UA: Fraud

Fraud disputes on transactions receive either UA01 for card-present disputes or UA02 for card-not-present situations. Each code comes with different laws about the proof you need and the ways to respond that can determine how your dispute turns out.

Merchants treat UA codes like warning signs – they show you that there’s a problem with your payment security. Strong prevention steps and paperwork can actually turn these expensive disputes into problems that you can manage without any harm to your revenue or account relationship.

How It Works

Cardholders who see charges on their statement that they didn’t make always have the same first instinct – to call the bank instantly. A representative from the bank will jot down everything that happened and start an investigation to see if this was actual fraud or maybe just a charge that the customer forgot about – this first investigation is where the whole UA fraud code process kicks into gear.

Once the bank confirms that it looks like fraud, they assign a particular UA code based on just how the transaction went down. If somebody used a physical card at a brick-and-mortar store that usually turns into a UA01 case. If the charge happened online or over the phone without the physical card being present, the bank marks it as UA02, and each code easily tells merchants what fraud claim they’re dealing with.

Merchants usually hear about these claims through their payment processor within a few days of the first report. Included in the notification are the transaction facts, the particular UA code, and whatever evidence the bank has already grabbed. This means the original charge amount, the date it went through and any details from the cardholder explaining why they believe it’s fraudulent.

All this paperwork that comes with these notifications can be quite a bit to take in. Banks will send along copies of account statements, letters from the cardholder and sometimes even police reports if the customer filed one. Merchants usually have about ten days to send back their own proof and this tight timeline means that you’ll need to move fast to pull up receipts, signatures or any other evidence that shows the transaction was completely legitimate.

How it Affects Chargeback Prevention

UA01 codes throughout your reports signal that your authorization procedures probably need some work. Maybe your staff ends up skipping the verification steps during busy peak hours. UA02 codes usually mean that your online fraud screening isn’t catching suspicious transactions before they actually go through the system.

Strong authorization laws cut back on your liability quite a bit – that’s the positive news. Card networks will protect merchants who follow the right steps during the authorization process. This protection definitely disappears when you cut corners or ignore authorization laws though. You need to know which codes affect your business the most so you can build the right defenses against future incidents.

Ignore these patterns and your business will have problems. Your chargeback ratio climbs higher each month without fail. Payment processors start to see this upward trend in your account. Eventually they’ll even threaten to close your merchant account if conditions don’t improve fast enough. Nobody wants that problem since prevention is actually fairly easy.

Staff training and UA fraud reduction are connected across the industry. Employees who are properly trained know just the right time to ask for extra verification from customers. They get why careful authorization matters even during busy times. Every prevented UA chargeback saves you money and protects your processing relationship over the long run. Small improvements in how your team works with authorizations can cut UA incidents by half or more within just a few months.

Example Scenarios

UA01 cases usually start like this scenario. You don’t know it. Someone actually stole the card two days earlier. They haven’t even realized it’s missing from their wallet yet. There were a couple of actions that you could have done differently. This transaction was well over your store’s ID verification threshold, so you should have asked for identification. A quick call to your authorization center would have saved you some trouble once the customer started acting strange. You chose speed over caution though with five other customers who waited impatiently in line.

Your authorization request came back clean and definitely looked legitimate on the surface. A few red flags were sitting right there though, completely missed in the rush to process the order.

That address mismatch alone should have been enough to hit the brakes and run some extra verification checks. Add in the weird timing and the customer’s push for fast shipping and the whole scenario starts to look suspicious. Fraudsters always want their items delivered fast because they know they need to act faster – they need those goods delivered before the cardholder sees something strange on their account.

A quick verification email or even a short phone call would have caught this fraud attempt before it turned into a problem. Sometimes the smallest extra step can save you from weeks of trouble down the road.

Requirements and Timeframes

Getting hit with a UA fraud code means the clock starts ticking instantly. You have a full ten days to respond to the chargeback once it arrives. Miss that deadline and you automatically lose the dispute – no exceptions. Once that happens the bank won’t even bother looking at your evidence.

Ten days is actually pretty generous compared to other deadlines in payment processing. It gets harder later though. Cardholders can report unauthorized transactions to their bank for sixty full days, so you might get a dispute about a transaction that was from two months ago, after memories have faded and records are much harder to track down.

Record-keeping laws exist for this very reason. You need authorization records for every transaction that goes through your system. Store those signed receipts and full transaction logs. Once that dispute comes in then you’ll need to produce these documents instantly. You’re legally required to have them ready at all times.

Strict laws also apply to how you process transactions from the start. Never try to force a declined transaction through your system. Always get authorization for any sale that you make.

Break these laws and you’re automatically liable for any fraudulent transaction. Your merchant account provider might raise your fees or put you on probation. Multiple problems could mean that they drop you or end your ability to accept credit cards altogether.