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Ecommerce Forum

This 71 message thread spans 3 pages: 71 ( [1] 2 3 > >     
Combatting Fraudulent Chargebacks
they're eating into my profits

 5:07 pm on Aug 5, 2009 (gmt 0)

Well it looks like my first post is going to be a bit of a rant. I just got my biggest single chargeback ($600) and I've noticed that they are becoming more frequent. When you factor in chargeback fees plus my cost on this item this one chargeback is going to put me out almost $1000. I thought I had it narrowed down to orders that were getting shipped to Miami but this one went to Maryland!

I'm sick of just giving into charge backs. If they continue to get worse the could put my quite profitable little website out of business. When we have a chargeback we give them all the info that they want (address verification, tracking info, copy of invoice) and we still lose every time!

What can be done to further combat against chargebacks? What does your website do? What percentage of orders get charge backed for you?

It really <makes me very angry> that everyone gets made whole in these things except for the merchant! While some <expletives deleted> gets a free $600 jacket at my expense! Police, FBI, Secret Service, nobody seems to care unless the fraud goes over $300,000.

[edited by: buckworks at 5:53 pm (utc) on Aug. 5, 2009]
[edit reason] Language [/edit]



 6:08 pm on Aug 5, 2009 (gmt 0)

Awe come on I used the little #%^ symbols instead of the whole word. Sorry it's just these charge backs makes me very angry.


 7:34 pm on Aug 5, 2009 (gmt 0)

If anything looks suspicious I call the customer to be sure it is legit. Are the chargebacks for nonreceipt? Stolen credit cards?


 8:04 pm on Aug 5, 2009 (gmt 0)

mxracer170 do you have anything on your site which gives you geo ip lookup info? It really helps.
"Police, FBI, Secret Service, nobody seems to care...." add Banks especially. Sucks, but as the merchant visa/mc has us over a barrel. Got to be a good detective on orders.


 8:08 pm on Aug 5, 2009 (gmt 0)

Is Miami really that notorious for fraudulent charges? ~Gary(In Miami)! :)


 8:17 pm on Aug 5, 2009 (gmt 0)

There is a really great service started by a group of online vendors that tracks people who issue charge backs on their credit cards. Google ChargeBackProtection.

For a fee or for free, you can query their database and if you find that a person or card that has placed an order on your site has issued charge backs in the past then you can decide if you want to fulfill the order or if you want to cancel it.

Also you get to put a "seal" of sorts on your pages that indicates you look this info up.. kind of a deterrent for people who abuse the charge back system.

The free service you can only perform 2 searches a day... The paid service is unlimited searches.

However ANYONE can report people who have issued charge backs to the database for free.

Notice to Vendors............ reporting these "people" is very important since, as pointed out, other agencies aren't interested in assisting us. Our only power is information.

Will this service stop it completely? No, however if you report this person then you may at least save someone else from being his next victim.

[edited by: lorax at 9:05 pm (utc) on Aug. 5, 2009]


 8:26 pm on Aug 5, 2009 (gmt 0)

The chargebacks are all for stolen credit cards. If I see and order has been declined 10 times and then accepted I of course look into it. It used to be these guys were dumb, they'd pick the most expensive item on the site and then try an order 20 of the. Thoes always got declined but it seems now they are going for smaller ticket items and the AVS is matching the first time.


 8:56 pm on Aug 5, 2009 (gmt 0)

That website seems to protect against what I've heard called "friendlly fraud" which as I understand it is where a customer places an order and then claims they never got it or that it was not up to their expectations and issues a chargeback.

I'm looking for ways to fight chargebacks due to credit card theft where someone steals your credit card info, places an order, gets it shipped to Miami, loaded on a boat and it's out of the country in 3 days.


 9:06 pm on Aug 5, 2009 (gmt 0)

Would love to use the site! I tried to register on it, but never received a password. Tried to have the password re-sent, but received a message that there was no active profile with that e-mail address. Tried to register again, but was informed there's already a profile registered with that e-mail address. Tried to register with my Hotmail e-mail address, but they require that your e-mail address match your site!

Sigh. Talk about an endless loop to keep people from using your site...


 11:47 pm on Aug 5, 2009 (gmt 0)

(OK, finally received my password.)


 12:25 am on Aug 6, 2009 (gmt 0)

I've had two chargebacks from customers trying to scam me using their own cards, and have won both of those.

I've had a couple chargebacks that were legitimate (stolen info) that I did not contest because they just purchased gift certificates that were never used.

I get fraudulent orders weekly, but 99% of these can be detected and deleted in less than 10 minutes.

You may need to tighten up your approval process.


 2:16 am on Aug 6, 2009 (gmt 0)

Demaestro, thanks for posting that site. I wonder how large their database is?

99.9% of chargebacks I have would fall under that "Friendly fraud" category, so it's nice to have a site like that available.

I would still accept an order from someone whose chargebacked another vendor in the past, but I would just know I should demand every proof of delivery/signature service required. (I cannot afford to do this with every purchase, especially the low-baller ones.. but to avoid that potential chargeback fee and headache from a known CB-friendly customer, it would be worth it)


 2:20 am on Aug 6, 2009 (gmt 0)

Can you elaborate on how you've tightened up on your approval process. We already use Authorize.net to do address verification to make sure the billing address is correct. How can we stop someone who has all of your credit card info, places a order and ships it to a different address.

