7 ms·

Ok so I know a bit about this as I had the same exact thing happen to me in the past. The reason this probably happened is that their business was getting a hi

by mpeg 3y ago

Ok so I know a bit about this as I had the same exact thing happen to me in the past. The reason this probably happened is that their business was getting a high % of chargebacks from paying customers, paypal is not a specialist payment provider that wants to handle what they consider high-risk business like that, so they block your account and hold your funds for 180 days and during that time keep processing chargebacks. After the 180 days, Paypal will give you the remainder of the money back, so the title is clickbait, they will get back their money. The best thing to do if you operate a business which gets a lot of chargebacks is to find a payment processor that is okay with that, when I had this issue I ended up looking at which payment processors porn sites used and picked one of them, which had no problems. That was a long time ago, so I'm sure there's more options now.

geek_at 3y ago
does that mean if a group of people don't like you they can chargeback-bomb you and get you banned?
- danpalmer 3y ago
  Yes, although in general this will happen with any payment provider. Stripe for example will decline your business after a certain point, and in a few cases have banned entire product categories that were having significant issues with chargebacks. There are payment providers that specialise in high chargeback rate industries, but they cost a lot more.
- Crosseye_Jack 3y ago
  Pretty much, and if your avg payment is rather low you could end up owing PayPal money as you don’t just pay for the refund of the order, but you have to pay additional charges for the chargeback. Let’s say your avg payment is $15, one chargeback means that not only have you lost the payment from the customer who charged back but as you now also owe the chargeback fee you technically lost the payment on a sale which wasn’t charged back. Edit: just a quick note. Chargebacks are different than “PayPal Claims”, chargebacks are initiated by the card issuer, claims are initiated by the customer in the PayPal interface, so claims cost less than chargebacks, but PayPal will still ding your account if you get too many of them. Edit the second: the 180 day hold is to cover not only chargebacks (which generally have a shorter period the customer can start one) but also PayPals own “protection program” claims which is 180 days iirc.
- jeroenhd 3y ago
  If you take credit card payments on any platform: yes. The difference is in how much prior warning you're getting and how expensive paying for the chargebacks is going to be, but every major payment platform will either shut you down or massively increase prices if you incur too many chargebacks. This is one of the practical reasons why credit card processors generally don't take porn sites as customers.
  - Crosseye_Jack 3y ago
    > This is one of the practical reasons why credit card processors generally don't take porn sites as customers Yup “buyer’s remorse” kicks in rather quickly when asked “Honey, what’s this transaction for xxx?” once the statement arrives.
    - Symbiote 3y ago
      Does anyone know if this happens in Europe, where stronger authentication is generally required for online purchases? Last year I asked my bank to chargeback a transaction, where I didn't recognize the merchant or the amount. They said it was paid in-person with a PIN, and unlikely to be fraudulent unless I'd lost my card. (It was genuine.) Normally when I purchase on my card I have to authorize the transaction with a smartphone app. I can see the bank being reluctant to reverse an honest purchase authorized this way.
      - Crosseye_Jack 3y ago
        Can't speak for the rest of Europe, but in the UK tech speaking the bank still needs to prove that you still made the transaction even though you say you didn't. While SCA does helps in their claim not every transaction uses SCA. In my experience its less than 10% of my normal transactions, but some companies (my old phone provider being one) required SCA on every transaction I made with them. Strangely enough, when I purchase something via the standard checkout process on Amazon I don't get a SCA prompt, but every time I setup a subscribe and save purchase I need to approve the transaction even though its the same card as my "normal" purchases with them, but I guess that's because I'm creating a automated repetitive charge on S&S orders. Also when I have seen cases in the news (this has been quite a while ago, so don't have sources to hand) where the bank have just told the customer "We know it was a legit payment, claim denied" but when pushed for copies of their proof its later turned out they didn't have any and were basically just saying that to get the customer off the phone. EDIT: Trying to think back to my last few "NSFW" transactions, I think some sites did require SCA but iirc my last SubscribeStar.Adult (think patreon but for NSFW creators) subscription didn't, but that might be because it was just adding a new creator to my existing payments. EDIT 2: For Chip and Pin, while the bank can say "Well the purchase was made with a pin, so you must have auth it", it doesn't prove that your card wasn't pick pocketed and the pin shoulder surfed from the last transaction/cash machine withdrawal.
