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Winning Chargebacks
frankodelic




msg:623345
 2:25 am on Apr 8, 2005 (gmt 0)

We'd like to maximize our potential to win chargebacks, so I'd like to hire a consultant to help us streamline our TOS and create effective chargeback response templates.

Can anyone recommend a good consultant or company? We're looking for someone with serious experience who can offer definitive and effective solutions in an ecommerce environment.

Thanks,

Frank

 

MarkHutch




msg:623346
 3:02 am on Apr 8, 2005 (gmt 0)

From what I've seen, CC charge backs via the Internet are hard to prevent. Might be a better idea to find some way to build a 2 or 3% buffer into your sales to cover these kind of things. I've know of people that spent many hours trying to win these disputes with little success. The way the CC business is set up, it very difficult for the CC companies and the banks that underwrite them to lost on a transaction. Unless the person uses their card in your business, signs the receipt exactly the way the did on their CC appliction with that company, you check their signature on the back of the card and get some other form of ID, you will lose any dispute.

Even if you get all those things, they can always claim that you didn't deliver exactly what you promised and you are guilty until proven innocent. Is it really worth the time and trouble to go through all these and most of the time lose anyway?

frankodelic




msg:623347
 3:28 am on Apr 8, 2005 (gmt 0)

Mark,

While I agree that fighting chargebacks can at times be pointless, we'd like to do our best where they're concerned.

BTW... I'm not talking about cc fraud. We primarily get damaged / defective merchandise chargebacks. Sometimes our widgets arrive with damage or defect. We have policies in place to correct these problems, but some customers prefer to contest their credit card instead.

A 2% - 3% increase in pricing leaves us less competitive in a very competitive space, so I'm not too excited about that idea.

We're exploring a two pronged approach to the problem... click here for prong two; [webmasterworld.com...]

Any and all recommendations are welcome!

Frank

[edited by: lorax at 12:35 pm (utc) on April 13, 2005]
[edit reason] widgetized [/edit]

MarkHutch




msg:623348
 3:46 am on Apr 8, 2005 (gmt 0)

Thanks. I understand now what you are talking about. Didn't mean to be too negative about CC charge backs. However, it is a negative subject if you are a merchant. :)

ecardswipe




msg:623349
 12:08 am on Apr 12, 2005 (gmt 0)

i work for a merchant processing company and to be honest fighting chargebacks really isn't worth your time. if your product shows up damaged they've got you. all i could suggest is talking to a more leanient service provider.

HRoth




msg:623350
 4:25 pm on Apr 12, 2005 (gmt 0)

How come so many of your widgets arrive damaged that you have to have a policy about it in your FAQ? Seems like a lot of damage. Perhaps the fault is in the way the widgets are shipped/packed or the shipper you are using rather than in the customers being quick to do a chargeback.

[edited by: lorax at 12:36 pm (utc) on April 13, 2005]
[edit reason] widgetized [/edit]

derekwong28




msg:623351
 11:44 pm on Apr 12, 2005 (gmt 0)

Even if the widgets turned up damaged, it does not mean that the customers can keep them by initiating a chargeback. I suppose the you can offer to pay for the return shipping costs in such instances.

We just had a case like this recently. The customer agreed to withdraw the chargeback and asked his bank to do so. Yet the chargeback still went through. This just shows once the chargeback process had been initiated, there is very little that can be done.

I think one of the reason is chargeback fee. The credit card have a vested interest to get this chargeback through otherwise they would not be able to get this fee.

[edited by: lorax at 12:37 pm (utc) on April 13, 2005]
[edit reason] widgetized [/edit]

jollymcfats




msg:623352
 11:56 pm on Apr 12, 2005 (gmt 0)

I think one of the reason is chargeback fee. The credit card have a vested interest to get this chargeback through otherwise they would not be able to get this fee.

We successfully reverse almost every chargeback we receive. But the fee never gets reversed. We pay it for every chargeback, reversed or not.

trader




msg:623353
 12:59 am on Apr 13, 2005 (gmt 0)

We successfully reverse almost every chargeback we receive. But the fee never gets reversed. We pay it for every chargeback, reversed or not.

