Mastercard Reason Code 4840: The Merchant's Guide to Fraudulent Processing Chargebacks

Code Number & Name

4840 – Fraudulent Processing of Transactions

Card Network

Mastercard

Category

Fraud

Definition

Cardholder claims the merchant processed a transaction fraudulently, or that the merchant processed a transaction without proper authorization or in violation of Mastercard rules. This often relates to merchant error or system issues, not cardholder fraud.

Key Challenge

Proving legitimate transaction processing and adherence to Mastercard rules and terms.

Primary Evidence Types

Transaction logs, authorization records, proof of delivery/service, terms & conditions, customer communication, compliance documentation.

Response Time Limit

Typically 30 days from the chargeback notification date.

Incorrect Recurring Billing

A customer was charged twice in one month for a subscription service due to a system error, despite agreeing to a single monthly charge.

The cardholder claims the merchant fraudulently processed a duplicate transaction.

Provide clear logs of billing cycles, proof of system error resolution, and customer communication regarding the billing discrepancy.

Unauthorized Transaction Type

A merchant processed a credit card transaction as a debit transaction, or vice - versa, without proper disclosure or specific cardholder authorization for that processing method.

The cardholder claims the transaction was processed using a method they did not authorize or agree to, implying fraudulent processing.

Demonstrate adherence to payment network rules, proper disclosure of transaction types, and valid authorization for the specific processing method used.

Misrepresented Service/Product

A customer purchased an item online, but received a significantly different or inferior product, leading them to believe the merchant intentionally misrepresented the offering.

The cardholder claims the merchant " fraudulently processed " their payment for a service or product not received as advertised.

Provide proof of delivery, clear product descriptions, terms of service, and evidence of attempts to resolve customer dissatisfaction (e.g., return policy, communication).

Improperly Voided/Refunded Transaction

A merchant attempted to void a transaction, but the void failed to process, or a refund was promised but never issued, resulting in the customer being charged for an unfulfilled service.

The cardholder claims the merchant fraudulently retained funds for a transaction that should have been voided or refunded.

Present transaction logs showing the attempted void or refund, communication with the cardholder, and proof of subsequent successful refund or credit.

Compliance Violation (e.g., Surcharging)

A merchant applied a surcharge that violated Mastercard rules, or processed a transaction without meeting specific regulatory compliance requirements for their industry.

The cardholder claims the merchant engaged in " fraudulent processing " by violating agreed - upon terms or payment network rules.

Provide proof of compliance with all Mastercard rules and relevant regulations, clear disclosure of all fees, and evidence of proper authorization.

False Merchant Identity

A customer believes they transacted with one merchant, but the charge appears under a different or confusing merchant descriptor, leading to a " fraudulent processing " claim.

The cardholder claims they did not authorize a transaction from the listed merchant, implying fraudulent activity by the processing entity.

Provide clear merchant descriptor information, proof of authorization, and evidence linking the transaction to the customer's intended purchase (e.g., order confirmation, website screenshots).

Transaction Logs

Proof of transaction initiation, authorization, and settlement details, showing the complete lifecycle of the payment.

Must clearly show date, time, amount, masked card number, authorization code, and merchant ID.

Authorization Records

Verifies that the card issuer approved the transaction. This confirms the payment was authorized by the card network.

Include the authorization code, issuer response, and the exact date and time of authorization.

Proof of Delivery/Service

Confirms that the product was shipped or delivered, or that the service was rendered as agreed. This counters claims of non - receipt or unfulfilled service.

Examples include shipping tracking numbers, delivery confirmation receipts, service completion records, or digital download logs.

Terms & Conditions/Policies

Shows that the customer agreed to the purchase, return, or cancellation policies at the time of transaction.

Provide a link to the live T&Cs, timestamped versions if possible, and evidence of customer acceptance (e.g., checkbox confirmation).

Customer Communication

Records of all interactions with the customer regarding the transaction, especially attempts to resolve any issues or provide refunds.

Include emails, chat transcripts, or call logs (if recorded with customer consent).

Compliance Documentation

Evidence of adherence to Mastercard rules, PCI DSS standards, and any other relevant industry or regulatory requirements.

This can include PCI DSS compliance certificates, internal processing policy documents, or attestations of regulatory adherence.

Website Screenshots

Shows the product descriptions, pricing, and checkout flow exactly as presented to the customer at the time of the transaction.

Timestamped images of relevant pages, along with corresponding URLs, are ideal.

IP Address and Device Data

Helps link the transaction to a specific user or device, providing an additional layer of verification.

Include IP logs, device fingerprinting data, or other session - related information.

Fraud Scoring Data

Demonstrates that the merchant utilized fraud prevention tools and conducted due diligence prior to processing the transaction.

Provide outputs or reports from your fraud detection tools indicating a low - risk score for the transaction.