- Dalewyn 3y ago
  Keep in mind that chargebacks are considered a nuclear, double-edged option. Yes, you can get your money back as a customer or abuse the system to financially cancel someone, but issue too many chargebacks and the banks will be more than happy to also kick you out too. Chargebacks as they are intended are used only when all other attempts at resolving a dispute have failed, including the merchant refusing to issue a refund. It's the means of last resort and damages the credibility of both sides involved in the transaction.
  - piltdownman 3y ago
    The problem here lies not in legitimate chargebacks, but in chargebacks as a result of using fake or stolen credit cards. There's a whole industry of blackhat and greyhat Scamming as a Service, ranging from botnets used to delist AdSense ads, to Eastern European carding forums which offer scripts to run 100s or 1000s of transactions that will be flagged fraudulent within 24hrs.
- deleted 3y ago
  [deleted]
- piltdownman 3y ago
  Exactly this. If you want to kill a competitors iOS app it's a well-known blackhat route, and testified to here before: https://news.ycombinator.com/item?id=343060 https://news.ycombinator.com/item?id=343060 In this case a competitor used fake accounts and stolen credit cards to buy a competing app to get it delisted - Apple's apparent policy once the chargeback total hits some arbitrary figure. Edit: Immediately downvoted for no reason. Catching these sort of malfeasant actors was literally one of the USPs of former Irish yCombinator Winter 2014 participant Trustev, which was picked up by TransUnion for €44 million a year later : https://www.siliconrepublic.com/business/transunion-buys-trustev https://www.siliconrepublic.com/business/transunion-buys-tru...
  - ClumsyPilot 3y ago
    People want to believe free market has no bad actors, when they are actually inherent in the system
  - KomoD 3y ago
    How is that comment from 2008 relevant... I'm confused? This is why I downvoted.
  - eeghyrdcg 3y ago
    You linked the wrong comment. I should like to read the right one.
    - piltdownman 3y ago
      Oh apologies, copy/paste ate the last two characters of the posted URL https://news.ycombinator.com/item?id=34306047 https://news.ycombinator.com/item?id=34306047
      - eeghyrdcg 3y ago
        I don’t know, all the comments in that thread seem to think the story is bullshit. So I don’t think I’m too swayed.
- reisse 3y ago
  It's more complicated. In theory, you should not be able to chargeback any transaction at will, you need to provide a reason for it. But because US banking is stuck in between of 90s and 00s, to pay with the card online it's enough to know what's printed on the one side of it, maybe two sides. Therefore, "fraud" can always be used as a chargeback reason ("Oh, it wasn't me, someone taken a photo of my card! I definitely didn't pay 300$ on that hot mums nearby website!"). In some parts of the world this is solved by mandatory 2FA authenticaton for online payments (3DSecure and similar tech). If the transaction is verified by 3DSecure or some other 2FA, you cannot chargeback because of "fraud", but you still can chargeback for any other verifiable reason (e. g. goods not delivered).
  - gambiting 3y ago
    To add to that - it's crazy(but also kinda cool?) that in US you can request an instant chargeback and the bank just does it no questions asked. I tried a chargeback on my British Credit card recently because the goods I ordered were never delivered, but it still took 60 days for the claim to be processed .
    - addandsubtract 3y ago
      I even had a back and forth to get my chargeback accepted. The product I ordered was broken on arrival and return shipping was like 40% of the product, so not worth it. After initially accepting my chargeback, the merchant somehow reopened the case and I had to state my claim again. It really is crazy how easy chargebacks are in the US in comparison.
rmholt 3y ago
Not critiquing you but the approach - that's abysmal UX. If PayPal blocks your account with no feedback, that's incredibly anxiety inducing. And in an environment like finance, good communication of the status of the account should be the difference between an "oh okay that's fair" and a lawsuit for theft.