Right, I have easily done that too BUT does it really STAY reversed or is it eventually debited again. That seems to happen almost all the time as chargebacks are almost impossible to win, IMO, what with the banks being basically 100% on the cardholders side.

frankodelic




msg:623354
 2:25 am on Apr 13, 2005 (gmt 0)

I believe there are some online companies that get the credit card companies to honor their Terms of Service. For example, if you called your credit card company because you decided you wanted to cancel airline tickets made through Priceline.com... I bet the credit card company wouldn't let you.

So, why would Priceline's TOS be honored by the credit card companies when other company's TOS are not?

MarkHutch




msg:623355
 3:27 am on Apr 13, 2005 (gmt 0)

The problem with online is that it's tough to prove that the person on the card actually made the purchase.

trader




msg:623356
 4:28 pm on May 15, 2005 (gmt 0)

Our chargebacks (very few in number overall but quite upsetting of course) are due to either a misunderstandings by the buyer regarding the service ordered, provided and used, or simply a hostile and nasty buyer who either changes his mind after getting and using the service or does a chargeback as a way to not pay for it but still keeps it and uses it.

Due to losing most chargebacks with our bank merchant acct we switched 100% to PayPal as we heard they were much more so on the merchants side. In fact, we heard that at the forums.

Unfortunatey, that is wrong and bad information. For a service (not a product) you can only win a PayPal chargeback assuming your buyer paid using only his PayPal cash available funds and NOT a credit card funding source.

As you may know, upon checokout the buyer is asked if he wants to use his PayPal Balance, a bank acct or Credit Card. For larger transactions I am sure most use the credit card option.

After a particularly disturbing recent chargeback I am told by PayPal there is no way I can win a chargeback if the lying buyer tells his credit card firm he did not get the service. Even though we have undeniable evidence he not only got but successfully used the service we lost the case. For a service we are told there is no hope no matter how solid the evidence is.

As a result we are likely going back to our old bank merchant acct where we at least have a fighting chance to win (occasionally we did) if our bank is on our side vs PayPal where we are told we lose 100% of the time.

Anyone else experience this or know a way to avoid this?

HRoth




msg:623357
 6:39 pm on May 15, 2005 (gmt 0)

This has not been my experience with Paypal. I just had a customer who did a chargeback through Paypal because he said he did not get the merchandise. I had a tracking number and gave it to Paypal. Even though it was a USPS delivery confirmation number and so only showed a zip code, not an address, like a UPS tracking number, they settled the chargeback in my favor.

But maybe the reaction of the powers that be has to do with how many chargebacks you get. Didn't you say before that you get a lot? I would not be surprised if that influences how Paypal and others react to a chargeback, because a chargeback is a pain in their behind too, not just yours. They don't refund the fee, but they still have to spend money to deal with it. If they have a merchant who gets a lot of chargebacks, they aren't going to be sympathetic.

Maybe it would be more productive for you to determine why you are getting so many chargebacks and fix that instead of trying to find some processor who is going to take your side in chargeback disputes.

RailMan




msg:623358
 8:21 am on May 16, 2005 (gmt 0)

>>So, why would [a big company's] TOS be honored
>>by the credit card companies when other
>>company's TOS are not?

any big company is going to do things right when it comes to credit card processing - many smaller merchants simply don't handle credit card processing properly ...........

frankodelic




msg:623359
 10:01 am on May 16, 2005 (gmt 0)

Railman, define "do things right" and we've got the answer to our million dollar question.

I've been trying to figure this one out for about three years. I've talked with lots of folks, done a load of research, and experimented with a high volume of different chargeback responses.

I got nada.

lgn1




msg:623360
 3:30 pm on May 16, 2005 (gmt 0)

If a customer scams you with a chargeback, you still have recourse thru a collection agency.