Previous Transaction History

Shows a pattern of legitimate transactions with the same cardholder, indicating a trusted relationship.

Include records of past successful transactions, especially if they are recurring payments.

Acknowledge and Review

Immediately confirm receipt of the chargeback notification. Carefully review al details provided, paying close attention to the transaction amount, date, and the specific reason cited for " fraudulent processing."

Internal Investigation

Initiate an internal audit of the transaction. Check your payment gateway logs, CRM, customer history, and any relevant customer communication to understand the alleged issue.

Gather Initial Data

Collect basic transaction details, authorization codes, and the cardholder's contact information. This foundational data will be essential for building your evidence package.

Pause Fulfillment (if applicable)

If the chargeback arrives before a product or service has ben fully delivered, immediately pause fulfilment to avoid further financial loss.

Check for Duplicates

Verify if a refund or void was previously attempted or processed for this transaction. This can often be a rot cause for 4840 and is a key piece of defense.

Identify Relevant Documents

Based on the specific scenario that triggered the 4840 chargeback, pinpoint which " Required " and " Supporting " documents from the previous section are most applicable to your case.

Retrieve Data

Aces al relevant systems—payment gateway, CRM, shipping provider, email archives—to pull every necessary record. Ensure al documents are clear, legible, and complete.

Annotate & Explain

Ad concise explanations or highlights to each piece of evidence. Clearly state its relevance to the dispute and how it counters the cardholder's claim of fraudulent processing.

Organize Logically

Arrange your documents in a clear, easy - to-follow order that supports your narrative. A chronological order or grouping by type of evidence often works best.

Convert to PDF

Compile al evidence into a single, high - quality PDF file. This makes it easier for the issuer to review and reduces the chance of missing documents.

Directly Address the Claim

Clearly state your understanding of the 4840 claim and unequivocally explain why it is invalid or disputable. Be specific about which aspect of " fraudulent processing " you are refuting.

Present a Clear Narrative

Tel a concise, factual story of the transaction, from initial purchase to fulfilment. This narrative should be directly supported by the evidence you are submitting.

Reference Evidence

Explicitly refer to each piece of evidence by number or title within your letter. Guide the reviewer to the specific documents that prove your case. State Compliance: Affirm your adherence to al relevant Mastercard rules and processing regulations. This particularly important for a code alleging " fraudulent processing."

Request Reversal

Conclude with a clear and confident request for the chargeback reversal, based on the strength of the provided evidence and your adherence to al terms.

Misinterpreting " Fraudulent Processing "

Many merchants mistakenly assume 4840 implies traditional cardholder fraud. However, this code often points to alleged merchant or system errors, such as incorrect billing or non - compliance. Failing to address the *merchant's* actions (or inactions) in the defense is a critical oversight, leading to submission of irrelevant evidence.

Insufficient or Irrelevant Evidence

Submitting generic transaction data without specific documentation, like detailed compliance records, service usage logs, or prof of customer agreement directly addressing the " fraudulent processing " claim, is a common error. Your defense must be surgical and highly targeted.

Missing Response Deadlines

Mastercard's 30-day window for response is strict. Late submissions are automatically lost, regardless of the strength of your evidence. Merchants must have robust internal processes to track chargeback notifications and respond promptly.

Generic Response Letters

Using templated responses that do not specifically address the nuances of the 4840 claim is a significant mistake. The response must tell a compelling story tailored to the specific scenario and clearly link to the provided evidence, demonstrating how the transaction was legitimate and compliant.

Failing to Address Internal Process Flaws

If the 4840 claim is indeed due to a merchant error (e.g., a billing mistake, a compliance lapse), simply denying it without showing corrective action can harm future disputes and your reputation. Acknowledging and proactively fixing internal issues is a key part of a strong defense.

Lack of Compliance Documentation

For a code alleging " fraudulent processing, " prof of adherence to Mastercard rules, PCI DS, and other relevant regulations is paramount. Merchants often overlook including these vital documents, which directly attest to their legitimate operational practices.

Not Communicating with the Cardholder

Before a chargeback is initiated, or even after, a lack of clear and responsive communication to resolve customer issues directly can escalate disputes. Ignoring opportunities for pre - dispute resolution can weaken a potential defense and lead to unnecessary chargebacks.

Detailed Product Descriptions

Ensure product pages accurately reflect items with high - quality images, clear specifications, and realistic expectations. Any discrepancy can fuel a " misrepresented service " claim.

Transparent Checkout

Clearly display total costs, shipping fees, taxes, and comprehensive terms of service before the customer completes a purchase. This provides evidence of customer agreement to al charges.

Digital Footprint Evidence

Collect and store IP addresses, device IDs, browser fingerprints, and website usage logs. This data helps link the transaction to a specific customer and device, countering claims of unauthorized use.

