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    19 Replies Latest reply on Dec 30, 2007 9:39 PM by samuelsegal2

    Dealing with Chargebacks

    BuynSell Newbie

      I have a question for everyone. I, just like many other business, have the occasional chargeback that we deal with. I am in the mail order business, and sometimes customers do a chargeback on me. If it is a non-receipt, I just try to file a claim with Fedex. But if Fedex denies my insurance claim for nonreceipt, then that shows the customer might have received it.

      What do you guys do after the customer charges back? Do you write it off and move on? Lately, I have established a new policy to refer all chargebacks to collections. I get especially annoyed when customers report a defective product but refuse to send it back, instead, file chargeback. I have all the proof that shows customer did not send it back. Any advice would be appreciated :)
        • Re: Dealing with Chargebacks
          42n8lady Newbie
          Yes, please just move on. We can't escape the fact that all businesses have problems. But this problem is a great opportunity for you to build a better relationship with your customers. Ask for a feedback. I would replace the merchandise without question. One can build cusomer loyalty in this way. Unless of course, the quantity of chargebacks is staggering, which may reflect on your items or delivery system. For a business to be truly successful, our offer must be risk-free.
          I once ordered $ 120.00 worth of multiple items through a catalogue. After a month of non-receipt, I called them up to ask when I can receive those items I ordered. They told me that in their files, UPS had delivered the big box on a certain date, however, they said that they'll mail them to me again. NO QUESTIONS ASKED.
          My mom heard my complaint and told me that she had found a box thrown into the side gate . I found it to be my long-awaited delivery and so I called the company, apologized, and told them not to deliver a second shipment. Though afterwards I wished that I could have had the second delivery for free!!!!
          • Re: Dealing with Chargebacks
            LUCKIEST Guide

            Chargebacks are a big and growing problem.

            A merchant is billed for chargebacks as they occur. . Because a
            merchant may be charged back in error, and because chargebacks may
            often involve complicated customer disputes, a chargeback may be
            appealed by the merchant. Thieves occasionally abuse the chargeback system. For example,
            an unscrupulous customer will make a purchase over the Internet with
            his own credit card and then issue a chargeback once the product or
            service is received. In such cases merchants can have difficulty
            recovering payment.


            Chargeback processing (handling) is complex as a result of frequent
            rule changes by the major credit card companies. There is an emerging
            market for business software that
            simplifies thechargeback process as well as separate chargeback
            processing services
            You said that you have established a new policy to refer all chargebacks to collections. How is that working.
            Has the collection agencies been successful.
            Best of luck, LUCKIEST


            • Re: Dealing with Chargebacks
              dollsbags Adventurer
              Agreed. Chargebacks are a problem for all businesses.

              Many times, chargebacks occur because an item description is not concise, item pictures are not accurate, or the customer is simply not happy with their purchase. Customer satisfaction is very important and we strive to keep all our our customers happy.

              To minimize chargebacks:

              Have a clear and concise return policy. Post it on your website and be sure it prints on your invoices. For instance, we accept return merchandise that is in excellent condition, unused, and all tags attached for 30 days. We recently had a customer return damaged goods to us without tags attached, and we refunded the money to her anyway. It's all about customer service. We also refunded the shipping costs for her to return the item to us.

              When possible, send merchandise with signature required at delivery time.

              Don't send merchandise to "unconfirmed" paypal addresses.

              Try to resolve issues directly with the customer. Encourage customers to call for an RMA number if they want to return something. Calling is much more personal service than an email. Discuss the problem with them. If anything, the feedback you get will be worth more than the loss you incur.

              Rich Petrelli, VP
              • Re: Dealing with Chargebacks
                BuynSell Newbie
                Thanks for your answers. My question is to deal with those unscrupulous customers who claim nonreceipt, and those who claim defective but refuse to do an exchange. Yes - those happen. We ask them to send the product back, and they don't. They just file a chargeback. Think I have the right to send the account to collections?
                  • Re: Dealing with Chargebacks
                    LUCKIEST Guide
                    BuynSell, How long have you been in business??. Do you have a Lawyer?? Maybe it is time to talk to him.
                    You and or your company has to set up a procedure when to send the account to collections
                    I am a SCORE Counselor and you can visit SCORE online and ask a counselor who has chargeback experience or a legal background these questions.

