22 replies to this topic

[phi148]

Hello all,

I'm new to the e-commerce world, and I want to make sure I am covered if any possible chargebacks occur in the future.

My questions are as follows :

1) What are the best ways to prevent chargebacks?

2) What can I do once a chargeback has occurred? Am I completely out of $$ and my product(s) ?

3) Is there "chargeback insurance" available to help protect retailers?

4) What are YOUR experiences, and what did you learn from them...? Please list any advice or tips you may have!

Thanks!

[toyicebear]

Some tips.....

[enragedcow]

 phi148, on Mar 18 2007, 08:34 PM, said:

1) What are the best ways to prevent chargebacks?

1 - ONLY ship to the AVS matched billing address.

2 - Require a direct signature on all shipments.

3 - Fully insure all packages.

4 - Require your users to actively accept your store policies during checkout (an "I accept these terms" checkbox sort of thing).

5 - Install a Verified by Visa/Mastercard Secure Code system (HIGHLY recommended!!!!!!!)

6 - Use a fraud screen system (algozone is a good one). It's not fool proof, but it helps.

7 - Use your head - a new customer ordering $2,000 worth of product via overnight shipping should raise red flags.

8 - Do not ship internationally.

9 - Do not give out your tracking numbers (Many customers hate this, so it's up to you. Giving them out is somewhat risky, but most people want them - so your call!)

These are the biggies.

 phi148, on Mar 18 2007, 08:34 PM, said:

2) What can I do once a chargeback has occurred? Am I completely out of $$ and my product(s) ?

In most cases, you are able to submit a rebuttal. You'll have to fax in all supporting documents (AVS match, shipping address, tracking #, etc) along with a written statement. Unfortunately, unless your case is airtight, you stand a good chance of losing. The card companies tend to side with the customer - this is why you MUST be diligent in following all applicable rules and regulations. If you fail to do even the simplest of things, you'll lose the case. In some cases, you'll lose even if you do follow all the rules

 phi148, on Mar 18 2007, 08:34 PM, said:

3) Is there "chargeback insurance" available to help protect retailers?

Not that I know of.

 phi148, on Mar 18 2007, 08:34 PM, said:

4) What are YOUR experiences, and what did you learn from them...? Please list any advice or tips you may have!

We lost close to $6,000 before we finally learned how to stop all possible chargebacks. There will always be holes and you'll always be vulnerable, but using due diligence, you'll do better. Follow the tips I mentioned above (ESPECIALLY the verified by visa/MC secure code thing - that reduced our chargebacks significantly!) .

[toyicebear]

One point to mention if you use the oscommerce cc module and inputs the cc info yourself manually. You will loose close to any chargeback case..

If you in addition are collection CVV numbers in your website and then inputing them manually, you might not only loose the chargeback case but also your merchant account aswell as getting some stiff fines.....

[phi148]

Thanks for all the tips! Great stuff!

 enragedcow, on Mar 26 2007, 08:40 AM, said:

5 - Install a Verified by Visa/Mastercard Secure Code system (HIGHLY recommended!!!!!!!)

Where do you get this?

[phi148]

 enragedcow, on Mar 26 2007, 08:40 AM, said:

9 - Do not give out your tracking numbers (Many customers hate this, so it's up to you. Giving them out is somewhat risky, but most people want them - so your call!)

Why is this risky?

[enragedcow]

Verified by Visa/ Mastercard Secure Code: http://www.oscommerce.com/community/contributions,2534/category,all/search,cardinal+commerce You will also have to enroll in the service from Cardinal Commerce - I think it's like $0.10 per transaction or something.

Authorize.net contrib that works well with it: Auth.net linky

I just recently got those to play nice with the gift card/voucher contrib. Took me forever. In theory this is a really easy install, but YMMV.

Pros:

For Visa cards, any customer who purchases using a card that has the enrollment capability (whether they are actually enrolled or not!) you are 100% protected from certain chargeback types (I didn't do it, it was unauthorized, etc).

For Mastercards, you're protected for any enrolled card.

Cons:

It does slow down the checkout process a little bit, as it adds an extra step.

Sometimes the banks force you to enroll - so customers get a screen during checkout asking for part of their SSN or something to verify thier ID, and to enroll the card. You don't ever see this data (it is directly between customer/bank) but some customers think it's your store asking for the SSN and they freak out. This problem, however, isn't as bad as it sounds, I've only ever had one customer refuse to do it.

Overall, I *LOVE* this system. I know for a fact that it has saved me from $2700 worth of chargebacks from one customer, and about $1800 from another one. Not too shabby.


About tracking numbers:

I don't really want to explain in detail why it can be bad to give them out - suffice to say scammers have found ways to use this information to scam you without you having any clue until after the fact, and you'll lose the chargeback every time This isn't a very common scam, but it's good to keep in mind if you're shipping a large order to a new customer. Offer to let them know the package status at anytime, but avoid passing out the actual tracking #.

