New Mastercard chargeback rules
 

Revised Standards for the Excessive Chargeback Program

Summary: Effective as of October 1st, 2006, MasterCard will implement the new Excessive Chargeback Program (ECP) standards which will replace the current standards.

Background:

The ECP encourages acquirers to closely monitor merchant's chargeback performance on an ongoing basis, so that the appropriate action can be taken to prevent chargebacks from becoming excessive.

Calculating monthly chargeback levels:
Each calendar month, the acquirer is responsible for calculating the chargeback-to-transaction ratio (CTR) in basis points for each of its merchants.
The CTR is the number of chargebacks that the acquirer receives for a merchant location in a calendar month, divided by the number of sales transactions received from that merchant location the preceding month. (A CTR of 1 percent equals 100 basis points.)

The CTR will be calculated on a monthly basis and will be reported to MC in CMM and ECM reports as described below:

CMM:

If a merchant location has a CTR in excess of 50 basis points and at least 50 chargebacks in a calendar month, MasterCard considers it a Chargeback-Monitored Merchant (CMM). The merchant will be charged 50$ for such a monthly report.

ECM:

If in each of two consecutive calendar months (the ?trigger months?), a merchant location has a CTR of at least 100 basis points and a minimum of 50 chargebacks, the merchant location is an Excessive Chargeback Merchant (ECM). The merchant location maintains the designation of ECM until its CTR is below 100 basis points for two consecutive months. The ?ECM Claim Period? starts on the first day of the first trigger month and ends when the merchant no longer is an ECM.


An ECM report (in lieu of a CMM report) for each merchant will be filled out on a monthly basis.
The merchant will be charged 300$ for such a monthly report. as well as any additional assessments MasterCard may assess for issuer reimbursement fees and violation assessments for excessive chargebacks arising from an ECM (as described below).



The ECM report must include all of the information required for the CMM report, and the following additional information:
a) A description of the acquirer?s chargeback controls in place to monitor the ECM?s activities
b) An evaluation of the practices that caused the ECM to exceed the ECP Standard
c) An acquirer action plan to reduce the ECM?s CTR

ECP Assessment Calculation

MasterCard determines an acquirer?s liability for the monthly issuer reimbursement fees and assessments for each ECM as set forth below. MasterCard calculates the issuer reimbursement fees in the following steps
1, 2, and 3, and calculates the violation assessment in step 4.

1. Calculate the CTR for each calendar month that the ECM exceeded a CTR of 100 basis points (which may also be expressed as 1% or 0.01).

2. From the total number of chargebacks in the above CTR calculation, subtract the number of chargebacks that account for the first 100 basis points of the CTR. (This amount is equivalent to 1% of the number of monthly sales transactions used to calculate the CTR.) The result is the number of chargebacks above the threshold of 100 basis points.

3. Multiply the result from step 2 by USD 25. This is the issuer reimbursement.

4. Adjust the result in step 3 to reflect the extent that the acquirer has exceeded the 100 basis points threshold by multiplying the value in step 3 by the CTR (expressed as basis points). Divide this result by 100. This amount is the violation assessment.
Repeat steps 1?4 for each calendar month that the ECM exceeded a CTR of 100 basis points or 1%.

Looks to be more fair to the merchant. Gone are the crazy $100,000 fines after a few months of over the limit. Looks like they eliminated the requisite of being in the excessive chargeback program for 12 months once you exceed 2 months. Thoughts?

Good find

is that high risk or just regular merchants?

a little confusing... glad I dont have to deal with proccessor :thumbsup:

The good: 50 CBs threshold
The bad: Thresholds are calculated on previous (!) months sales. Makes it a bit harder to manage accounts if you know what I mean.