3 ms·

Would you have to go to court to dispute the chargeback? Couldn't you set up some kind of system to send them to the credit card company if a customer attempts

Would you have to go to court to dispute the chargeback? Couldn't you set up some kind of system to send them to the credit card company if a customer attempts a chargeback, so they can verify that the chargeback is invalid?

dangrossman 14y ago
It doesn't matter. The chargebacks count against your limit whether you dispute them or not. You must get less than 1% of your monthly gross volume back in chargebacks if you hope to stay in business. If you're above that for several months in a row, 99% of MSPs will terminate your account immediately. As far as Visa and MasterCard are concerned, if you're generating chargebacks on a regular basis, something is wrong with your business model and you must either correct the business model or stop accepting credit cards as payment for it. It's not a question of whether you were legally owed the money or not; it's about protecting the card brands from whatever negative experience you're creating such that customers feel forced to go to their banks and complain about the charges.
- w1ntermute 14y ago
  It's very unfortunate that credit card companies are willing/forced to take the side of the consumer even when they're clearly in the wrong. Maybe this will have to be revisited when/if a more impartial payment system becomes common. Edit: it seems like the endpoint of all this is the banks. If the credit card companies could send the pictures to them, maybe things could be resolved? But I doubt the banks would want to get involved in that. Either way, if I were running a bank, I would take Visa or MasterCard's word over that of any individual customer.
  - dangrossman 14y ago
    I disagree. The only flaw in the policy of low chargeback limits is that it doesn't discriminate between chargebacks due to stolen cards and chargebacks due to extreme customer dissatisfaction. If a large percentage of your paying customers are so angry with you that they'll complain to any 3rd party they can find, something is wrong with your business and no other brand should want to be associated with the experience you're creating. A low chargeback limit makes policies like "bury a $300 cleanup fee in the fine print" non-viable. That kind of thing shouldn't be viable even if it's technically legal. If you find a way to charge a cleanup fee and not surprise and anger customers when doing so, you won't get chargebacks. If you find a way to operate the pods without attracting people that will trash them, you won't get chargebacks. Speaking to your edit: the banks and credit card companies are not separate entities. There are only the banks. The banks own the card brands, and the card brands are not involved in the chargeback process. You dispute a charge by calling your card-issuing bank. The phone number on the back of your card is your bank's number, not Visa's. Visa does not interact directly with customers. Your bank sends the dispute to the bank underwriting the merchant account, which sends it to the merchant. The merchant presents its evidence to its bank, which forwards it back to the card-issuing bank of the customer for a decision.
    - w1ntermute 14y ago
      I never said that the cleanup fee should be buried. In fact, this is all hypothetical. By requiring payment by credit card, you'll hopefully eliminate prostitutes, drug users, and homeless people anyway. At that point, if you make the cleanup fee really obvious to customers, it may be feasible. And I don't know how common chargebacks for unethical purposes are, but neither me nor anyone I know has ever mentioned using a chargeback in a situation where they weren't genuinely scammed.
      - jarek 14y ago
        > By requiring payment by credit card, you'll hopefully eliminate prostitutes, drug users, and homeless people anyway. I'm not sure there's a way to distinguish a "regular" credit card from a prepaid store-bought "credit" card, which are easily obtained by the undesirables. Maybe you could try putting a thousand-dollar hold on the card for verification. Car rental could also be a good business to study for inspiration.
        dnissley 14y ago
        It's usually possible to distinguish between a pre-paid credit card and a non-pre-paid card, depends on your software though. A hold would work much better though -- for example, I don't keep a huge amount of money in my checking account which is what is connected to my debit card, and a $1k hold would fail usually. Mind you I'm in the U.S. where there's not a huge difference between debit/credit cards.
    - learc83 14y ago
      In my experience 1% can be too low depending on the size of transactions. My company charges high monthly subscriptions, and on several occasions we've had people outright lie to credit card companies to get a chargeback. In 3 years of business we've never had a single legitimate chargeback (e.g., fraud, or someone who wasn't satisfied and asked us for a refund that we refused). The few times we have made mistakes in billing, or some other customer satisfaction issue, the customer called us and we initiated a refund. In my experience the chargebacks increase the more expensive the transaction, i.e., people are more willing to go through the procedure to make $1000 than, $10. If just one unscrupulous customer attempts to chargeback months worth of fees, it can easily place us over the limit for the month. We had one customer initiate chargebacks going back 6 months. Plus the customers who are likely to use chargeback scams are also likely to spend more than the average customer in the first place. While we've had no where near even 0.1% of customers attempt (7 in 3 years) this--they're have been several months where 1 chargeback brought us near the 1% threshold. The worst part about chargebacks is how ridiculously stacked it is for the consumer, and they know it. We've even gotten notices to dispute the chargeback that arrived in the mail after the due date. I've also had friends who sold large ticket items that had thousand of dollars stolen in chargeback scams. This problem is only going to get worse as more people become aware of how easy chargebacks are for the customer. >If you find a way to charge a cleanup fee and not surprise and anger customers when doing so, you won't get chargebacks. Doesn't matter how upfront you are about it. You can make the customer sign a single sheet of paper with "$300 cleanup fee in case of damage" written in 30pt font. If you try to charge a cleanup or damage fee--chances are the customer will initiate a chargeback. The only customers who are going to get charged a $300 cleanup fee are the customers who don't respect other people's property in the first place--those kinds of people have no problem with illegitimate chargebacks.
- tibbon 14y ago
  Wonder how that works with companies that I'm sure do get chargebacks a lot, but are huge? Car rental companies come to mind.