Edited by enragedcow, 27 March 2007, 13:22.

[FlyingKites]

If there is an issue with supplying Tracking Numbers I think it would be in everyone's best interests to explain it.

[richieboy29]

one other thing to watch out for is third party sellers. I used to work for an ecommerce company and the main problem they had was with 3rd party companies. you louse out on both ends if you arent carefull as they charge you for getting the sale and then the customer claims the money back against you.

what I did learn was the best option is allways to make sure you have an address match. if the customer supplies a security code match only then get them to e-mail or fax in a bank or credit card statement for the card in question (showing the address provided), or a drivers licence (photocard and paper) to prove there address. just so long as you state in your terms and conditions that you requiare a full address match and security code match then its all good.

of coure this all relies on only shipping to the card holder address, however company addresses can work to assuming that you can verify the company's address and legal status (registration).

as for paypal without paypals registration they do specify wheather the address has been verified as well or inform you wheather customers have been through paypals verification process. the best bet when using paypal if you are suspect of a sale is to put it on hold and conform with the customer via e-mail or recorded phone call (if a registered paypal user then preferably by e-mail) to ensure that they cannot claim you are to blaim for sombody abusing there account.

[FidelGonzales]

 toyicebear, on Mar 26 2007, 03:21 PM, said:

One point to mention if you use the oscommerce cc module and inputs the cc info yourself manually. You will loose close to any chargeback case..

If you in addition are collection CVV numbers in your website and then inputing them manually, you might not only loose the chargeback case but also your merchant account aswell as getting some stiff fines.....

Can you explain why this is? Are the liabilities simply because of the room for human error you have built into your methods?

[jakehr2000]

This is my first reply ever.. I use to work for a Major Credit Card Issuing Bank. We had merchants call all the time to verify the purchaser's name, address, and phone. Most banks will verify 2 yes or no questions. It happened to me in my store over the counter. Always ask for ID over the counter. Good Luck! Charge Backs SUCK!!

[JustPhish]

It's all good advice. However, I find my chargebacks come from unscrupulous customers who lie to get their money back because they are upset about something. I deal with live product. I have a guarantee clearly stated on my site which details refunds, etc. What happens is that a customer, through their fault entirely, causes something to go wrong with their shipment. Whether abandoning it, or getting buyers remorse, etc. Then they whine to get their money back. More often then not I go ahead and work something out with a partial refund even though they deserve nothing. But then, after I do that they go and file a chargeback and LIE about what happened and request the ENTIRE amount back, even after already getting a partial refund!

I state my case, point to my policies, provide emails that show the customer is lying about the events....I still lose every time. How do I protect against this?! It's INCREDIBLY frustrating.

[Domains877]

 enragedcow, on Mar 26 2007, 01:40 PM, said:

1 - ONLY ship to the AVS matched billing address.

Useless. Most of fraudsters already have AVS matched billing address along with their stolen credit card data etc....

 enragedcow, on Mar 26 2007, 01:40 PM, said:

3 - Fully insure all packages.

Expensive.

 enragedcow, on Mar 26 2007, 01:40 PM, said:

4 - Require your users to actively accept your store policies during checkout (an "I accept these terms" checkbox sort of thing).

Totally useless.

 enragedcow, on Mar 26 2007, 01:40 PM, said:

5 - Install a Verified by Visa/Mastercard Secure Code system (HIGHLY recommended!!!!!!!)

Yes. This is correct. This will reduce your fraud rate. However, your conversion rate will be reduced as well. Strange but proved.

 enragedcow, on Mar 26 2007, 01:40 PM, said:

8 - Do not ship internationally.

Do not ship to anyone ;-)) Sorry for this joke.

 enragedcow, on Mar 26 2007, 01:40 PM, said:

9 - Do not give out your tracking numbers (Many customers hate this, so it's up to you. Giving them out is somewhat risky, but most people want them - so your call!)

Unacceptable for most businesses.

[kdogg]

I just had a meeting with a bank official today, I'm going to start processing my own credit cards and they told me the more info, the better.

They told me to get info like:

Name
Address
Phone
Card Number
Exp Date
CVV/CVV2 etc
Email
Record IP

They also told me its bank policy to add a box with a check mark that says something like: I'm the owner of this card, I authorize its usage blah blah. They said it was the samething as a signiture from an in-store point of sale transaction.

The person who came out and signed us up said all this info would keep us from having a charge back.

[totalnumpty]

Remember there is a very large difference between cc chargebacks and PayPal chargebacks

Under PayPal rules, all shipments must be trackable online throughout their journey (including internationally) AND the shipping address must be BOTH verified and confirmed by PayPal AND the shipping address must be in the "list" of acceptable countries - i.e. Canada, Germany, UK & US ONLY.