- mcv 3y ago
  Not only anxiety inducing, it can actively deny the customer the thing they paid for. I've heard of events that had to be cancelled because PayPal didn't want to release the money. PayPal making the chargebacks a self-fulfilling prophesy.
  - droopyEyelids 3y ago
    Your example is where naive business hits the wall of reality. Collecting money for events is the archetypal high risk credit card processing business. You get to spend all the money in advance, while the processor holds your chargeback liability that will only come due after your cash flow dries up Every processor mentions this in their t&c. Events require special underwriting.
    - mcv 3y ago
      The real problem is that the possibility of chargebacks makes every transaction uncertain. Chargebacks are an ugly fix to a broken system. Direct payment is better in nearly all situations. The one exception being dishonest merchants, but I don't think that's something you can really fix without lawsuits and/or police.
      - droopyEyelids 3y ago
        You still aren't accounting for the case of things sold in the future, like event tickets. That's a unique situation because the event organizer (or kickstarter inventor, or travel agent, etc) needs the money now to invest in something they may not be able actually provide. That isn't dishonesty, but a question of competence plus the uncertainty of life. Those types of businesses rely on loans. The money has to come from somewhere, and be spent before the product is delivered. A payment processor is not in the business of giving loans.
helsinkiandrew 3y ago
Isn't the real issue that Paypal lets both consumers and businesses receive money, and consumers are far more likely to be fraudsters - receiving money and not sending goods or requesting chargebacks for goods they have received etc. If you use a credit card merchant that does more vetting of the seller side businesses, they're more likely to give you the benefit of doubt if you start getting chargebacks and not lock everything.
beeboobaa 3y ago
An $80k interest free loan sounds pretty nice
- posting_mess 3y ago
  Any evidence it appears on balance sheet / they use it as capital for investments? or are you just parroting a line you heard someone say one? Parent comment makes it fairly obvious why they are holding the money, seems entirely sane and reasonable - or do you think PayPal should take on an $80K risk? Would you or your business? (in this very specific context)
  - beeboobaa 3y ago
    You think they're holding it in a 0% interest account? That'd be foolish. And we know the people they steal from aren't getting their due interest.
    - posting_mess 3y ago
      You have any evidence for that claim or just assuming? Wild to me how you can assert these things with no evidence.
      - beeboobaa 3y ago
        You have any evidence for the claim that PayPal would keep their money in a zero interest account for some reason?
        posting_mess 3y ago
        You made the claim "its a 0% loan", i'm asking you to prove that. Its not on me to somehow counter prove they aren't as I didn't make the original claim.
        MagnumOpus 3y ago
is_true 3y ago
It happened to me a while ago and while chatting with support they had my birth date wrong and thought I was underage. When I told them that they just deleted the support thread. I had only ONE charge back, in 2015 I think. I would understand if they would try to cooperate or ask for more info to prove things. But they have too much power and it's easier to just limit accounts. In times of high interest rates it's even better.
pyb 3y ago
But Danny will have a $80k gaping hole in his cash flow for half a year. Some businesses would not survive this
aga98mtl 3y ago
If you are at or above 1% chargeback you are going to get problem at any normal payment processor. Source: https://www.chargeflow.io/blog/chargeback-threshold-limits https://www.chargeflow.io/blog/chargeback-threshold-limits
- mpeg 3y ago
  Yep! In my case I switched to a processor that had higher fees but had less of an issue with chargebacks. Having said that, I think these days there are ways to limit your exposure, for example requiring 3D Secure for every card payment, as well as tools like Stripe Radar that help reduce fraud.
KomoD 3y ago
> After the 180 days, Paypal will give you the remainder of the money back, so the title is clickbait, they will get back their money. Not always, they can take it sometimes as "damages"
- mpeg 3y ago
  Hence why I said the remainder. In my case they held about $10k and I got back most of it, they take back any chargeback amounts + a flat fee per chargeback
lgregg 3y ago
What payment provider did you switch to?
ijhuygft776 3y ago
Paypal still need to be regulated. It also needs to be fined for events like this.

