First announced in April 2019, Mastercard’s Excessive Chargeback Merchant Program (ECMP) imposes significant financial penalties on merchants that incur what the network regards as unusually high levels of chargebacks.
It might seem very unfair.
Particularly if you’re one of the vast majority of businesses that try to do the right thing by their customers, but fall victim to fraud – either friendly or unfriendly.
Why is MasterCard Doing This?
But the major card networks are concerned above all to preserve the reputation and integrity of their brands.
And if you fail to comply with their requirements they’ll have no hesitation in levying hefty fines, or – in the worst case – removing you from their network altogether.
So Mastercard is now monitoring all transactions for chargebacks and will notify your acquiring bank at once if your business exceeds certain thresholds.
The Key Chargeback Numbers You Need to Know
Incur between 100 and 299 chargebacks in a calendar month – or if your chargebacks are between 1.5 and 2.99% of your total transactions in the same period – you will be placed in the ECMP.
But if your chargebacks exceed 300 – or 3% of your transactions – in a month, you will be placed in what is called the High Excessive Chargeback Merchant Program (HECMP).
Fines will then be assessed on an ascending scale based on the number of months of non-compliance with the above limits.
The Enormous Potential Costs of Non-Compliance
No fines are levied in the first month, but they begin at $1,000 in month 2. Thereafter, it’s important to note that fines for merchants in the HECMP will be double those payable in the ECMP, rising to $10,000/$5,000 in months 4-6 of non-compliance, and $100,000/$50,000 after a year.
Stay in the programs for 19 months or more and you could theoretically be hit with staggering fines of $200,000/$100,000.
We say theoretically because in practice either Mastercard or, more likely, your acquiring bank will almost certainly terminate your account long before things get to that stage.
It’s crucially important, therefore, that you keep your chargebacks below the program thresholds. Or, in the worst case, that you’re able to exit the ECMP as quickly as possible.