                    Some buyers became familiar with the dispute process and knew that all
                    they had to do to get a merchant chargeback was to a nonreceipt claim.. Card issuers now are better at
                    screening legitimate disputes, but it hasn't eliminated the abuse.
                      One solution to habitual disputers is to send them a letter explaining that you
                    would no longer accept purchases from them because you could not seem to meet
                    their expectations. You could also flag the name in your ordering system, cancel
                    any incoming orders and send them the same letter again.
                      It wasn't foolproof, but it also didn't cost the money that ChargeBack
                    Bureau charges.
                    Again, Good luck, LUCKIEST

                      • Re: Dealing with Chargebacks
                        BuynSell Newbie

                        My company has been opened 3 yrs but I have been in other businesses for the last 9 yrs. My buyers are one-time buyers mostly so I'm not sure how I can word a letter. I have mostly consultants and legal accountants helping me out, and they said that they don't see anything right or wrong sending one time customers to collections... If anything, the customers become more willing to deal with problems when they have a collections agent calling them.


                        I've sent collections companies after customers who do not pay their import taxes (those taxes get billed back to me by Fedex). For some reason, customers never answer my phone calls and such, but when a collector calls, they start providing proof of payment or even payment. So I do collect at least 30-50% of the amount back, after paying collections fees.


                        I want to see if there are legal implications to send collections to people who CLAIM that they dont receive their goods when fedex clearly shows a signature. I'm not really worried about whether they will come back or not - If I get a customer who is beyond reason and is unwilling to deal with my customer service, I don't want them back. Case in point - my last chargeback was with a customer who received goods, claims partial defect, but unwilling to do an exchange. Instead I get a chargeback. I have all emails stating they dont want to send it back...
                          • Re: Dealing with Chargebacks
                            LUCKIEST Guide
                            BuynSell. It is great that you consultants and legal accountants helping you try and solve this problem.
                            Bottom line. How big a problem is this. On a monthly basis, how often does a chargeback happen??
                            Overall is the company making money?? If one thinks about Chargebacks, it is like a "Bad Debt".
                            (Bad Debt sounds the old days). Nobody wants to give product away, BUT percentage wise,
                            what are you talking about. This is not a solution, just looking for more info.
                            Again LUCKIEST
                              • Re: Dealing with Chargebacks
                                BuynSell Newbie
                                Luckiest - Thanks for your input. I get 3-4k of bad debts a year. I don't like forgiving - I rather assign to collections and forget. What do you think?
                                  • Re: Dealing with Chargebacks
                                    LUCKIEST Guide
                                    It is NOT what I think. It is your business. Do you want to think of chargebacks as another business
                                    expense like shortages, inventory shrinkage, and discount??
                                    • Re: Dealing with Chargebacks
                                      Lighthouse24 Ranger
                                      You mentioned (in another post) that you do $2 million a year in sales. Even if ALL of your $4K in bad debt is credit card chargebacks, that's only one-fifth of one percent of your sales. I have over a dozen retail clients who'd consider that world class performance! In my experience, you'd normally have more "no-fault" transactions than that (where neither you nor the customer did anything wrong -- i.e., the apartment groundskeeper signed for it and kept it, the manufacturer mispacked it, the customer moved, etc.).

                                      I know you'd like the number to be zero, and that's very admirable management and cost control on your part. Still, if you have a retail operation and only one-fifth of one percent of the general public is trying to steal from you, a lot of people would say count your blessings!
                                        • Re: Dealing with Chargebacks
                                          BuynSell Newbie
                                          Lighthouse, in my opinion, for anything there is always room for improvement. It becomes a point to see whether marginal benefit outweighs the marginal cost, in this case, the time I spend to see if I can recover my $4-5k I lose every year. That number is bound to increase as my business grows, and since I am looking at this issue, I'd want to develop a system to handle these. Instead of feeling like i threw $5k into the water, I like to think that I have fishermen (collections agencies) who try to recover some of it. Even if they recover 20% of the $5k, I can feel gratified knowing that I did the best I could. I just dont like to feel that its gone and I cannot do anything about it. I'm just wondering if this is a common practice for merchants send chargebacks to collections.
                                            • Re: Dealing with Chargebacks
                                              Lighthouse24 Ranger

                                              BuynSell, yes always room for improvement -- as I said, admirable management on your part. To answer your follow-up question, no I don't advocate the use of a collections agency, and most small businesses I work with concur.

