Effective Date: January 23, 2025
LAST UPDATE: January 23, 2025
1. Introduction
This Dispute Policy outlines the procedures and guidelines for handling disputes related to transactions, account activity, or any other issues that may arise on the Modak Communities Operating Holdings Inc. DBA Modak. platform. We are committed to providing a fair and transparent process for resolving disputes and ensuring the best experience for our users. Transaction disputes can occur due to reasons like card misuse or dissatisfaction with products/services. The Chargeback process involves formal procedures among issuing banks, card schemes, and merchant banks, making it lengthy. Parties follow guidelines to resolve disputes, determining whether the merchant keeps the payment or refunds the cardholder. This process is known as a chargeback.
1.1 What is a Chargeback
A chargeback is a refund process primarily used in the United States, initiated by the issuing bank of the payment card used in a transaction. It involves reversing funds from a consumer's prepaid card back to the merchant. Chargebacks occur when transaction circumstances meet specific reason codes defined by Visa. They can be initiated by consumers disputing transactions or by the issuing bank to rectify accounting errors, such as misrecorded ATM deposits.
2. Regulation E
Modak Communities Operating Holdings Inc (Modak, or the “Company”) is committed to following Reg E practices as general operating guidelines. The Electronic Fund Transfer Act (“Regulation E” or “Reg E”) establishes the basic rights, liabilities, and responsibilities of users who use electronic fund transfer services as well as the Financial Institutions that offer these services. The primary objective of the act is the protection of individual users engaging in electronic fund transfers.
2.1 Reg E applies to the following types of transactions:
• Unauthorized Electronic Fund Transfers (“EFTs”) including:
◦ Automated Clearing House (“ACH”)
◦ Point of Sale (“POS”)
◦ Automated Teller Machine (“ATM”)
• Duplicate transactions.
• Canceled recurring transactions.
• Incorrect transfer to or from the user’s account.
• Incorrect amount billed.
◦ Bookkeeping or computational error
• ATM
◦ Funds not dispensed
◦ Incorrect amount of money dispensed
2.2 Reg E does not apply to:
• A routine inquiry about the balance in the user’s account or a request for documentation or other information that is made only for tax or other record-keeping purposes.
• Buyer’s remorse.
• Non-receipt of merchandise/service.
• Merchandise/service not as described.
2.3 Refund Eligibility
Customers are eligible for a refund under the following conditions:
• Unauthorized Transactions: If a payment was processed without the customer’s authorization, in accordance with Regulation E, the user must notify Modak within 60 days of the transaction date.
• Service/Product Not Delivered: If the service or product was never received, users must first attempt to resolve the issue with the merchant and provide proof of communication before Modak intervenes.
• Incorrect Charge Amount: If a user was charged an incorrect amount, they must submit a refund request within 10 business days from the transaction date.
2.4. Non-Refundable Transactions
Refunds will not be issued in the following cases:
• Change of Mind: Buyer’s remorse is not a valid reason for a refund.
• Merchandise or Services as Described: If the user received the item or service as described by the merchant, no refund will be issued.
• Subscription Services: If the user fails to cancel a subscription before the renewal date, the transaction is non-refundable unless stated otherwise in the merchant’s terms.
2.5 Regulation E Requirements
The following are requirements as laid out in the regulations:
• Initial Disclosure of Terms & Conditions
• Documentation of EFTs – terminal receipts &
• Periodic statements
• Consumer liability for unauthorized transfers
• Procedures for error resolution including the use of templated customer dispute correspondence (see Appendix F)
• Restricts the unsolicited issuance of ATM cards and other access devices
• Outlines certain rights related to preauthorized EFTs
3. Dispute Policies
When a consumer disputes a transaction with the Company, established procedures are followed to adhere to Visa, issuing bank, and Company policies, aiming to ensure user satisfaction.
The dispute process begins with the user contacting the Company regarding an erroneous or unauthorized transaction. The Company then verifies the dispute and decides whether to proceed with a chargeback.
Detailed policies and procedures have been developed by the Company regarding initial user contact and the steps to be taken based on the provided information and the nature of the dispute. These scripts and procedures are outlined in Addendum A.
3.1 Dispute Timeframes
Users must meet certain timeframes when submitting a dispute; timeframes depend on the type of transaction. Additionally, the Company must complete its investigation on certain other timeframes. The following guide is meant to help operational teams assess when a dispute must be actioned.
3.2 Investigation And Response Timeframes
The Company is committed to promptly investigate the user dispute and complete the investigation within Reg E timeframes. Under normal circumstances, this means:
• Investigate all disputes received no later than 60 days after the transaction history is available to the user.
• Report the result of the investigation within three business days after completing the investigation.
• Correct the error within one business day after determining that an error has occurred and credit any fees imposed as a result of the error.
3.3 Dispute Validity
As a first step, the Company validates the basis of the dispute on its face. The user’s complaint must be reasonable, and fall into one of the appropriate categories described by a Chargeback Reason Code (see Addendum B).If the Company finds the request invalid, the dispute is simply declined.
3.4 How to Request a Refund
Customers seeking a refund must:
1. Contact the Merchant First: Before disputing a charge, customers must contact the merchant directly and request a refund. If the merchant denies the request, the user must obtain a written response from the merchant.
2. Submit a Refund Request to Modak: The request must include:
a. Full name and account details
b. Transaction details (date, time, amount)
c. Reason for the refund request
d. Proof of merchant contact [email/chat transcripts] (optional)
3. Review Process: Modak will review the refund request within 10 business days and notify the user of the decision.
4. Refund Issuance: If approved, refunds will be credited to the user’s original payment method within 5-7 business days.