However, dishonest people generally don't have good credit scores, or care about their credit anyways, so collections are generally unsucessful.

trader




msg:623361
 4:25 pm on May 16, 2005 (gmt 0)

"This has not been my experience with Paypal. I just had a customer who did a chargeback through Paypal because he said he did not get the merchandise. I had a tracking number and gave it to Paypal. Even though it was a USPS delivery confirmation number and so only showed a zip code, not an address, like a UPS tracking number, they settled the chargeback in my favor. But maybe the reaction of the powers that be has to do with how many chargebacks you get. Didn't you say before that you get a lot? I would not be surprised if that influences how Paypal and others react to a chargeback, because a chargeback is a pain in their behind too, not just yours. They don't refund the fee, but they still have to spend money to deal with it. If they have a merchant who gets a lot of chargebacks, they aren't going to be sympathetic. Maybe it would be more productive for you to determine why you are getting so many chargebacks"

HRoth, are you talking to me or someone else? I never said or even implied I get a lot of chargebacks. In fact I said the opposite that they are very few in number in my post.

Also, please read in better detail as I was referring ONLY to services being automatic paypal losses, NOT actual products or merchandise shipped out.

If you strictly follow paypal seller protection rules and can prove the product was delivered with a shipping tracking number under $250 and a signed receipt above $250 you will win the PayPal dispute.

However, if you sold a service and they paid thru PayPal (with a credit card) you apparently will lose 100% of the time, even if you can verify with absolute certainty the service was provided and used successfully, makes no difference at all.

HRoth




msg:623362
 4:50 pm on May 16, 2005 (gmt 0)

Sorry, Trader, I was getting you confused with Frankodelic.

RailMan




msg:623363
 1:32 am on May 17, 2005 (gmt 0)

>>Railman, define "do things right" and we've got
>>the answer to our million dollar question.

yup.
the big boys figured this out a long time ago - and it's a multi-million dollar question for each one of them. do what they do and you can't go far wrong.

in general, they will use automated systems - cards will be processed automatically in real time, AVS / CVV will be checked automatically in real time, VbV / MCSC authorisation will be checked automatically in real time. they will often ship only to the billing address. they will often require a signature etc etc etc.

any "dodgy" orders will be either rejected at payment time or flagged for further investigation.

they won't use "el-cheapo shared SSL certificates" to collect card numbers, then store them in plain text on a web server, then manually tap the card number into a terminal. they won't phone the card issuer for verification. they just don't need an army of people to do all this as 99% of it is automated.

they won't ship to nigeria, full stop. they won't offer a dozen different payment options - almost everyone has a credit card now so no need to allow alternatives like paypal / cheque / wire transfer etc etc. they use fraud pattern detection. they probably check white pages / online telephone directories / electoral roll etc (depending on which country etc) and they probably automate all that.

it's not rocket science, just common sense.

and best of all, companies like worldpay / 2CO etc offer some or all of these automated services (AVS / CVV / VbV / MCSC etc). it's not perfect, but it's secure, it does all the checks, it saves you a lot of work. it costs a bit more, but it's the shopper that pays in the end, not you.

the big boys will "roll their own" payment systems so they aren't branded, but you can easily use worldpay / 2CO etc without much trouble. the big boys will automate other checks - you can still do those manually if you don't want to rely 100% on AVS / VbV etc etc - and you could roll your own system to automate that later.

>>I've been trying to figure this one out for
>>about three years. I've talked with lots of
>>folks, done a load of research, and
>>experimented with a high volume of different
>>chargeback responses.
>>
>>I got nada.

you're looking at the wrong thing. don't look at your potential for winning chargebacks - remove the causes of the chargebacks and they'll (mostly) go away.

in your case it's a problem with "damaged / defective merchandise" - solutions are:
- better packing to prevent damage
- try different delivery companies to prevent damage
- require signature on delivery to say goods received in good condition
- more prominent returns / refunds information on your website (esp at POS) with clear offer to replace or refund (including that you'll pay return shipping)
- include delivery note with returns / refunds info
- state clearly that if refund is required, you'll refund them direct to their credit card (they will hassle you for the refund, not the card company, result being fewer chargebacks)
etc etc

you'll find this is just the same as what the big boys do ..........

as for fighting the chargebacks, just keep the info simple - include the transaction info, point out your returns / refunds policy etc, stating that you'll happily replace the goods or refund the payment etc.

trader




msg:623364
 5:17 pm on May 17, 2005 (gmt 0)

RailMan, your post was mostly about preventing fraud and damaged goods, etc. However, they are really non-issues for myself and many others who mainly are troubled by dishonest consumers who simply are not happy with the service ordered or perhaps bothered by some minor issue, or have Buyers Remorse (a common ailment) and demand a refund.