With the amount of legitimate orders that we have shipping to addresses other than the billing this usually doesn't raise a red flag. What raises red flags for you?


 5:07 am on Aug 6, 2009 (gmt 0)

#1...IP Address.
#2...Different ship to/bill to
#3...yahoo, gmail, hotmail, netzero email accounts
#4...non-existent phone number
#5...next day, 2nd day air shipments


 5:29 am on Aug 6, 2009 (gmt 0)

mxracer170, once everything passes ... I compare the products they buy. If they're not something that "matches" (someone who likes product X would not have interest in product y), that's usually an indicator.

Best way to explain it: If someone buys a Bryan Adams CD, it's highly unlikely they'd buy an ICP, 2pac & Biggie CD to compliment it.

I don't force customers to give me their phone #. A lot will not, because they don't want to be telemarketed. If they're a new customer to you, you've got to minimize the "requirements" you force them to have.


 10:39 am on Aug 6, 2009 (gmt 0)

How can we stop someone who has all of your credit card info, places a order and ships it to a different address.

If the billing and shipping address do not match you do not ship the goods. It's the responsibility of the client to setup with his bank another shipping address if he wants to ship elsewhere.

There are ways to also verify that by having in the shipping or payment form of your store an edit box for the customer to enter the bank issuer phone number as printed on the card. Then you should be able to verify.

And I am not sure about the other recommendations to pay some "protection service" in order to avoid chargebacks sounds like spam, because the payment gateway is going to do that anyways and you pay commission to them in the first place.


 11:27 am on Aug 6, 2009 (gmt 0)

Yeah, I don't see the purpose in subscribing to a site that keeps track of a small number of people who do chargebacks, especially if the issue is really stolen cards. I know that plenty of merchants don't ship to a different address, but I do. Lots of people want to be able to get a package without having to wait on a line at the PO after work, so they have an order delivered to their job. You could require a signature confirmation on orders over X amount; I do this on orders over $200 if I feel a little uncomfortable about the order. IME, though, the dead giveaway for cc fraud is multiples of the same item, often chosen in alphabetical order--IOW, they did not have something in particular in mind when they came to the site, like 90% of customers do. They just paged through and put a bunch of multiples of stuff in the cart and entered the stolen card number. I recently had one by check like that. I was glad it was Paypal that took the bad check and not me so I didn't have to pay a bounced check fee.

The other thing I notice is that frauds rarely contact you before the order is sent except to ask for faster shipping. I don't do any overnights anymore because of fraud.


 3:57 pm on Aug 6, 2009 (gmt 0)

I out and out refuse to send to any address other than the card holders. I have had a few stolen cards used over the years but because they go to the card holder address the parcels always get returned as "not called for" by the legal owner of the card who knew nothing about it.

I did make 6 exceptions over the first year year we did this and all 6 turned out to be fraud. I have VERY tight profit margins so I can't take the chance to lose money on any order.


 5:34 pm on Aug 6, 2009 (gmt 0)

How can we stop someone who has all of your credit card info, places a order and ships it to a different address

Do a search in Google for "ecommerce id verification" without quotes. One of the first natural listings does just that for ecommerce sites. Its the one that has "E-Commerce Customer Verification" in the title.


 5:57 pm on Aug 6, 2009 (gmt 0)

If you have the valid shipping address, you can usually turn up a valid phone number. If the phone number you find matches the number associated with the order, it's a positive sign. If not, call the number you've turned up to confirm the order.

Our situation is a little different than many, in that we have a relatively small # of orders (less than 20 per week), but the average value is close to $1000, with a number of items that are in the tens of thousands of dollars (US). So, we have time to investigate each order.

Orders that raise no flags get only cursory attention. Orders that raise multiple flags get deleted, while others get the full treatment:

Name search, reverse address and phone look-up, card issuing bank, and email address verification. Phone confirmation.

Our model allows this kind of attention, while the high volume low margin model will not.

How much do you want to write off?


 9:22 pm on Aug 7, 2009 (gmt 0)

I do charges all the time and have it shipped to another address and by refusing to do so is costly.

My ecommerce site gets charges all the time to ship to another address. 90% are fraud easy to check and see the other 10% a Simple check is verify the cc by phone number. If the number matches the card then call the number and ask them "Did you Place this Order" somethimes we get a yes sometimes we get a no.

I am seeing fraud orders with the card owner name, address, telephone number, cvv number, and zip coming in.

Fraud is getting harder and harder to detect and you need to put more effort into verifying the order otherwise you will continue to get more and more of them.

The CVV number is not as secure check now as it use to be and more work on your end is required to deter future fraud orders that are sure to come.

The best way is call the owner of the card "if" anything is fishy and any order shipping to another address is an automatic check to verify the charge with the card holders phone number.