3.5 Chargeback Initiation
If an erroneous transaction is otherwise validated – the underlying complaint has been deemed appropriate, and the merchant is unwilling to resolve the dispute through other means – the Company then initiates a chargeback to obtain credit from the merchant’s acquiring bank.
4. Chargeback Policies
In some scenarios, the Company, or the issuing bank, may generate a chargeback of their own accord – that is, a chargeback not generated by a user dispute. Reasons for such a chargeback vary, but typically include accounting or reconciliation errors or discrepancies, resulting from transaction faults, or other systematic causes.
4.1 Example Chargeback Reasons
4.2 Reconciliation And Out-Of-Balance Scenarios
The Company bears responsibility in ongoing reconciliation and balancing of accounts. During such review and reconciliation, out-of-balance findings should generate a chargeback where applicable to properly balance any affected accounts.
4.3 General Chargeback Flow
When chargeback rights apply, the Company will submit the transaction back to the acquirer, effectively charging back the dollar amount of the invalidated sale. The acquirer then researches the transaction. If the chargeback is valid, the acquirer deducts the amount of the chargeback from the merchant account and informs the merchant. The Company also credits the transaction amount back to the user, reversing the purchase. The user is notified of the result of the dispute.The Company follows standard procedures dictated by Visa and Bank Partners. Unless otherwise specified, these flows and procedures are described in detail in Addendum C.
4.4 Chargeback Handling
Chargebacks are unauthorized transactions that are disputed by the issuer or cardholder. When an item is purchased using a prepaid card, the merchant sends through a pre-authorization request to the Brand network. If there are funds on the card sufficient to cover the purchase, an authorization is received, and a hold is placed on the funds. Then, between one and 30 days later, a corresponding transaction posts to the card account and the funds are deducted from the settlement account. Authorization holds with delayed matching posts may drop off the account prior to the account posting of the charge. This scenario can cause a card to go over limit and is a business loss.Only the value difference between the pre-authorization and the post can be charged back. In some cases, such as restaurants and hotels, the merchant is able to charge a certain percentage above the authorized amount and no chargebacks are allowed.
Two types of procedure scenarios:
• Forced post
• Partial authorization
4.4.1 Forced Post Charge
A forced post charge (without valid pre-authorization or when the authorization is less than the final charge) occurs on an invalid card number or puts a valid prepaid card over limit.DefinitionA forced post with no associated pre-authorization appears on the Processor Exception Items Report. Some card transactions can only be charged back to the merchant if there is no valid pre-authorization associated with the transaction, or if the amount of the posted transaction does not match the pre-authorization.
Transactions without valid pre-authorizations include:
• Duplicate posts of transactions with the same pre-authorization
• Posts to cards that have been closed or reported lost or stolen
• Posts to expired cards
• Posts to non-activated cards
• Posts to counterfeit cards within BIN range
4.4.2 Chargeback Timeline
The Issuer may generally initiate a dispute within 120 calendar days of the processing date of a debit card transaction or a prepaid card transaction. However, if the transaction had a valid authorization, and the cardholder does not recognize the transaction, it cannot be charged back.
4.4.3 Chargeback Guidelines
• All forced posts to invalid card numbers and that put valid cards over limit must be charged back within network timeframes.
• All posts without matching pre-authorization amounts that put cards over limit by over $[[$50]] should be investigated and charged back with Chargeback Manager approval based on merchant type.
5. Representment And Chargeback Defense
In many cases, the acquiring bank, along with the merchant of record, may refute a chargeback, by presenting information in defense of the original transaction. Known as representment, such defense is reviewed by the Company or Bank Partners, towards finalizing any chargeback event.
In all representment cases, the Company carefully considers all information and material presented in defense of the chargeback, and makes a reasonable decision whether to honor such evidence as proof of a valid transaction engaged and authenticated by the user.
5.1 Proof Of Purchase
The merchant may present copies of receipts, with user signature, in defense of a chargeback. Examples of valid receipts can be found in Addendum D.
5.2 Proof Of Delivery
Typically for eCommerce purchase, the merchant may also present proof-of-delivery evidence, such as signature images from USPS, FedEx, or UPS. Any such evidence must show clear signature and/or address information that matches the user signature and/or address information on-file with the Company.
6. User Notification
In all chargeback events, whether a user-initiated dispute, or issuer-generated chargeback, the Company communicates with the user to report the status and final outcome of the chargeback. Changes and adjustments to the user’s account balance are updated and made visible to the user in a prompt manner. Communication includes the use of templated customer dispute correspondence (see Appendix F).
7. Dispute Tracking And Documentation
The Company maintains a tracking log of disputes:
• Customer Name
• Card Number (last 4 digits)
• Program
• Date of Initial Notification of Dispute
• Date Written Confirmation was Requested
• Date Dispute Reported in Writing
• Customer Discovery Date
• Access Device Lost or Stolen
• Error Description
• Type of Transaction
• Date of Disputed Transaction
• Disputed Amount
• Provisional Credit Date
• Amount of Provisional Credit
• Date Provisional Credit Letter Sent
• Date Investigation Completed
• Resolution
• Date Final Resolution Letter Sent
• Amount of Customer's Liability
• Provisional Credit Amount Reversed
• Comments
7.1 Dispute Documentation Recordkeeping
All dispute documentation is retained for a minimum of two years from the date the dispute is resolved.