by mpeg 3y ago

geek_at 3y ago

does that mean if a group of people don't like you they can chargeback-bomb you and get you banned?

danpalmer 3y ago
Yes, although in general this will happen with any payment provider. Stripe for example will decline your business after a certain point, and in a few cases have banned entire product categories that were having significant issues with chargebacks. There are payment providers that specialise in high chargeback rate industries, but they cost a lot more.
Crosseye_Jack 3y ago
Pretty much, and if your avg payment is rather low you could end up owing PayPal money as you don’t just pay for the refund of the order, but you have to pay additional charges for the chargeback. Let’s say your avg payment is $15, one chargeback means that not only have you lost the payment from the customer who charged back but as you now also owe the chargeback fee you technically lost the payment on a sale which wasn’t charged back. Edit: just a quick note. Chargebacks are different than “PayPal Claims”, chargebacks are initiated by the card issuer, claims are initiated by the customer in the PayPal interface, so claims cost less than chargebacks, but PayPal will still ding your account if you get too many of them. Edit the second: the 180 day hold is to cover not only chargebacks (which generally have a shorter period the customer can start one) but also PayPals own “protection program” claims which is 180 days iirc.
jeroenhd 3y ago
If you take credit card payments on any platform: yes. The difference is in how much prior warning you're getting and how expensive paying for the chargebacks is going to be, but every major payment platform will either shut you down or massively increase prices if you incur too many chargebacks. This is one of the practical reasons why credit card processors generally don't take porn sites as customers.
- Crosseye_Jack 3y ago
  > This is one of the practical reasons why credit card processors generally don't take porn sites as customers Yup “buyer’s remorse” kicks in rather quickly when asked “Honey, what’s this transaction for xxx?” once the statement arrives.
  - Symbiote 3y ago
    Does anyone know if this happens in Europe, where stronger authentication is generally required for online purchases? Last year I asked my bank to chargeback a transaction, where I didn't recognize the merchant or the amount. They said it was paid in-person with a PIN, and unlikely to be fraudulent unless I'd lost my card. (It was genuine.) Normally when I purchase on my card I have to authorize the transaction with a smartphone app. I can see the bank being reluctant to reverse an honest purchase authorized this way.
    - Crosseye_Jack 3y ago
      Can't speak for the rest of Europe, but in the UK tech speaking the bank still needs to prove that you still made the transaction even though you say you didn't. While SCA does helps in their claim not every transaction uses SCA. In my experience its less than 10% of my normal transactions, but some companies (my old phone provider being one) required SCA on every transaction I made with them. Strangely enough, when I purchase something via the standard checkout process on Amazon I don't get a SCA prompt, but every time I setup a subscribe and save purchase I need to approve the transaction even though its the same card as my "normal" purchases with them, but I guess that's because I'm creating a automated repetitive charge on S&S orders. Also when I have seen cases in the news (this has been quite a while ago, so don't have sources to hand) where the bank have just told the customer "We know it was a legit payment, claim denied" but when pushed for copies of their proof its later turned out they didn't have any and were basically just saying that to get the customer off the phone. EDIT: Trying to think back to my last few "NSFW" transactions, I think some sites did require SCA but iirc my last SubscribeStar.Adult (think patreon but for NSFW creators) subscription didn't, but that might be because it was just adding a new creator to my existing payments. EDIT 2: For Chip and Pin, while the bank can say "Well the purchase was made with a pin, so you must have auth it", it doesn't prove that your card wasn't pick pocketed and the pin shoulder surfed from the last transaction/cash machine withdrawal.
