We have a situation where a customer filed a dispute for merchandise/services not received in December 2024. The $3,000 purchase transaction occurred in February 2024. Since this is non-Reg E, we are looking at the Visa dispute rules. They seem to say that a dispute under this condition must be processed no later than 120 calendar days from the transaction processing date or 120 calendar days from the last date that the cardholder expected to receive the merchandise or services. The customer indicated that she expected to receive the merchandise within 30 days of the February order date. We attempted a charge back through our system and cannot complete it due to the length of time. However, one of the footnotes in the Visa rules for this dispute condition says "not to exceed 540 calendar days from the transaction processing date."

Are we ok to deny this dispute due to untimely reporting by the customer? Is that 540-day limit just the maximum amount of time allowed to process a dispute, but not a requirement to keep a dispute open that long?

The 540 days would be applicable for something with a delayed delivery date. For example, I purchased merchandise in Feb 2024, knowing it wouldn't be available until Dec 2024. If the merchandise was never sent, and I reported it to my bank in January, I would be WELL past the 120 days from purchase, but still within 120 from expected receipt date. Since I'm also within 540 from the purchase date, I would be able to complete a chargeback.

In the situation you've described, there are no chargeback rights.

Claim not covered by Reg E.
As JR00K says, no chargeback rights because we are more than 120 days from the promised delivery date of the merchandise.

This dispute is now between the cardholder and the merchant. You have no obligation to investigate or credit the cardholder.