 3:02 am on Aug 8, 2009 (gmt 0)

Your right on with the Miami and Florida hint. You have to watch out for those Florida orders, especially for expensive items. There is a lot of mail order fraud there, etc. Don't know why. Something about living beyond your means I think.

Our items are in about the same price range as yours. But, we WIN almost every time there is a chargeback, not lose.

If you are verifying everything you need to and defending yourself, then it is time to check up on your merchant account or whoever your merchant account contracts out to mediate chargebacks. There is actually a middleman between you, the customer, and the bank in a chargeback who is responsible for asking for and assembling your defense. If you are using some mass online processor, or worse a PayPal or some processor down the food chain you probably won't get any service to justify that slightly cheaper processing rate. They are not all the same, some handle things better then others. We work with Merlin Solutions for payment disputes and they have always been extremely fair.


 3:18 am on Aug 8, 2009 (gmt 0)

I out and out refuse to send to any address other than the card holders. I have had a few stolen cards used over the years but because they go to the card holder address the parcels always get returned as "not called for" by the legal owner of the card who knew nothing about it.

This is by far the best answer.


 11:58 am on Aug 8, 2009 (gmt 0)

A client of mine had constant chargebacks, so I implemented a card verification system, whereby people have to verify their cards first (a la Paypal) before it can be used on any of his systems. He also uses Maxmind fraud detection system to spot potential problems. Since these two things have been implemented his chargebacks are zero.



 3:31 pm on Aug 8, 2009 (gmt 0)

Miami is high risk for several reasons.

We get orders from Miami transshipper warehouses that forward goods overseas, usually to Latin America. That's a huge red flag of course but even in those cases the great majority are good sales, Those warehouses are easy to spot if you look up the address (which usually has a box or "suite" number) in Google.

You'll find similar overseas forwarders in large port cities, like Oakland, LA and New Jersey.

Our fraud losses due to chargebacks and otherwise are microscopic. Incredibly, they AREN'T rising. As others have said, it's easy to spot the scammers and we are staying well ahead of them with improved technology.

Yes, when in doubt phone the customer. A buyer named Pat O'Mally in Des Moines shouldn't have a thick African accent. Actually, from my experience, scammers almost never answer their phones.


 3:41 pm on Aug 8, 2009 (gmt 0)

I out and out refuse to send to any address other than the card holders

About 10% of our orders use separate ship and bill addresses. We suffer almost no fraud.

eg, I buy stuff on my business CC and have it shipped to my home. All computers, for example, go first to my house where I set them up and load software.

Things bought on the personal card go to business address sometimes. I don't want extremely high value items left outside our door all day. And kids use CC's away in college. etc. etc.


 4:58 pm on Aug 8, 2009 (gmt 0)

As a download site, for us the chargeback rate is much too high - paypal contacted us already about it and we try to implement better measures with IP scans, cookie checks, etc.

But it looks like a neverending work!

We are close to team up with other eCommerce vendors, who also have a lot of traffic and fraud problems to run one central server to combat these schemes...


 8:18 pm on Aug 8, 2009 (gmt 0)

#1...IP Address.
#2...Different ship to/bill to
#3...yahoo, gmail, hotmail, netzero email accounts
#4...non-existent phone number
#5...next day, 2nd day air shipments

All of those are based upon 1st time buyers to your site. Established buyers may have all those issues at some point but you probably know who they are...

Its not unfair to ask for more info on a suspicious order if you've never dealt with someone before. If they balk refer them kindly to your favorite competitor.

1. Web ip is really good, email ip is often better.

2. is a flag but not a reason to deny, I travel 100% and often have things shipped to the city I am in not my mail service in Seattle. And often banks dont have a place to put temp addresses.

3. is another good flag, but not an end all.

4. no phone is a full flag, so email for phone number or you will cancel order. On the first few orders you have no business relationship and need training wheels for each side of the order.

5. Depends on the item... I order K9 supplies next day, as well as other things I need for things that way with my screwy addresses, emails and the like. But I work both ways with my suppliers.


 8:52 pm on Aug 8, 2009 (gmt 0)

Regardless of whether you did address verification, if you ship the order to ANY other address - even one house away - you will automatically LOSE on a chargeback.

The ONLY way you will ever win a chargeback dispute is to prove that you shipped the items to the billing address on the credit card, and you'll have to decide for yourself the size order that makes sense to spend the money requiring a signature.

(In my experience, both UPS and USPS are not consistent when it comes to doing what they are supposed to do with restricted deliveries/signatures/etc.)

Small orders I don't sweat any of this stuff, because it's not a problem (luckily) in my industry.

But for larger orders, you have to trust your instincts, have a plan, and stick to it...sometimes losing a sale here or there is worth not gambling on potential chargebacks.


 8:54 pm on Aug 8, 2009 (gmt 0)

Let me add that in 98% of what we see, the first sign is that the confirmation email bounces.

When we call, the phone number doesn't work, or isn't who it's supposed to be.

Two strikes and they are out.

This is one reason I HATE systems that automatically process credit card transactions. If you catch a fraudulent large order and the card was automatically run, you're still going to be zapped for the merchant fees.

This 71 message thread spans 3 pages: 71 ( [1] 2 3 > >
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