Understanding Visa Chargeback Reason Code 10.5: Visa Fraud Monitoring Program
Visa reason code 10.5 indicates the Visa Fraud Monitoring Program has flagged a transaction because the merchant’s fraud ratio is too high. The transaction is automatically reversed. Merchants caught in the VFMP face chargebacks, fines and potential loss of processing rights, so prompt action is needed to protect revenue.
Key Takeaways
What it means: A transaction is disputed because the merchant has exceeded VFMP fraud thresholds.
Causes: High fraud-to-sales ratios. Weak authentication. Poor fraud controls.
How to respond: Provide evidence of prior refunds, earlier chargebacks, or withdrawal of the dispute, and file it within 30 days.
How to prevent: Reduce fraud ratios. Deploy AVS/CVV checks. Use anti-fraud tools and chargeback alerts.
What is a Visa Reason Code 10.5 Chargeback?
Reason code 10.5 occurs when a merchant exceeds the fraud ratios set by the VFMP. Visa then instructs issuers to reclaim funds on qualifying transactions. A dispute is raised even if the cardholder never questioned the purchase. Placement in the VFMP works in three phases. At 0.65 per cent fraud and at least $50,000 (USD) in monthly fraud, merchants receive an “Early Warning”. At 0.9 per cent and $75,000, the merchant enters the “Standard” tier. At 1.8 per cent and $250,000, they enter the “Excessive” tier.
Once listed, every fraud-related sale is scrutinised. If it is not already charged back under another code, Visa or the issuer files it under 10.5. Unlike ordinary fraud chargebacks, proof of delivery, CVV match, or EMV chip acceptance carry little weight. Monthly fines begin immediately and climb the longer the merchant remains above the threshold.
Primary Causes for a Code 10.5 Chargeback
The cause is a fraud ratio that breaches Visa’s tolerance levels. Merchants are particularly vulnerable when they process high volumes of card-absent transactions. Manual approval of low-value orders, accepting partial matches, or re-trying declined cards can inflate fraud. Merchants whose processes do not distinguish card-present from card-absent sales are also at risk.
Another driver is poor post-sale monitoring. If a business fails to track and dispute fraud trends, it cannot react before the VFMP thresholds are met. Finally, overly generous trial periods, vague refund policies, or slow customer support encourage both genuine and “friendly” fraud, each contributing to the VFMP totals.
Time Limit for Disputing a Visa Reason Code 10.5 Chargeback
Visa gives the issuer 120 calendar days from the central processing date to initiate a 10.5 dispute. After the issuer transmits the dispute, the acquiring bank has 30 days to send any representment on the merchant’s behalf.
That 30-day interval is strict: documentation lodged on day 31 is rejected automatically. Merchants should act fast, as 10.5 chargebacks are often bulk-filed and can flood an account. Late replies allow the chargeback to go unchallenged, adding to fraud ratios and increasing VFMP penalties.
What 10.5 Means for Consumers & Issuers
From a cardholder’s perspective, a 10.5 dispute may be invisible. In most cases, the consumer never raises a claim. Instead, the issuer receives a VFMP alert about transactions processed by a high-risk merchant. The issuer is obliged by Visa rules to credit the account, protecting the consumer from possible fraud exposure. For issuers, reason code 10.5 is a compliance tool. It caps losses by assigning liability to merchants with demonstrated fraud problems.
Operationally, issuers value the direct feed from Visa because it avoids manual investigation. Once triggered, the issuer trusts Visa’s data and rarely seeks additional proof, filing the chargeback as a matter of procedure. That speed benefits the cardholder, who gains swift restitution, and lowers the issuer’s fraud write-off. The trade-off is that legitimate shoppers might see a valid purchase reversed if processed by a merchant caught in the VFMP net.
What 10.5 Means for Merchants
For the merchant, code 10.5 is a serious issue. Each dispute shifts the transaction amount, a chargeback fee, and escalating VFMP fines onto the business. Remaining in the “Standard” tier for 12 months or “Excessive” for 6 months can lead to termination of processing privileges. Reputation also suffers, as acquirers may raise reserves or refuse additional services. 10.5 disputes erode cash flow because they arrive without a customer complaint, making them hard to forecast. Even merchants with sophisticated order validation can be caught out if they ignore fraud metrics.
However, merchants who act swiftly, cooperate with their acquirer, and invest in stronger risk tools can exit the VFMP. This restores normal chargeback rights. Ongoing monitoring, segmented by card-present and card-absent channels is therefore vital.
How to Respond to a Code 10.5 Chargeback
Although options to respond are limited, merchants should still review each case. First, confirm the issuer filed within 120 days; if not, cite the elapsed time and request reversal. Second, check for prior action. If the cardholder has already received a refund, submit the credit memo and settlement record to prove the balance was repaid. If the same transaction was previously charged back under a different code, provide the earlier dispute reference. Third, verify whether the cardholder has now acknowledged the purchase. A signed letter or email retracting the claim can overturn the chargeback.
Compile this evidence in the format prescribed by your acquirer and ensure that you send it within the 30-day time limit. Keep language factual and specify the exact compliance breach. Success rates are low, but each reversal lowers your fraud ratio fractionally. This helps to shorten the time spent in the VFMP.
Proactive Prevention: The Ultimate Defence
Escaping the VFMP requires merchants to maintain consistent fraud rates below 0.9 per cent for three months. Systematic AVS/CVV checks, strong step-up authentication and detailed order-review rules all help. Pair those tools with continuous dispute analysis so emerging patterns are spotted early. Many merchants also try out chargeback alerts. These services flag risky transactions before a chargeback is filed. This can help you to keep your fraud ratios under the VFMP threshold.
