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TREASURY MANAGEMENT

Credit Card Fraud: What Is It and How To Avoid It

What Is a Chargeback?

A chargeback is the result of a credit card transaction being reversed and deducted from our bank account. The process of a chargeback begins when a credit card holder disputes a charge posted to their credit card statement. The cardholder communicates the dispute within 120 days to their bank (issuer) who files the complaint with our bank (acquirer). This process is governed by Visa, MasterCard, Discover and American Express. Upon receipt of the chargeback request, our bank (acquirer) will prepare a retrieval request on our behalf. We have 5 days to respond and supply a copy of the sales draft back to our bank (acquirer). If the appropriate documents are provided, our bank will reverse the chargeback and our account will be credited.

Reasons for Chargeback

Account number not on file
The cardholder's account number presented to the cardholder's bank (issuer) does not match one on their files.
Canceled recurring transaction
The cardholder or the cardholder's bank (issuer) states that the merchant was advised to cancel a recurring transaction and did not do so.
Cardholder dispute
The cardholder has disputed the charge for reasons of:
For all of these reasons, the cardholder must issue a letter and have made an attempt with the merchant to resolve the dispute.
Credit not processed
A credit or written credit acknowledgment was issued to the cardholder but never processed by the merchant. The cardholder states that the good(s) or service(s) was not delivered/performed.
Declined authorization
A transaction was completed after a declined authorization response was received.
Duplicate processing
A single transaction was processed two or more times to the issuer for the same cardholder account number.
Expired card or never issued account number
A mail order/telephone order or recurring transaction was completed using an expired or fictitious account number and no authorization was obtained.
Fraudulent mail/telephone transaction
A mail order/telephone order or recurring transaction was completed without the cardholder's authorization or participation.
Fraudulent transaction—no imprint
A transaction was completed without obtaining the card imprint with the exception of stripe read transactions, and the cardholder has written a letter stating that they neither made nor authorized the transaction.
No authorization or exceeds floor limit—not authorized
A transaction was complete which exceeded the merchant’s floor limit and for which no authorization was obtained.

How to Avoid Fraud for Non-Card Present Transactions—Follow These Steps

  1. Ask for the name of the bank that issued the credit card. This will discourage thieves since the cardholder may only have the account number and not the actual card in hand.
  2. Contact the customer and verify the information that was originally provided for the credit card transaction. In many cases, if they are a fraudulent consumer, they will not be able to verify the information that they originally provided since they may have been offering information at random with no real record of what they provided.
  3. Request the billing address on the transaction when the customer calls, in addition to the mailing address. Perform address verifications manually by calling Chase Paymentech at 1-800-884-1159 or if you are a merchant that accepts transactions without the card present, we can add this to your card terminal.
  4. Be sensitive to unusual activity during the telephone conversation and communicate to others in your department for awareness.
  5. Refer to "GUIDELINES FOR CARDHOLDER SECURITY FOR CARD-NOT-PRESENT CREDIT CARD TRANSACTIONS" for additional information.
  6. Settle your terminal daily before 5pm and prepare and deposit your credit card transactions daily to your central processing unit.

How To Avoid Fraud for Card Present Transactions—Follow These Steps

  1. Settle your terminal daily before 5pm and prepare and deposit your credit card transaction daily to your central processing unit.
  2. Retain your terminal's daily settlement receipts in a locked secure manner which can be retrieved timely and easily.
  3. Reply to any chargeback request within the 5 day business period.
  4. Maintain a system of receipts that contains information relative to the transaction that may be referred to if a chargeback occurs.

Process for Internal Handling of Chargeback

Our bank, First Data Corp. will notify Treasury via fax of a request for chargeback. Treasury will fax the notification to the department head and/or the individual responsible for the terminal.

The department must then take the appropriate action to respond to the bank's request. The request will identify what action is required of the department. The department must research the appropriate customer receipt—signed or unsigned, the daily settlement receipt and other appropriate documents that are requested by the bank.

In most cases, the reply should be faxed to the bank. The department should fulfill this request within 5 business days and if necessary, perform the appropriate cash entry to reverse the ledger charge. If there are any questions, please refer to your department head or to Treasury (extension 5-3734).