Automated Communication

Implement post - purchase emails for order confirmation, shipping updates, and review requests. Proactive communication can preempt " item not as described " or " service not received " disputes.

Proof of Service Usage

Maintain detailed logs of user activity, login times, feature usage, and data consumption within your platform. This demonstrates that the service was actively used and available.

Clear Billing Cycles & Notifications

Send automated reminders before recurring charges, clearly outlining the service, amount, and upcoming billing date. Transparency reduces " unexpected charge " claims.

Subscription Management Portals

Empower users to easily manage, upgrade, or cancel their subscriptions without needing direct support. This reduces friction and prevents disputes over failed cancelations.

Trial Period Transparency

Clearly state the terms of free trials, including when biling begins and how to cancel, to avoid claims of unauthorized charges after a trial period.

Booking Confirmations & Vouchers

Provide detailed confirmations with precise dates, services included, and explicit cancelation policies. This serves as prof of the agreed - upon terms.

Proof of Service Delivery

Keep meticulous records of check - ins, flight manifests, guest rosters, and service completion forms. This confirms that the boked service was indeed rendered.

Clear Cancellation Policies

Ensure cancelation policies are easily accessible, clearly stated, and acknowledged by the customer at the time of boking. This vital for disputes related to non - refundable bookings.

Customer Feedback & Resolution

Document any attempts to resolve on - site issues or complaints during the service period. Proactive resolution can prevent minor grievances from escalating into chargebacks.

Enhanced KYC/AML

Implement stronger Know Your Customer (KYC) and Anti - Money Laundering (AML) checks for new customers or high - value transactions. This helps verify customer identity and intent.

Proactive Customer Outreach

For new customers or transactions exceeding a certain threshold, initiate follow - up calls or emails to confirm legitimacy and satisfaction. This can preempt disputes and verify purchases.

Detailed Risk Scoring

Utilize advanced fraud detection tools to assign risk scores to transactions and flag suspicious activity. Evidence of these efforts demonstrates due diligence to the card issuer.

Strict Compliance Audits

Regularly audit internal processes to ensure full adherence to payment network rules and industry regulations, especially regarding " fraudulent processing." Documenting these audits provides strong defense.

Regular Billing Audits

Periodically review billing systems to catch and correct duplicate charges, incorrect amounts, or failed voids/refunds before they become customer disputes.

Clear Service Descriptors

Ensure your merchant descriptor on customer bank statements is clear, recognizable, and consistent with your brand name. Ambiguous descriptors are a common cause of confusion.

Consistent Policy Enforcement

Apply return, refund, and cancelation policies consistently and fairly across all channels. Deviations can lead to claims of unfair or fraudulent practices.

Employee Training

Train staff on proper transaction processing, customer service protocols, and chargeback prevention best practices. Educated employees are the first line of defense.

Transparent Pricing

Ensure al prices, fees, and surcharges are clearly disclosed before the customer commits to a purchase. Hidden fees often trigger claims of fraudulent processing.

Automated Compliance Checks

Integrate automated checks within your processing workflow to ensure transactions comply with local laws and card network rules, minimizing accidental violations.

Advanced Fraud Detection Tools

Implement solutions that use machine learning and AI to identify suspicious transaction patterns, device anomalies, and behavioral red flags that might indicate internal or external fraudulent processing attempts.

Automated Billing Management

Utilize robust subscription billing platforms that handle recurring charges, prorations, and cancelations accurately, sending automated notifications to customers.

Real - time Authorization Verification

Ensure your payment gateway performs real - time authorization checks, including Address Verification Service (AVS) and Card Verification Value (CV) to confirm cardholder legitimacy.

Data Storage & Retrieval Systems

Invest in systems that allow for easy and rapid retrieval of al transaction - related data, customer communications, and policy agreements for efficient dispute resolution.

Secure Payment Gateway

Partner with a PCI DS compliant payment gateway that offers advanced security features to protect sensitive cardholder data, preventing data breaches that could lead to fraudulent processing claims.

Proactive Order Confirmations

Send immediate, detailed order confirmations for every purchase, including item specifics, total cost, and expected delivery dates.

Post - Purchase Updates

Provide timely updates on order status, shipping, and any potential delays. Transparency builds trust and reduces anxiety.

Easy - to-Access Customer Service

Make it simple for customers to contact you with questions or issues through multiple channels (phone, email, chat). Prompt responses are crucial.

Visible Return/Refund Policies

Clearly display your return, refund, and cancelation policies on your website and in transaction confirmations. Ensure they are fair and easy to understand.

Pre - Dispute Resolution

Implement a system for customers to easily request refunds or report issues directly to you before they consider initiating a chargeback. This could involve a dedicated customer portal or clear contact instructions.