Mastercard Excessive Chargeback Program

By October 25, 2018Industry Terms

Mastercard’s Excessive Chargeback Program (ECP) is used as both a penalty for excessive chargebacks and a corrective effort to help manage chargebacks more effectively.

Acquirers must carefully monitor the risk that individual merchants pose to the Mastercard brand. If certain risk metrics exceed predetermined thresholds, acquirers must enroll merchants in the Excessive Chargeback Program, classified as either a Chargeback-Monitored Merchant or an Excessive Chargeback Merchant.

How Does Mastercard Measure Risk?

Mastercard uses two benchmarks to evaluate risk: number of chargebacks and the chargeback-to-transaction ratio.

Merchants who breach both of these thresholds are enrolled in the Excessive Chargeback Program.

Chargeback-Monitored Merchant

Classification as a Chargeback-Monitored Merchant is essentially a warning. The merchant is on pace to breach thresholds and have chargeback metrics that are considered “excessive”.

A Chargeback-Monitored Merchant receives 100 or more chargebacks in a calendar month and has a chargeback-to-transaction ratio of 1% or above.

Mastercard does not assess fees to CMMs.

Chargeback-Monitored Merchants exit the program when their monthly count and ratio remain below the thresholds for two consecutive months.

Excessive Chargeback Merchant

An Excessive Chargeback Merchant receives 100 or more chargebacks each month and has a chargeback-to-transaction ratio of 1.5% or above for two consecutive months.

Mastercard assesses fees to ECMs, and the merchant must create an action plan to reduce their risk exposure.

Excessive Chargeback Merchants exit the program when their chargeback-to-transaction ratio is below 1.5% for two consecutive months.

The ECM timeline is broken up into two tiers. Penalties and fees depend on how long the merchant remains in the program. Length of time is both consecutive and non-consecutive months.

  • Tier 1: Months 1 – 6
  • Tier 2: Months 7 – 12

The acquirer’s liability increases significantly when the merchant advances to tier 2, incurring more responsibilities, costs, and penalties. Acquirers are considered non-compliant if they continue to provide payment processing privileges to a merchant who has been an ECM for more than 12 months.

In reality, the acquirer will likely be interested in severing ties much sooner than the 12-month deadline.

Additional Details for Acquirers

Acquirers are responsible for effectively managing merchant risk. Mastercard regulations include the following:

CMM Monthly Reports

  • Submit one report per merchant.
  • Submit the report no later than 45 days after the reviewed month and every month thereafter that the merchant is in the program.
  • Send reports for an additional two months after the merchant exits the program.
  • Share a copy of the report with the merchant.
  • The report must include all of the following:
    • CMM’s name and location
    • Month being reported
    • The month’s chargeback-to-transaction ratio
    • Merchant’s MCC and a description of the business
    • Number of Mastercard transactions in the reported calendar month
    • Number of Mastercard transactions in the preceding calendar month
    • Gross dollar volume of Mastercard transactions in the reported calendar month
    • Gross dollar volume of Mastercard transactions in the preceding calendar month
    • Number of Mastercard chargebacks in the reported calendar month
    • Gross dollar volume of Mastercard chargebacks in the reported calendar month
    • Additional information that Mastercard may require

ECM Monthy Reports

  • Submit one report per merchant.
  • Submit the report no later than 30 days after the second trigger month and every month thereafter that the merchant is in the program.
  • Send reports until the merchant’s chargeback-to-transaction ratio is below 1.5% for two consecutive months.
  • Share a copy of the report with the merchant.
  • The report must include all of the following:
    • CMM’s name and location
    • Month being reported
    • The month’s chargeback-to-transaction ratio
    • Merchant’s MCC and a description of the business
    • Number of Mastercard transactions in the reported calendar month
    • Number of Mastercard transactions in the preceding calendar month
    • Gross dollar volume of Mastercard transactions in the reported calendar month
    • Gross dollar volume of Mastercard transactions in the preceding calendar month
    • Number of Mastercard chargebacks in the reported calendar monthGross dollar volume of Mastercard chargebacks in the reported calendar month
    • A description of the chargeback controls the acquirer is using to monitor the merchant’s activities
    • An evaluation of the practices that caused the merchant to exceed program thresholds
    • An action plan to help reduce the merchant’s chargeback-to-transaction ratio
    • An electronic file containing details for each chargeback received in the month
    • Additional information that Mastercard may require

Additional Responsibilities

  • Receive feedback from Mastercard regarding each Tier 2 ECM, including tips to update the action plan and additional steps the acquirer should take to reduce the chargeback-to-transaction ratio
  • Undergo a Global Risk Management Program Customer Risk Review if desired by Mastercard (at the acquirer’s expense)

Fees

  • Issuer reimbursement fees (dynamic calculations–contact Midigator if you’d like to learn more)
  • Violation assessments (dynamic calculations–contact Midigator if you’d like to learn more)
  • $100 for each ECM report
  • $5,000 monthly late fee if the acquirer fails to submit a CMM report (applicable for each past-due month)
  • $500 daily late fee if the acquirer fails to submit an ECM report (increases to $1,000 a day after the first 15 days)
  • $50,000 monthly non-compliance fee if the acquirer continues to provide payment processing privileges to a merchant who has been classified as an ECM for more than 12 months

Need Help Managing Chargebacks?

Midigator® simplifies the dispute process for the entire payment ecosystem.

If you are a merchant, Midigator has the tools you need to reduce chargebacks and abide by thresholds. We can help you exit the Mastercard Excessive Chargeback Program and avoid enrollment in the future.

If you are an acquirer or processor, Midigator can help you identify the source of disputes to better manage them. The technology enables unparalleled transparency.

Sign up for a demo of Midigator today.

 

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