High Dispute, Chargeback and Fraud Monitoring Programmes
Part of processing card payments and having a merchant account with Square means that your dispute ratios (rate of chargebacks) and fraud volume have to remain within acceptable limits, set by card networks. Though these limits vary by network (e.g. Visa and Mastercard), the spirit of their programmes remains consistent – to manage the risk within the ecosystem and to notify, monitor and, if applicable, fine merchants who exceed these acceptable limits.
VDMP & VFMP
Visa’s excessive chargeback and fraud programmes are referred to as Visa Dispute Monitoring Program (VDMP) and Visa Fraud Monitoring Program (VFMP). These programmes set standards for a merchant’s acceptable monthly chargeback ratios and fraud amount and the assessment of potential fines depends upon the count, type of chargebacks and dispute and fraud amount you are experiencing. See the tables below for additional guidelines.
VDMP Thresholds
| Timeline | Dispute Count | Dispute Count to Sales Count Ratio |
|---|---|---|
| Standard | 100 | 0.90% |
| High Brand Risk Merchants / Excessive | 1000 | 1.80% |
VDMP Non-Compliance Fine Schedule
| Timeline | Month | Assessment |
|---|---|---|
| Standard | 1-4 | N/A |
| Standard | 5-9 | $50 per dispute |
| Standard | 10-12 | $50 per dispute & $25,000/mo. reserve fee |
| High Brand Risk Merchants / Excessive | 1-6 | $50 per dispute |
| High Brand Risk Merchants / Excessive | 7-12 | $50 per dispute & $25,000/mo. reserve fee |
VFMP Thresholds
| Timeline | Fraud Amount | Fraud to Sales Amount Ratio |
|---|---|---|
| Standard Threshold | $75,000 | 0.90% |
| Excessive Threshold | $250,000 | 1.80% |
VFMP Non-Compliance Fine Schedule
| Timeline | Month | Assessment |
|---|---|---|
| Standard | 1-4 | N/A |
| Standard | 5-6 | $25,000 |
| Standard | 7-9 | $50,000 |
| Standard | 10-12 | $75,000 |
| High Brand Risk Merchants / Excessive | 1-3 | $10,000 |
| High Brand Risk Merchants / Excessive | 4-6 | $25,000 |
| High Brand Risk Merchants / Excessive | 7-9 | $50,000 |
| High Brand Risk Merchants / Excessive | 10-12 | $75,000 |
ECM & HECM
Mastercard’s versions of high dispute programmes are called Excessive Chargeback Management (ECM) and High Excessive Chargeback Management (HECM). As above, these programmes set thresholds for acceptable monthly chargeback ratios and allow for potential fines, again, depending on the count and type of chargebacks arriving. Please see below for guidance on Mastercard programmes.
ECM & HECM Chargeback Thresholds*
| Mastercard Program | Count of Chargebacks | Chargeback to Sales Count Ratio |
|---|---|---|
| ECM | 100-299 | 1.5%-2.99% |
| HECM | 300+ | 3% |
*Both the count and the ratio thresholds must be met for a merchant to enter the ECM or HECM programmes.
ECM & HECM Fine Schedule
| Months Above ECM Thresholds | Assessment | Issuer Recovery Assessment |
|---|---|---|
| 1 | 0 | No |
| 2 | $1,000 | No |
| 3 | $1,000 / $2,000 (HECM) | No |
| 4-6 | $5,000 / $10,000 (HECM) | Yes* |
| 7-11 | $25,000 / $50,000 (HECM) | Yes* |
| 12-18 | $50,000 / $100,000 (HECM) | Yes* |
| 19+ | $100,000 / $200,000 (HECM) | Yes* |
*Issuer recovery assessment applies to the merchant at $5 per chargeback for over 300 chargebacks.
Support from Square
Not only can these programmes result in fines that will impact your business, but they can also result in the card networks, such as Visa & Mastercard, refusing to allow continued acceptance of their cards. Though these instances are rare, they illustrate the importance of taking steps to quickly address the elevated chargeback rates.
Square will notify you as soon as we are made aware of your placement within one of the above programmes. We can also help identify potential causes and contributors to the increased rates, as well as recommend actions you can take to help drive down your chargeback exposure and get you back to what you do best – running your business.