Therefore, they simply do not want to pay and do a chargeback, even though they successfully used and benefited from the service provided. What can be done about that?

We are thinking about no longer accepting PayPal as they tell me a loss is 100% assured on services if there is a chargeback originally on an original credit card payment and there is no actual trackable product or merchandise involved. At least with regular credit card merchant accounts you have a fighting chance to win an occasional chargeback and the percentage of losses will not be 100% as with PayPal.

hfwd




msg:623365
 3:33 am on May 18, 2005 (gmt 0)

dishonest consumers who simply are not happy with the service ordered or perhaps bothered by some minor issue, or have Buyers Remorse (a common ailment) and demand a refund.

There will always be those who think that they can get something for nothing - if it's a small percentage of your customers (and the average ticket size is small), I suggest you chalk it up to regular business losses.

For large amounts chaged for services - you're better off having them sign a contract before service is rendered. Fax 'em a contract, with clauses of what happens if they want a refund, etc.

RailMan




msg:623366
 10:13 am on May 18, 2005 (gmt 0)

RailMan, your post was mostly about preventing fraud and damaged goods, etc. However, they are really non-issues for myself and many others who mainly are troubled by dishonest consumers who simply are not happy with the service ordered or perhaps bothered by some minor issue, or have Buyers Remorse (a common ailment) and demand a refund.
Therefore, they simply do not want to pay and do a chargeback, even though they successfully used and benefited from the service provided. What can be done about that?

my post wasn't so much about "preventing fraud", it was about "sensible and responsible trading etc to prevent chargebacks (for any reason)" and demonstrating to card issuers that you are a "sensible and responsible trader" which can get them on your side when it comes to chargebacks etc.

if you take away reasons for chargebacks, you prevent most of them. if you use automated systems for card processing you can include VbV / MCSC (the online equivalent of chip and pin etc) which removes the "i didn't place the order" reason for chargeback.

likewise if you have clear information for returns and refunds etc, then you are less likely to get chargebacks, especially for minor issues.

if a chargeback occurs, you can demonstrate that the cardholder has not followed correct procedures and has no justification for charging back. this helps your case when fighting a chargeback, especially for "Buyers remorse".

card issuers don't automatically refund every chargeback request - show that you're trading sensibly and responsibly, show that you provide clear information etc, and you remove most of the problem.

(20,000 online transactions in 5 years, 4 chargebacks, 3 of which were prevented - the other was the first one i got when i was green and didn't realise indonesia was a high fraud country)

and if a "buyers remorse" chargeback goes through, simply revert to legal action to recover goods / costs. (this is what the big boys do). you will have taken the necessary precautions to verify the transaction at the time of purchase, you will have clearly displayed returns / refunds / complaints / contact information etc, the law will be on your side.

HRoth




msg:623367
 1:41 pm on May 18, 2005 (gmt 0)

Railman, I think there is a big difference between the credit card situation when selling a service and when selling a tangible good, so I don't think that many of the tactics used for selling goods work for selling a service. One does, though, and that's reassuring the customer.

I used to sell a service (writing) instead of tangible goods but had no chargeback problems because I didn't accept credit cards - on the advice of someone who had been in that business for 20 years. Even when the cost of the service was in the thousands (and I always required payment in advance), customers were able to come up with checks, money orders, or wire transfers to pay. I did take Paypal at the time, but few customers used it and I never had anyone try to get a chargeback through it then. So Trader, one possibility is just not to accept credit cards at all. Of course, if you don't take credit cards, you have a lot fewer customers, but you don't have any chargebacks or any processing fees, either. And I think the personal contact of arranging payment by other means is a good thing - it builds customer confidence in you.

