American Express Chargeback Reason Code F31: EMV Lost/Stolen/Non-Received

What is American Express Chargeback Reason Code F31?

The American Express chargeback reason code F31 covers transactions on lost or stolen EMV chip-and-PIN-enabled cards. It falls under the fraud category and is closely related to the chargeback reason code F30. Addressing it requires evidence that you used the appropriate devices to process payments securely.

Cardholders can lose their cards and request new ones. Fortunately, they might receive new cards and deactivate the old ones before fraudsters lay hands on them. The same thing happens with stolen cards.

Merchants must use appropriate security measures, like EMV-enabled payment terminals, to detect unauthorized transactions. Skipping that leaves you open to fraudulent transactions and the chargebacks that follow them. Frequent chargebacks under this reason code dent your business reputation with American Express and customers.

This chargeback reason code applies to card-present and card-not-present transactions. The underlying parameter is that the cardholder’s card is used and not cloned. Of course, cardholders will deny such transactions because the card was not on them when the payments occurred.

Cardholders must raise the alarm on these fraudulent transactions, or else the issuer will consider them legitimate. The non-use of a card PIN should raise a red flag and help you detect stolen or lost cards. Even so, your payment terminals should reject these cards since the user did not input the PIN.

American Express or issuers will also use this chargeback reason code if the cardholder never received the card with the disputed transaction. That means they may have applied for the cards but have yet to receive and use them.

Merchant negligence is a prominent cause of chargebacks under this reason code. Nevertheless, cardholders can also raise false alarms to invalidate a transaction they agreed to earlier.

This guide will show you the scenarios that can escalate to chargebacks under this reason code.

Important notice

This chargeback reason code does not apply to the following:

• Contactless payments
• Digital wallet transactions
• Payments that qualify under the no signature/PIN category

Why Did It Happen?

Chargebacks under this reason code occur when cardholders deny transactions that occurred on their lost, stolen, or never-received cards. The transaction must meet the following conditions before American Express escalates it to a chargeback under the reason code F31:

• The cardholder denies participating in the transaction
• The card is chip-enabled with PIN capabilities
• The card was lost or stolen
• The cardholder never received the card
• The POS did not process the transaction as a chip card payment with PIN validation
• The merchant keyed the transaction manually

Using POS systems that are not chip-and-PIN-enabled will result in chargebacks under this code, provided the cardholder denies the transactions. American Express considers that a sufficient reason, as it is crucial to fraud detection and prevention.

With that in mind, we can wrap up the causes of this chargeback into two primary scenarios, as follows:

• Compromised card or card number: In this case, the cardholder has not reported the card stolen or lost. However, fraudsters still access the card and perform transactions (online or offline) with it. The PIN validation was bypassed through the methods listed above.

The cardholder’s family members might conduct transactions without the cardholder’s knowledge. With no way of determining who was on the other end immediately, issuers will process chargebacks.

• The cardholder reported the card as lost or stolen: Again, someone other than the card member used the card and bypassed the PIN validation.

Chargebacks in fraud-related transactions will come to you if the issuer determines you are liable for not preventing the fraud. Modern payment systems are more secure and have several features, including PIN validation. Bypassing that and any other security measure like the EMV chips leaves you liable for the losses or, in this case, the chargebacks.

Other things that shift liability to you include the following:

• Failing to swipe the card
• Failing to read the chip
• Failing to identify and classify the transaction as a card-not-present payment

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How to Fight American Express Chargeback Reason Code F31: EMV Lost/Stolen/Non-received

You have 20 days to submit your reply to your acquirer or the issuer. American Express will reverse the chargeback if your proof absolves you of liability.

Our approach does not deny that the fraud occurred. However, it involves proving that you took adequate steps to prevent the fraudulent transaction according to American Express’s standards.

With that in mind, here are the approaches you can use to dispute chargebacks under reason code F31:

• If the transaction did not involve the physical use of the card: Submit proof that the transaction was card absent. While that absolves you of the POS terminal requirements, you must also show that you took adequate verification steps. That must include PIN verification.

You can use this approach for telephone or mail orders and other online-based payments.

• If the POS system used PIN validation when processing the chip card transaction: Submit evidence that your POS complies with the PIN validation standards and that the same occurred during the disputed transaction.

The above approaches are the only ways to shift the liability to American Express. Also, you can submit proof of a previous credit transaction to offset the fraudulent payment. That will negate and reverse the chargeback.

How to Prevent American Express Chargeback Reason Code F31: EMV Lost/Stolen/Non-received

You must take active steps to reduce fraudulent transactions to the barest minimum. A high frequency might get you blocklisted.

We recommend the following measures to prevent chargebacks under reason code F31:

• Upgrade your POS systems to EMV-chip-enabled.
• Always use EMV-chip-PIN-enabled POS systems.
• Confirm identities when processing large transactions, especially when done face-to-face.
• All keyed transactions should have a valid authorization code and imprint
• Keyed transactions should have a key CID.
• Obtain sufficient cardholder consent for all card-not-present transactions.
• Maintain documentation that links the cardholder’s consent to the transaction and its terms.
• Process refunds promptly and send advance notifications for any delays.
• Provide a timeframe for credit refunds to ease customers' minds and discourage them from approaching their issuers for a chargeback.

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