Dalewyn 3y ago
Keep in mind that chargebacks are considered a nuclear, double-edged option. Yes, you can get your money back as a customer or abuse the system to financially cancel someone, but issue too many chargebacks and the banks will be more than happy to also kick you out too. Chargebacks as they are intended are used only when all other attempts at resolving a dispute have failed, including the merchant refusing to issue a refund. It's the means of last resort and damages the credibility of both sides involved in the transaction.
- piltdownman 3y ago
  The problem here lies not in legitimate chargebacks, but in chargebacks as a result of using fake or stolen credit cards. There's a whole industry of blackhat and greyhat Scamming as a Service, ranging from botnets used to delist AdSense ads, to Eastern European carding forums which offer scripts to run 100s or 1000s of transactions that will be flagged fraudulent within 24hrs.
deleted 3y ago
[deleted]
piltdownman 3y ago
Exactly this. If you want to kill a competitors iOS app it's a well-known blackhat route, and testified to here before: https://news.ycombinator.com/item?id=343060 https://news.ycombinator.com/item?id=343060 In this case a competitor used fake accounts and stolen credit cards to buy a competing app to get it delisted - Apple's apparent policy once the chargeback total hits some arbitrary figure. Edit: Immediately downvoted for no reason. Catching these sort of malfeasant actors was literally one of the USPs of former Irish yCombinator Winter 2014 participant Trustev, which was picked up by TransUnion for €44 million a year later : https://www.siliconrepublic.com/business/transunion-buys-trustev https://www.siliconrepublic.com/business/transunion-buys-tru...
- ClumsyPilot 3y ago
  People want to believe free market has no bad actors, when they are actually inherent in the system
- KomoD 3y ago
  How is that comment from 2008 relevant... I'm confused? This is why I downvoted.
- eeghyrdcg 3y ago
  You linked the wrong comment. I should like to read the right one.
  - piltdownman 3y ago
    Oh apologies, copy/paste ate the last two characters of the posted URL https://news.ycombinator.com/item?id=34306047 https://news.ycombinator.com/item?id=34306047
    - eeghyrdcg 3y ago
      I don’t know, all the comments in that thread seem to think the story is bullshit. So I don’t think I’m too swayed.
reisse 3y ago
It's more complicated. In theory, you should not be able to chargeback any transaction at will, you need to provide a reason for it. But because US banking is stuck in between of 90s and 00s, to pay with the card online it's enough to know what's printed on the one side of it, maybe two sides. Therefore, "fraud" can always be used as a chargeback reason ("Oh, it wasn't me, someone taken a photo of my card! I definitely didn't pay 300$ on that hot mums nearby website!"). In some parts of the world this is solved by mandatory 2FA authenticaton for online payments (3DSecure and similar tech). If the transaction is verified by 3DSecure or some other 2FA, you cannot chargeback because of "fraud", but you still can chargeback for any other verifiable reason (e. g. goods not delivered).
- gambiting 3y ago
  To add to that - it's crazy(but also kinda cool?) that in US you can request an instant chargeback and the bank just does it no questions asked. I tried a chargeback on my British Credit card recently because the goods I ordered were never delivered, but it still took 60 days for the claim to be processed .
  - addandsubtract 3y ago
    I even had a back and forth to get my chargeback accepted. The product I ordered was broken on arrival and return shipping was like 40% of the product, so not worth it. After initially accepting my chargeback, the merchant somehow reopened the case and I had to state my claim again. It really is crazy how easy chargebacks are in the US in comparison.

