MasterCard Lowers Acceptable Chargeback Levels

According to a document sent to AVN Online by an anonymous source, "Effective March 1, 2000, MasterCard will implement an excessive chargeback program for electronic commerce merchants and other selected merchant categories to reduce excessive chargebacks and fraud."

The document was allegedly sent to clients by (, an online E-commerce provider. It continues, "If a merchant engages in electronic commerce transactions or provides services using the Merchant Category Code (MCC) 4816 or 5967 and has a 1% or higher ratio of chargebacks transactions to total sales transactions or a 2.5% or higher ratio of chargeback dollar volume to interchange sales volume in each month for two consecutive calendar months, then MasterCard may, at its sole discretion, declare the merchant an excessive chargeback special electronic/computer network/inbound telemarketing merchant."

Adult Web sites are not being singled out per se, but it is no secret that they have historically accounted for a much higher percentage of chargebacks than mainstream companies relative to the amount of business they do. Penalties for merchants who exceed the above thresholds will probably vary, but if the fines we have seen proposed are any indication, they will cause serious problems for Adult Web masters large and small. With the one-percent threshold many Adult sites will be threatened with the loss of their merchant accounts, and third-party processors will be forced to implement draconian policies in order to keep theirs.

VISA accounts for about 60% of online transactions and has yet to announce a similar policy. If they do, expect a massive online merchant reaction, especially from Adult Web masters. As it is, our source tells us that several concerned Web masters are already initiating contact with the Federal Trade Commission and the ACLU, seeking regulatory or legal remedies to this problem. AVN Online has many calls out about this late-breaking story and will follow it up in depth. As of the posting of this story, had not yet to return calls to verify the facts as they have been told us. Stay tuned for further information as it becomes available.

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