Understanding chargebacks and how to prevent them
4 Minutes
The amendments to these rules are designed to simultaneously improve transparency for cardholders and to decrease chargebacks.
What are the new requirements for merchants?
Following the changes, merchants that set up RTAs with cardholders will be required to do the following:
- Provide a notification to cardholders prior to the expiration of any “free” trials, introductory offers, or promotional activities.
- Provide ongoing notification of any changes to an RTA or notification of an upcoming payment when there is a long gap between payments.
- Submit an Account Verification message (0 value authorization) where no immediate payment is required. Note: If a non-approval response is returned, no subsequent Recurring Transactions may be submitted under the RTA, and merchants should address this matter with the cardholder.
What do you need to do?
The following operating principles will need to be applied to transactions that form part of RTAs:
1. Entering a Recurring Transaction Agreement
A merchant must provide the following information to the cardholder prior to obtaining their consent:
- The amount of the recurring transaction.
- Whether the amount is fixed or variable.
- The date of the recurring transaction.
- Whether the date is fixed or variable.
- The method of communication for all cardholder correspondence.
2. Confirmation of a Recurring Transaction Agreement
Once the cardholder has provided their consent for an RTA, the merchant must provide confirmation of the RTA within two business days, using the agreed method of communication.
3. Notification of changes to a Recurring Transaction Agreement
A merchant must notify the cardholder, using the agreed method of communication, at least seven working days prior to the RTA payment being processed in any of the following situations:
- More than six months have elapsed since the last payment.
- A trial period, introduction offer, or promotional activity expires.
- Any change to the amount of the recurring transaction and/or any change to the date of the recurring transaction.
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