Mastercard Chargeback Reason Code 4850: Installment Billing Dispute

What is Mastercard Chargeback Reason Code 4850?

This chargeback applies to merchants who deal with installment-based products or services. In other words, the customer pays specified installments over different periods to add up to the total price of the goods. The chargeback will occur if the customer disputes a transaction under your installment billing contract.

Installment billing, or the buy now, pay later transaction, is a popular and flexible way to pay for goods and services. However, it has unique challenges, including this chargeback under reason code 4850.

What could make a customer dispute the agreed-upon transactions in the contract? Installment billing involves specific amounts charged over specific periods. It could be that your contract is to process the billing on the 25th of every month until the total amount is realized.

That sounds easy, but a customer might file a chargeback claim that you processed the payment too early. There are other reasons for a customer to file a claim and receive a chargeback under this reason code. For example, a cardholder may claim they were not adequately informed that the transaction was on an installment-billing basis.

Regardless of how many reasons a cardholder may have for filing the claim, you can quickly dispel them. The key is following due process on your end and looking out for the time frame when the chargeback is filed. Sometimes, filing a chargeback outside the stipulated period will invalidate it.

Let’s jump in and see the reasons this chargeback will occur.

Why Did It Happen?

This chargeback occurs when a cardholder disputes an installment bill that has been processed. The reasons vary and often boil down to the transaction amount, the payment period, or the denial that it was an installment transaction.

With that in mind, here are the reasons you’ll find behind this chargeback:

• An incorrect number of installments: The cardholder may claim that you’ve charged the payment more than the agreed number of times. For example, the cardholder can claim that you processed payment six times when the contract stated five times.
• Incorrect installment amount: This reason is similar to the one mentioned above but involves the amount. The buyer claims that the amount processed differs from what was agreed upon in the contract.
• The cardholder believes you processed payment for an installment prematurely. You can refer to the example cited in the previous section.
• The issuer received a clearing record for the installment billing contract payment. However, it differs from the total transaction amount on the original authorization request and the terminal ID.
• There is a disparity between the number of installments specified on the Financial Detail Addendum and the number of installments the user authorized on the Authorization Response.
• The cardholder claims that the transaction was not an installment billing transaction. In this case, the claim is that you did not indicate that the transaction was an installment billing.
• There was an acceleration in processing the installments without the issuer’s consent.
• You can also receive this chargeback with the reason code 4850 if the issuer charges back subsequent installments after the first one with the reason code 4837

These are straightforward reasons that can be dealt with quickly. Also, friendly fraud could be behind it. An example is where a cardholder claims they were unaware of the installment billing contract, but they were.

{{COMPONENT_IDENTIFIER}}

How to Fight Mastercard Chargeback Reason Code 4850: Installment Billing Dispute

Issuers have 120 days to file this chargeback. You should keep that in mind when fighting it if they exceed the stipulated period.

Let’s address how to fight this chargeback under three conditions: incorrect amount, incorrect number of installments, premature installments, and invalid acceleration.

Incorrect Transaction Amount

You’ll need a few documents to prove that the installment amount in the FIDA (Generic Detail)/1644 message is the same as what was agreed. The records include the following:

• Documentation to show that the cardholder authorized that amount for processing (TID can suffice for this)
• Proof that you corrected the error that resulted in the dispute

The second document is only required if you fixed the error and probably issued a refund.

Incorrect Number of installments

You need documents proving that the cardholder agreed to the disputed installments. A TID or screenshot showing that the buyer agreed to the terms and conditions can suffice.

Premature Processing

You could prove that the payment was not part of the installment billing if they were two separate transactions. An example would be a recurring payment mistaken for installment billing.

Installment Acceleration

Provide documents showing that the cardholder requested and received the accelerated installment payment for the transaction. That will render the chargeback invalid.

What if these conditions do not match your case? We’ve identified other ways you can fight it. They include the following:

• Proof that you did not receive the required documentation for the chargeback
• Evidence that you received documentation but the Acquirer Reference Data on the chargeback is invalid
• Evidence that you have issued a refund
• Proof of a duplicate chargeback
• Evidence that the chargeback is past the time limit (120 days).

You have 45 days to fight this chargeback.

How to Prevent Mastercard Chargeback Reason Code 4850: Installment Billing Dispute

The best part of this chargeback is never getting to experience it. Fortunately, you can take steps to prevent it from occurring, and they are as follows:

• Ensure the cardholder agrees to and signs the contract containing the number of installments, their dates, and amounts. That will prevent a counterclaim and also give you evidence to fight the chargeback if it occurs.
• Inform the buyer beforehand when approaching the due date for an installment. Use their preferred contact channel: email, SMS, telephone, etc.
• Keep up with all laws and regulations regarding recurring and installment payments.
• Ensure your customers can easily change their preferred payment method for a future installment. 

The bulk of preventing this chargeback is ensuring that your customers are adequately informed. Send an email with details of the contract immediately after final confirmation. Also, avoid processing the initial payment if you’ve not obtained the necessary permission and consent.

‍