dangrossman 14y ago

It doesn't matter. The chargebacks count against your limit whether you dispute them or not. You must get less than 1% of your monthly gross volume back in chargebacks if you hope to stay in business. If you're above that for several months in a row, 99% of MSPs will terminate your account immediately. As far as Visa and MasterCard are concerned, if you're generating chargebacks on a regular basis, something is wrong with your business model and you must either correct the business model or stop accepting credit cards as payment for it. It's not a question of whether you were legally owed the money or not; it's about protecting the card brands from whatever negative experience you're creating such that customers feel forced to go to their banks and complain about the charges.

w1ntermute 14y ago
It's very unfortunate that credit card companies are willing/forced to take the side of the consumer even when they're clearly in the wrong. Maybe this will have to be revisited when/if a more impartial payment system becomes common. Edit: it seems like the endpoint of all this is the banks. If the credit card companies could send the pictures to them, maybe things could be resolved? But I doubt the banks would want to get involved in that. Either way, if I were running a bank, I would take Visa or MasterCard's word over that of any individual customer.
- dangrossman 14y ago
  I disagree. The only flaw in the policy of low chargeback limits is that it doesn't discriminate between chargebacks due to stolen cards and chargebacks due to extreme customer dissatisfaction. If a large percentage of your paying customers are so angry with you that they'll complain to any 3rd party they can find, something is wrong with your business and no other brand should want to be associated with the experience you're creating. A low chargeback limit makes policies like "bury a $300 cleanup fee in the fine print" non-viable. That kind of thing shouldn't be viable even if it's technically legal. If you find a way to charge a cleanup fee and not surprise and anger customers when doing so, you won't get chargebacks. If you find a way to operate the pods without attracting people that will trash them, you won't get chargebacks. Speaking to your edit: the banks and credit card companies are not separate entities. There are only the banks. The banks own the card brands, and the card brands are not involved in the chargeback process. You dispute a charge by calling your card-issuing bank. The phone number on the back of your card is your bank's number, not Visa's. Visa does not interact directly with customers. Your bank sends the dispute to the bank underwriting the merchant account, which sends it to the merchant. The merchant presents its evidence to its bank, which forwards it back to the card-issuing bank of the customer for a decision.
  - w1ntermute 14y ago
    I never said that the cleanup fee should be buried. In fact, this is all hypothetical. By requiring payment by credit card, you'll hopefully eliminate prostitutes, drug users, and homeless people anyway. At that point, if you make the cleanup fee really obvious to customers, it may be feasible. And I don't know how common chargebacks for unethical purposes are, but neither me nor anyone I know has ever mentioned using a chargeback in a situation where they weren't genuinely scammed.
    - jarek 14y ago
      > By requiring payment by credit card, you'll hopefully eliminate prostitutes, drug users, and homeless people anyway. I'm not sure there's a way to distinguish a "regular" credit card from a prepaid store-bought "credit" card, which are easily obtained by the undesirables. Maybe you could try putting a thousand-dollar hold on the card for verification. Car rental could also be a good business to study for inspiration.
      - dnissley 14y ago
        It's usually possible to distinguish between a pre-paid credit card and a non-pre-paid card, depends on your software though. A hold would work much better though -- for example, I don't keep a huge amount of money in my checking account which is what is connected to my debit card, and a $1k hold would fail usually. Mind you I'm in the U.S. where there's not a huge difference between debit/credit cards.
  - learc83 14y ago
    In my experience 1% can be too low depending on the size of transactions. My company charges high monthly subscriptions, and on several occasions we've had people outright lie to credit card companies to get a chargeback. In 3 years of business we've never had a single legitimate chargeback (e.g., fraud, or someone who wasn't satisfied and asked us for a refund that we refused). The few times we have made mistakes in billing, or some other customer satisfaction issue, the customer called us and we initiated a refund. In my experience the chargebacks increase the more expensive the transaction, i.e., people are more willing to go through the procedure to make $1000 than, $10. If just one unscrupulous customer attempts to chargeback months worth of fees, it can easily place us over the limit for the month. We had one customer initiate chargebacks going back 6 months. Plus the customers who are likely to use chargeback scams are also likely to spend more than the average customer in the first place. While we've had no where near even 0.1% of customers attempt (7 in 3 years) this--they're have been several months where 1 chargeback brought us near the 1% threshold. The worst part about chargebacks is how ridiculously stacked it is for the consumer, and they know it. We've even gotten notices to dispute the chargeback that arrived in the mail after the due date. I've also had friends who sold large ticket items that had thousand of dollars stolen in chargeback scams. This problem is only going to get worse as more people become aware of how easy chargebacks are for the customer. >If you find a way to charge a cleanup fee and not surprise and anger customers when doing so, you won't get chargebacks. Doesn't matter how upfront you are about it. You can make the customer sign a single sheet of paper with "$300 cleanup fee in case of damage" written in 30pt font. If you try to charge a cleanup or damage fee--chances are the customer will initiate a chargeback. The only customers who are going to get charged a $300 cleanup fee are the customers who don't respect other people's property in the first place--those kinds of people have no problem with illegitimate chargebacks.
tibbon 14y ago
Wonder how that works with companies that I'm sure do get chargebacks a lot, but are huge? Car rental companies come to mind.