What Are Late Presentment Chargebacks & How to Prevent Them?

I came across "late presentment" while researching other chargeback types. Digging further, I found they're serious but have a simple solution.

In this guide, I’ll explain what late presentment chargebacks are, why they happen, and how to avoid them.

Here we go.

Key Takeaways

• Late presentment chargebacks result from missed transaction deposit deadlines.
• Merchant error accounts for 40% of all chargebacks across industries.
• Visa enforces an 8-day transaction window for payments.
• Mastercard allows up to 30 additional days under certain conditions.
• Sellers rarely succeed in disputing late presentment chargebacks.

While there aren’t many ways to prevent late presentment chargebacks, using chargeback alerts can help prevent other types of disputes.

Click here to learn more.

What Are Late Presentment Chargebacks?

Late presentment chargebacks occur when merchants miss transaction deposit deadlines. Banks issue these when payments aren't processed within required timeframes. Regardless of customer satisfaction.

Issuers initiate these chargebacks, not the customer. Meaning, this type of dispute results from merchant error.

Are these common?

Merchant error contributes to about 40% of all chargebacks. These errors include transaction entry mistakes, incorrect shipping, or missed deadlines. I couldn’t find specific numbers on what percentage of those come from late presentment.

"Late presentment" appears under the following chargeback reason codes:

• Visa: 12.1
• Mastercard: 4842
• Discover and JCB (US purchases): LP
• American Express: P07 – Late Submission

Chargeback rules vary across card networks, as discussed later.

What does “presentment” even mean?

Summary: Merchants miss transaction deposit deadlines.

Understanding Presentment in Payment Processing

Presentment refers to the steps involved in processing transactions and paying merchants.

Here’s an overview:

1. Authorization: Verifying the cardholder’s funds and card status before transaction approval.
2. Batching: Grouping authorized transactions into a batch for submission to the acquirer.
3. Clearing: The acquirer routes sales through card networks to issuing banks.
4. Funding: Merchants receive payment, minus fees, and the cardholder is billed.

Here’s more context for each point:

Authorization occurs when a customer starts a credit card transaction. The payment system immediately checks that the card is valid, active, and has enough available funds. This process ensures the transaction’s security.

For instance, it makes sure the card is valid, hasn’t been reported stolen, and the account is active.

Think of it as a safeguard.

Batching is when merchants review and group daily sales into one batch for the acquirer, their payment processor or bank. This step organizes transactions, saving time by processing them in groups instead of one by one.

However:

Sellers have limited time to complete this step, which is where “late presentment” issues can happen.

By the way, the acquirer is the merchant’s payment processor or bank.

Clearing is when the bank routes each payment through card networks to the correct issuing bank. During this step, banks verify and reconcile transaction details to finalize payments accurately.

After clearing, the merchant receives funds, minus any fees.

Let’s see why late presentment could happen.

Common Causes of Late Presentment Chargebacks

The main causes of late presentment chargebacks include:

• Failing to process transactions within the required timeframe.
• System outages that prevent timely submission.
• Delaying transactions to reduce processing fees.
• Staff turnover causing unprocessed transactions to pile up.
• Technical issues between the point-of-sale system and processor.
• Temporary terminal malfunctions delaying uploads.
• Natural disasters disrupting normal transaction processing.

Each of these scenarios results from late transaction submissions. For instance, staff turnover can create backlogs that delay processing.

Now, let's examine the rules set by different card networks.

Rules for Different Card Networks

Mastercard and Visa handle late presentment chargebacks differently.

Discover also has the “LP” reason code, though specific guidance is less available. A dedicated section isn’t necessary. American Express uses P07 for similar situations.

Each network’s rules affect how merchants should approach chargeback disputes and deadlines.

Let’s see how they differ.

1. Visa’s Late Presentment Rules

Visa’s reason code 12.1 flags transactions as “late” if not submitted within:

• 8 calendar days for general transactions.
• 8 calendar days for Visa Electron and ATM.
• 5 calendar days for returns and credits.
• 2 calendar days for Visa ReadyLink.

Visa doesn’t allow disputes for these chargebacks; merchants must accept them.

Is Mastercard more forgiving?

2. Mastercard’s Late Presentment Rules

Mastercard’s reason code 4842 applies to late presentment if you meet 3 conditions:

• The cardholder’s account is permanently closed.
• The issuer tried to collect payment.
• Seller submitted payment after the deadline.

Mastercard timeframes include:

• 1 business day for payment transactions.
• 7 calendar days for electronic transactions.
• 14 calendar days for contactless transit.
• 8 calendar days for manual entries (14 days if both merchant and card are US-based).

Merchants may get up to 30 extra days for specific conditions. For instance, having permission to delay transactions or experiencing a bank holiday lasting four days or more.

Merchants can contest a chargeback if they submitted on time, the cardholder’s account isn’t closed, or an approved exception applies.

Here’s a guide on how Mastercard’s chargeback process works. Read it before fighting the dispute.

However…

If they missed the deadline, they must accept the chargeback.

How would you deal with this type of chargeback in general?

How to Deal With Late Presentment Chargebacks

Don’t bother fighting them. Late presentment chargebacks are tough to dispute. You’d need solid, irrefutable evidence to win. Attempting to fight one might even lead to a different chargeback reason code.

Are there average success rates for merchants fighting these disputes? Nope.

If you face a late presentment chargeback, there’s little you can do besides learning from it and preventing future ones.

Summary: You can try to fight them, but you’d waste time doing so.

How to Prevent Late Presentment Chargebacks

Prevent late presentment chargebacks by processing transactions on the same day. Submit complete payment details immediately. Always meet your card network's specified timeframes for transaction processing.

I’d love to write a 400-word section providing a million ways to prevent this chargeback type. But the solution is simple. Respect the issuer’s deadlines.

Why should you even worry about late presentment chargebacks?

Summary: Process transactions on the same day.

Impact of Late Presentment on Business Revenue

Chargebacks bring additional fees, and too many can place you in a chargeback monitoring program. This means further costs per chargeback and review fees that reach thousands of dollars.

If I didn’t scare you, read this guide on how nasty chargeback monitoring programs are.

Frequent late presentments can also strain relationships with card networks. Potentially increasing fees or imposing stricter requirements.

There’s not much else to cover here. I recommend reading more guides on different chargeback types. As all types of chargebacks contribute to chargeback rates.

Wrapping Up

If you receive a late presentment chargeback, it’s best to accept it and focus on prevention. Fighting it will waste time, money, and other resources you could put toward other efforts.

To prevent other chargeback types, consider using chargeback alerts. We offer CDRN, RDR, and Ethoca alerts in one place.

Try them out.