The thing is, though, in six years almost none of my customers were unhappy after receiving the service. That was partly because I was pretty good at what I did:) but also partly because I talked to my customers. I made myself available to them. Often with a new customer I could hear the tension drain out of their voice as we talked. Emails don't compare to talking by phone in terms of reassuring people. People are (unjustifiably, IMO) afraid of being ripped off on the Internet. That fear has to be dealt with.

Also, Trader, maybe you are giving your customers the feeling that you are snakebit about chargebacks. That could make them snarky in return. I have seen sites where the owner has had a lot of chargebacks and has decided to make a statement about it on the site. To me as a potential customer, this is an alarm bell. Why would they anticipate a problem with a chargeback if there was nothing wrong with what they sell? It makes people suspicious, and then they go looking for something to justify their suspicions.

In the end, though, Trader, there is no reason why your customers should be any nastier or have any more buyer's remorse than anyone else's. So that means that the problem lies not with them but with either the service provided or the process of providing that service. So I guess if I were you, I would look at how much customer contact I was having during the process of selling. If it's something sold by filling in a form online, for example, maybe it would help if you called them to let them know you got their order and that it will be filled by x date, and if they have a problem, they can call you. Or maybe it's something as simple as having your phone number prominently displayed, making sure the phone is answered, and returning calls promptly.

RailMan




msg:623368
 2:01 pm on May 18, 2005 (gmt 0)

I don't think that many of the tactics used for selling goods work for selling a service.

they do - good, clear information, automatically verifying the order etc etc etc
mind you, intangibles (services / downloads etc) is always a much higher risk than goods being delivered

In the end, though, Trader, there is no reason why your customers should be any nastier or have any more buyer's remorse than anyone else's. So that means that the problem lies not with them but with either the service provided or the process of providing that service.

i would tend to agree - we all get nasty customers, but they are few and far between

Or maybe it's something as simple as having your phone number prominently displayed, making sure the phone is answered, and returning calls promptly

or like i said "clear information / policies etc" - it prevents the vast majority of problems occuring in the first place .........

frankodelic




msg:623369
 11:48 pm on May 18, 2005 (gmt 0)

In our case, we're doing all we can on the front end to provide the level of service necessary to avoid chargebacks, but when it comes down to damaged/defective merchandise some customers just plain don't like our TOS.

...and Railman, our TOS aren't changing, they're required in our niche. We're also doing everything possible to prevent damaged or defective merchandise, so suggestions for improvement in that area really aren't helpful.

To address the problem, one alternative we're currently exploring is collections.

While a customer may get their money back by contesting payment, they still owe. If the customer is aware collections is an option, I also believe they'll be less inclined to chargeback in the first place.

Has anyone else considered this option?

RailMan




msg:623370
 12:32 am on May 19, 2005 (gmt 0)

...and Railman, our TOS aren't changing, they're required in our niche.

i don't know your particular area of business, but it sounds to me like you've written "strict" TOS for your particular business and this appears to leave just "one way out" for unhappy customers - chargeback.

IMO, you should still do as the big boys do. your TOS should be no different to the TOS of any large mainstream business. the principles are the same regardless of the area of business you're in - clear sales info, clear TOS, clear returns / refunds info, etc etc.

but like i said, i don't know your area of business ........ please can you explain why your business needs a different TOS? (PM me if you want to).

While a customer may get their money back by contesting payment, they still owe.

i fully agree

If the customer is aware collections is an option, I also believe they'll be less inclined to chargeback in the first place.

Has anyone else considered this option?

yes, all the big boys have something in their TOS about taking action etc for non-payment and that the "customer" will be liable for all costs incurred.

this tends to be a long way down the TOS where people get bored before they read it. you should bury this in your TOS as well. don't shove it in their faces as you'll come across as an aggressive retailer and you're likely to scare away potential customers.

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