chargeback-Monitored Merchants — those merchants which are approaching their monthly chargeback limits — and Excessive Chargeback Merchants — those merchants which have exceeded their monthly chargeback limits.

Though these new standards will certainly drop the number of adult entertainment businesses classified as excessive chargeback merchants, they do not fully fix the chargeback issues some merchants face.

The primary factor in classifying which category a merchant falls into under the Excessive Chargeback Program is the chargeback-totransaction ratio, which is defined as the number of MasterCard chargebacks received for a merchant in a calendar month divided by the total amount of the merchant’s MasterCard sales transactions from the preceding month.

MasterCard clarifies that a merchant is defined, for the purposes of the Excessive Chargeback Program, as any distinct merchant location identified by the acquirer – the bank that processes the transaction — in the transaction record.

The “location” in this definition refers to either a physical location or a merchant’s website.

The Excessive Chargeback Program is intended to encourage each payment processor to closely monitor its chargeback performance at the merchant level and determine when a merchant has exceeded, or is likely to exceed, monthly chargeback thresholds.

All merchant data reported to the Excessive Chargeback Program after the effective date are subject to the new criteria.

The new thresholds are as follows:

  • For chargeback-monitored merchants: a chargeback-totransaction ratio in excess of 100 basis points (1 percent) and at least 100 chargebacks in a calendar month;
  • For excessive chargeback merchants: a minimum chargeback-to-transaction ratio of 150 basis points (1.5 percent) and at least 100 chargebacks in each two consecutive calendar months.

These changes should come as welcome relief to the adult industry, as many adult businesses have struggled with the previous guidelines set by MasterCard.

Though these new standards will certainly drop the number of adult entertainment businesses classified as excessive chargeback merchants, they do not fully fix the chargeback issues some merchants face.

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