MasterCard designed the Excessive Chargeback Program (ECP) to encourage each Acquirer to closely monitor, on an ongoing basis, its chargeback performance at the Merchant level and to determine promptly when a MasterCard Merchant has exceeded or is likely to exceed the defined monthly chargeback thresholds.
A licensed member who maintains Merchant relationships receives all payment card transactions from the Merchant and initiates that data into an interchange system.
The CTR is the number of MasterCard chargebacks received by the Acquirer for a Merchant in a calendar month divided by the number of the Merchant’s MasterCard sales transactions in the preceding month acquired by that Acquirer.
A CMM is a Merchant that has a CTR in excess of 100 basis points and at least 100 chargebacks in a calendar month. This is effectively an early warning classification for Merchants approaching ECM thresholds.
A Merchant is an ECM if, in each of two consecutive calendar months (the “trigger months”), the Merchant has a minimum CTR of 150 basis points and at least 100 chargebacks in each month. This designation is maintained until the ECM’s CTR is below 150 basis points for two consecutive months.
A Merchant is a Tier 1 ECM during the first through the sixth month (whether consecutive or non-consecutive) that the Merchant is identified as an ECM.
A Merchant is a Tier 2 ECM during the seventh through the twelfth month (whether consecutive or non-consecutive) that the Merchant is identified as an ECM.
In addition to any applicable assessments for ECM reports or late report submissions, MasterCard may assess the Acquirer for issuer reimbursement fees and violation assessments for excessive chargebacks arising from an ECM. MasterCard calculates the issuer reimbursement fees and assessments as described below and they apply in each calendar month that the ECM exceeds a CTR of 150 basis points after the first trigger month.
For the first 12 months of a Merchant’s identification as an ECM, MasterCard will consider the Merchant’s actual chargeback volume as a factor in its determination of Acquirer liability. During this period, MasterCard will assess the Acquirer the lesser of:
MasterCard determines an Acquirer’s liability for the monthly issuer reimbursement fees and assessments for each ECM as set forth below. MasterCard calculates the issuer reimbursement fees in Steps 1, 2, and 3, and calculates the violation assessment in Step 4, as outlined below.
Repeat Steps 1–4 for each calendar month (other than the first trigger month) that the ECM exceeded a CTR of 150 basis points or 1.5 percent.
In the following example the Acquirer for Merchant ABC acquired MasterCard sales transactions and chargebacks over a six-month period as follows:
| Month | Billed | Chargebacks | CTR in Basis Point | Chargeback % |
|---|---|---|---|---|
| January | 95665 | 1050 | - | - |
| February | 95460 | 1467 | 153 | 1.53% |
| March | 95561 | 1635 | 171 | 1.71% |
| April | 95867 | 1556 | 163 | 1.63% |
| May | 95255 | 1495 | 156 | 1.56% |
| June | 95889 | 1052 | 110 | 1.10% |
| July | 95758 | 985 | 103 | 1.03% |
February and March are the trigger months, as these are two consecutive months where the CTR exceeded 150 basis points. At the end of July, Merchant ABC was no longer an ECM as its CTR was below 150 basis points for two consecutive months. MasterCard calculates assessments and Issuer reimbursements for each of the months March through July.
For example, the assessment for April (using March sales transactions and April chargeback volumes) is calculated as follows:
Using this methodology, the issuer reimbursement fees and assessments for the Acquirer for Merchant ABC are as follows:
| Month | Issuer Reimbursement | Assessment | Total |
|---|---|---|---|
| February (first trigger month) | $0.00 | $0.00 | $0.00 |
| March (second trigger month) | $5,075.00 | $8,678.25 | $13,753.25 |
| April | $3,075.00 | $5,012.25 | $8,087.25 |
| May | $1,425.00 | $2,223.00 | $3,648.00 |
| June | $0.00 | $0.00 | $0.00 |
| July | $0.00 | $0.00 | $0.00 |
| Total | $9,575.00 | $15,913.50 | $25,488.50 |
Example: For the month of March, the Acquirer reported Merchant ABC chargeback volume of 1,635 chargebacks totaling $12,145. This amount is less than the calculated amount of the issuer reimbursement plus violation assessment total of $13,753.25, as shown above for March. Therefore, MasterCard will assess the Acquirer with the lesser chargeback volume amount rather than the greater calculated amount.