rmholt 3y ago

Not critiquing you but the approach - that's abysmal UX. If PayPal blocks your account with no feedback, that's incredibly anxiety inducing. And in an environment like finance, good communication of the status of the account should be the difference between an "oh okay that's fair" and a lawsuit for theft.

mcv 3y ago
Not only anxiety inducing, it can actively deny the customer the thing they paid for. I've heard of events that had to be cancelled because PayPal didn't want to release the money. PayPal making the chargebacks a self-fulfilling prophesy.
- droopyEyelids 3y ago
  Your example is where naive business hits the wall of reality. Collecting money for events is the archetypal high risk credit card processing business. You get to spend all the money in advance, while the processor holds your chargeback liability that will only come due after your cash flow dries up Every processor mentions this in their t&c. Events require special underwriting.
  - mcv 3y ago
    The real problem is that the possibility of chargebacks makes every transaction uncertain. Chargebacks are an ugly fix to a broken system. Direct payment is better in nearly all situations. The one exception being dishonest merchants, but I don't think that's something you can really fix without lawsuits and/or police.
    - droopyEyelids 3y ago
      You still aren't accounting for the case of things sold in the future, like event tickets. That's a unique situation because the event organizer (or kickstarter inventor, or travel agent, etc) needs the money now to invest in something they may not be able actually provide. That isn't dishonesty, but a question of competence plus the uncertainty of life. Those types of businesses rely on loans. The money has to come from somewhere, and be spent before the product is delivered. A payment processor is not in the business of giving loans.

helsinkiandrew 3y ago

Isn't the real issue that Paypal lets both consumers and businesses receive money, and consumers are far more likely to be fraudsters - receiving money and not sending goods or requesting chargebacks for goods they have received etc. If you use a credit card merchant that does more vetting of the seller side businesses, they're more likely to give you the benefit of doubt if you start getting chargebacks and not lock everything.

beeboobaa 3y ago

An $80k interest free loan sounds pretty nice

posting_mess 3y ago
Any evidence it appears on balance sheet / they use it as capital for investments? or are you just parroting a line you heard someone say one? Parent comment makes it fairly obvious why they are holding the money, seems entirely sane and reasonable - or do you think PayPal should take on an $80K risk? Would you or your business? (in this very specific context)
- beeboobaa 3y ago
  You think they're holding it in a 0% interest account? That'd be foolish. And we know the people they steal from aren't getting their due interest.
  - posting_mess 3y ago
    You have any evidence for that claim or just assuming? Wild to me how you can assert these things with no evidence.
    - beeboobaa 3y ago
      You have any evidence for the claim that PayPal would keep their money in a zero interest account for some reason?
      - posting_mess 3y ago
        You made the claim "its a 0% loan", i'm asking you to prove that. Its not on me to somehow counter prove they aren't as I didn't make the original claim.
        MagnumOpus 3y ago

is_true 3y ago

It happened to me a while ago and while chatting with support they had my birth date wrong and thought I was underage. When I told them that they just deleted the support thread. I had only ONE charge back, in 2015 I think. I would understand if they would try to cooperate or ask for more info to prove things. But they have too much power and it's easier to just limit accounts. In times of high interest rates it's even better.

pyb 3y ago

But Danny will have a $80k gaping hole in his cash flow for half a year. Some businesses would not survive this

aga98mtl 3y ago

If you are at or above 1% chargeback you are going to get problem at any normal payment processor. Source: https://www.chargeflow.io/blog/chargeback-threshold-limits https://www.chargeflow.io/blog/chargeback-threshold-limits

mpeg 3y ago
Yep! In my case I switched to a processor that had higher fees but had less of an issue with chargebacks. Having said that, I think these days there are ways to limit your exposure, for example requiring 3D Secure for every card payment, as well as tools like Stripe Radar that help reduce fraud.

KomoD 3y ago

> After the 180 days, Paypal will give you the remainder of the money back, so the title is clickbait, they will get back their money. Not always, they can take it sometimes as "damages"

mpeg 3y ago
Hence why I said the remainder. In my case they held about $10k and I got back most of it, they take back any chargeback amounts + a flat fee per chargeback

lgregg 3y ago

What payment provider did you switch to?

ijhuygft776 3y ago

Paypal still need to be regulated. It also needs to be fined for events like this.