Even if you comply with all of that, it's still a flip of a coin if PayPal will protect your funds. Plus if you do not have confirmation from the delivery service WITH on online-viewable receiver's signature, then you're likely to lose.

All that being said, off-eBay we've never had a PayPal chargeback, and less than 1% of on-eBay sales have been subjected to shargeback - usually due to impatient buyers thinking Thailand is within continental USA or is just across the English Channel from the UK. This is especially true when they choose the cheapest (slowest) delivery service and expect next day delivery.

..... the customer is always wrong, even when they're right ?

[toyicebear]

 FidelGonzales, on Jun 6 2007, 04:06 PM, said:

Can you explain why this is? Are the liabilities simply because of the room for human error you have built into your methods?

Quote

One point to mention if you use the oscommerce cc module and inputs the cc info yourself manually. You will loose close to any chargeback case..

1. Unless you are PCI compliant you can not collect and store cc info online. (Opening you up for massive fines, lawsuits and possible lose of your merchant account)

2. When you process the payment later manually - you do not have any reliable ref. purchase ip and avs info which is deemed as any kind of valid proof. (Even if you record this yourself it will in most cases be dismissed)

If you had used a respectable payment gateway provider, their recorded info on the other hand would be deemed reliable proof.

Quote

If you in addition are collection CVV numbers in your website and then inputing them manually, you might not only loose the chargeback case but also your merchant account aswell as getting some stiff fines.....

Quite simply because you are not alowed to store CVV number online periode...

Edited by toyicebear, 25 October 2007, 05:28.

[netgroupone]

How do you guys handle the panalty for chargebacks? do you charge it to your client or do you the lose money?

[toyicebear]

 netgroupone, on May 13 2008, 07:27 PM, said:

How do you guys handle the panalty for chargebacks? do you charge it to your client or do you the lose money?

If a chargeback is "valid" you can not charge the fees to the client.


If a chargeback is unjustified/fraudulent and you have the needed documentation you can charge the client for any fees/cost incured.

In such a case you can even use a collection agency to do the actual collection of the money with the backing of the legal system where the client risk demerits in their credit rating if they do not pay up.

[WoodsWalker]

 JustPhish, on Jul 29 2007, 10:03 PM, said:

It's all good advice. However, I find my chargebacks come from unscrupulous customers who lie to get their money back because they are upset about something. I deal with live product. I have a guarantee clearly stated on my site which details refunds, etc. What happens is that a customer, through their fault entirely, causes something to go wrong with their shipment. Whether abandoning it, or getting buyers remorse, etc. Then they whine to get their money back. More often then not I go ahead and work something out with a partial refund even though they deserve nothing. But then, after I do that they go and file a chargeback and LIE about what happened and request the ENTIRE amount back, even after already getting a partial refund!

I state my case, point to my policies, provide emails that show the customer is lying about the events....I still lose every time. How do I protect against this?! It's INCREDIBLY frustrating.

The above is my experience as well.

I must say that, having been in business and taking credit cards for over ten years (custom electronics biz + related books and kits), we have only had a handful of chargebacks (say, one every 2 years). These have all been as described above - never someone saying they didn't _make_ the purchase (which most of the lists of guidelines are aimed at), but rather someone backing out of an order they initiated, without trying to work it out with us. They simply call their bank and lie. It's hard for us honest folks to believe, but they do it. Still, I must add that it is seldom.

In these cases, we have found it is useless to appeal the decision - the customer already has their money back, withdrawn automatically (and with no immediate notice) from our business account. They may even still have the product. It is their word against ours. If you issue checks from the same business account you use for credit card deposits, watch your balance daily so they never bounce if there has been a chargeback that you are not aware of!

I think a significant factor that protects us from having more chargebacks is that we are in a niche business that tends to attract intelligent, moneyed people. That is a happy accident. The next, and most important factor is, we do our best to have happy, satisfied customers. No one seems to have mentioned this, and of course it's hardly foolproof, but a business with poor customer relations is bound to have more chargebacks. So try to keep 'em happy with a superior product and level of customer service.

Best of luck to you!
~Wendy

Edited by WoodsWalker, 30 May 2008, 16:28.

[gabbyem]

Does anyone have any information about this problem? A lawsuit has been filed and I’m trying to learn more about it. Online merchants might be getting ripped off through inflated credit card chargebacks.

Here’s how it goes:

First, online merchants are defrauded by foreign buyers using stolen credit card numbers. When the real cardholder reports the fraud, VISA and other credit card companies may be using the wrong foreign-currency exchange rates to perform the chargeback. If VISA uses a higher rate of exchange, THEN THE MERCHANT LOSES SERIOUS MONEY!!!

Visit www.chargebackdispute.com if you’re interested in learning more. Merchants who have fallen victim to this possible scheme may be eligible for compensation.