Excessive Chargeback Program

− The merchant captured fraudulent card(s) transacted at its location.

− The merchant assisted with the apprehension and conviction of criminal(s) that transacted fraudulent cards at its location.

− The merchant identified fraudulent transactions before shipping merchandise and issued credits to the cardholder account in a timely fashion, provided the credit was not issued in response to a retrieval request or chargeback.

8.6 Excessive Chargeback Program

The Excessive Chargeback Program applies to all merchants and is designed to reduce excessive chargebacks, excessive credits to cardholder accounts, and fraud.

It is the acquirer’s responsibility to monitor its merchants on an ongoing basis, in accordance with the requirements set forth in section 7.2 of this manual. Should the acquirer determine that a merchant exceeded the Excessive Chargeback Program thresholds, it must immediately notify the MasterCard Merchant Fraud Control department and declare the merchant an Excessive Chargeback Merchant.

Should a merchant, or a merchant location, have a minimum of 15

chargebacks and a ratio of chargeback transactions to total sales transactions of at least 1%, or a ratio of chargeback dollar volume to sales dollar volume of at least 2.5% for two consecutive calendar months, then MasterCard staff may, at its discretion, declare the merchant, or a specific location of the merchant, to be an Excessive Chargeback Merchant.

8.6.1 Credits

When, in the opinion of MasterCard staff, the merchant has issued credits for any of the reasons or conditions listed below or to otherwise avoid the

applicability of this rule, MasterCard will consider the credits as chargebacks in evaluating the merchant’s performance. For example:

• Credits issued in lieu of chargebacks, either before or after the initiation of the chargeback

• Credits issued because of the merchant’s failure to control its backroom processes

8.6 Excessive Chargeback Program

• Credit issued exceed the number of chargebacks received by the merchant

• Refunds issued by means of a check to resolve fraud or customer service issues

MasterCard may assess the acquirer USD 25 for each credit processed, in addition to any chargeback assessments.

8.6.2 Acquirer Liability

Once a merchant is declared an Excessive Chargeback Merchant, the

acquirer(s) of record is liable for issuer recovery costs related to chargebacks and credits (if applicable), as described in section 8.6.6.1 and any other applicable fees and assessments from the period during which the Excessive Chargeback Program thresholds were exceeded. A change to the corporation status, business name, or ownership of an Excessive Chargeback Merchant will not affect the applicability of these rules.

If MasterCard identifies a merchant under the Excessive Chargeback Program and the acquiring relationship ends and the merchant subsequently enters into a new acquiring relationship, MasterCard reserves the right to transfer the chargeback recovery cost liability and any other applicable fees and

assessments to any new acquirer for the applicable period. MasterCard will base the applicable period on information in the MATCH system and

published in the Global Security Bulletin. The new acquirer must register the identified merchant with MasterCard, as described in section 8.6.3 before processing transactions.

8.6.3 Registration

MasterCard will identify merchants exceeding the Excessive Chargeback Program thresholds in a Global Security Bulletin. The acquirer must register such merchants within 15 calendar days of the Global Security Bulletin. For registration requirements, refer to section 9.4.4of this manual.

MasterCard will assess the acquirer an annual USD 1,000 registration fee for each merchant identified under the Excessive Chargeback Program.

8.6 Excessive Chargeback Program

8.6.3.1 Noncompliance Assessments for Failure to Register and for

Excessive Fraud

If the acquirer fails to register an Excessive Chargeback Merchant or if an Excessive Chargeback Merchant exceeds USD 25,000 in fraud in any calendar month, the acquirer will be subject to the assessments described in section 9.4.5.

8.6.4 MasterCard Evaluation

MasterCard will evaluate transaction data to determine whether the Excessive Chargeback Program thresholds were exceeded. MasterCard will notify affected acquirers formally, in writing, of the evaluation outcome.

If a subsequent MasterCard evaluation of a merchant previously declared an Excessive Chargeback Merchant determines continuing performance issues at the original or new acquirer, MasterCard may extend the assessments and the issuer recovery cost period beyond the dates initially indicated in the original Global Security Bulletin.

8.6.5 MasterCard Post-evaluation Procedure

If MasterCard declares a merchant, or a merchant location, in violation of the Excessive Chargeback Program, MasterCard will notify the acquirer and directly debit its MCBS account for the appropriate amount.

Staff then will list the merchant in a Global Security Bulletin and notify issuers of the period during which they can charge back transactions.

8.6.7 Recurring Payment Transaction Processing Prohibition

for Electronic Commerce Adult Content (Videotext) Merchants

If MasterCard determines that an electronic commerce adult content (videotext) merchant is identified in the Excessive Chargeback Program, MasterCard will notify the acquirer and will list the identified merchant in a Global Security Bulletin. The acquirer must not submit into interchange a recurring payment transaction for a one-year period, effective from the first day of the month following the acquirer’s notification.

If an Excessive Chargeback Merchant terminates its relationship with the acquirer, MasterCard will transfer the prohibition for processing recurring transactions to any new acquirer for the applicable period.