Mastercard’s chargeback monitoring program is called the Excessive Chargeback Program (ECP). It contains two tiers of program thresholds (CMM and ECM) and your account will fall into one or the other, depending on the severity of the chargeback issue. Just as with their fraud program, the goal of this program is to reduce chargebacks — due to either fraud or consumer dispute reasons — and improve the payment experience. This program is not new and there are no changes to this program at this time.
Excessive Fraud Merchant (EFM)
Mastercard identifies merchant activity at the merchant account level. If a merchant account meets the following conditions in a calendar month, they can be placed in the EFM program:
- At least 1,000 Mastercard sales transactions in the previous month
- At least $50,000 in Mastercard fraud chargebacks under reason codes:
- 4837 (No Cardholder Authorization)
- 4863 (Cardholder Does Not Recognize — Potential Fraud)
- At least 0.50% fraud chargebacks-to-sales ratio
- Less than 10% of volume passing through 3D Secure in non-regulated countries or less than 50% of volume passing through 3D Secure in regulated countries
Non-regulated countries refers to countries without a legal or regulatory requirement for strong cardholder authentication (e.g. US, Canada, some European countries). Regulated countries refers to countries with legal or regulatory requirements for strong cardholder authentication (e.g. some European and APAC countries).
Once in the EFM program, the account is eligible for the fines as shown in the table below. However, while the program is rolling out in October 2019, Mastercard will not start assessing these fines until March 2020 for most regions. The exception is Canada, who will not receive fine assessments until October 2020.
To be removed from the EFM program, a merchant must be in compliance for three consecutive months, meaning the account did not meet the criteria listed above to be flagged in the program. Once a merchant exits the EFM program, any subsequent flagging would start over at Month 1 again. While enabling 3D Secure is not a requirement of this program, it is recommended to help mitigate fraud by authenticating transactions.
Excessive Chargeback Program (ECP)
Just as with the EFM program, merchants are identified in the Mastercard chargeback program at the merchant account level. Mastercard calculates chargeback ratios by taking the total number of first chargebacks received in a given calendar month and dividing it by the prior month’s sales.
For example: June’s chargebacks / May’s sales
There are two different thresholds in Mastercard’s ECP program in which a merchant could be identified. Those are:
Chargeback Monitored Merchant (CMM)
A merchant can be placed in the CMM program when the following criteria is met in a calendar month:
- First chargebacks received: 100
- Chargeback-to-sales ratio: 1.0%
There are no fine assessments at the CMM level.
Excessive Chargeback Merchant (ECM)
A merchant can be placed in the ECM program when the following criteria is met in a calendar month:
- First chargebacks received: 100
- Chargeback-to-sales ratio: 1.5% for two consecutive months
Mastercard can assess fines the first month a merchant enters the ECM program. These fines are assessed at the discretion of Mastercard and, in general, can be up to the total amount of Mastercard confirmed chargebacks in the ECM identification. For example, if your account had $5,000 in confirmed Mastercard chargebacks in your ECM identification, this fine would not exceed $5,000.
To be removed from the ECP, a merchant must be below CMM thresholds, which is 100 chargebacks and 1.0% chargeback to sales ratio, for two consecutive months. Once a merchant exits the ECP they begin a clean slate, and any subsequent flaggings would start their standings from the beginning.
Other considerations
If a merchant breaches the thresholds for both the Excessive Fraud Merchant (EFM) program and the Excessive Chargeback Program (ECP), they would be entered into the EFM program and not the ECP.
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