                                              My initial advice to retail clients with high chargebacks is to be easily reachable by customers with problems. The Customer Service address, phone number, and e-mail needs to be clearly displayed on the website, in catalogs, and on receipts or invoices - and someone needs to be there answering the phone and responding to e-mails. If the customer has a problem and they can't immediately reach the retailer to resolve it, they call the credit card 800 number and dispute the charge next. Just being reachable is enough to get chargebacks down to a reasonable percentage (which yours already are, compared to the rest of the industry). I advise that the remaining chargebacks be handled in house, with e-mail reminders, letters, or telephone calls as appropriate (and as others have already suggested).

                                              The only retail clients I have that utilize collection agencies are big box stores. None of my small business clients do for two reasons: First, there are too many problems within the collection industry itself (abusive agents, unethical methods, outdated records, accounts that are sold and resold), and retailers with a solid reputation are quick to recognize that the fallout from one agent's stupid actions could cost them far more than they stand to gain. Second, it's usually not an effective place to focus management time and energy. I'm sure you have an excellent operation, but I'd guarantee than any competent business consultant in this community could do a walk-through and find more than $5K in waste or inefficiencies without even looking too hard -- because we're only talking about one-fifth of one percent. Yes, always room for improvement, yet as an owner or senior manager, I might be inclined to focus my attention on one of those areas where measured performance is not nearly as good.

                                              Either way, I respect the fact that you're actively trying to do what you feel is necessary to increase your profits, and I wish you the best.
                                                • Re: Dealing with Chargebacks
                                                  Lighthouse24 Ranger

                                                  You mentioned a specific computer manufacturer and direct seller in another post as being a great supplier with whom to build credit (provided you pay your bills), and I absolutely agree. So not knowing if this item was in the national news, or just local because that company is up the road a few miles, I wanted to add this as an addendum to my previous comment about the collections industry.

                                                  The computer Manufacturer/Seller reportedly awarded a contract to a collection agency to handle their unpaid and overdue accounts of home/office computers sold on-line. The agency sent a few letters to the offenders, collected a portion of the payments on the Seller's behalf, and then subcontracted the "personal" aspect of the collection work to more than a dozen other agencies across the country. Unfortunately, that first agency forgot to remove the people who paid from the lists they farmed out. They also failed to update the lists to include all the people who paid the Seller directly (albeit late) after receiving the first collection letter. It turned out that more than half of the people across the country who were being harassed by collections agents had already paid in full -- so they naturally refused to pay again, and the agents naturally escalated the pressure they were applying. Obviously, the Seller did not cause or endorse any of this, but it happened -- and who did customers blame? The Seller. (To their credit, the Seller is paying a considerable price to get this mess straightened out, but some of the lists have been resold a third time now.)
                                  • Re: Dealing with Chargebacks
                                    puzzleman Tracker

                                    I deal with chargeback by first calling the customer personally to ask if everything was fine with the order. I tell that I am calling as a regular followup to our customers.

                                    If everything is fine, I send the chargeback to the CC company with all the appropiate paperwork, such as order, delivery statement and any correspondence and also my notes of my phone call with date and time noted.

                                    If things are not fine, I fix the problem and then send all of the above information to the CC company.

                                    I have found that I get all of my chargebacks resolved this way.
                                    • Re: Dealing with Chargebacks
                                      amspcs Ranger
                                      Two things re your questions about chargebacks you would do well to understand:.

                                      #1, unfortunately, when you deal in non face-to-face environment, you are particularly vulnerable to credit card chargebacks. Unless you have BOTH original siguature on a credit card voucher AND proof of card in hand (which you'll have neither) you chances of prevailing in a chargeback dispute are slim and none. Just chalk it up to experience and cost of doing business. Thankfully most customers are reasonable and honest; the few who aren't and abuse the system just come with the territory.There ARE things you can do as a merchant to avoid being ripped off. Your merchant provider should have trained you in these areas. If not, you need a new merchant provider.

                                      #2, I suggest to all our MOTO (mail order/telephone order) merchants to always have some sort of return policy and dispute resolution verbage included in the 'sales contract' that the customer views at some point in the transaction. I suggest having a qualified attorney help you out with this, no do-it-yourself jobs. This way, if you do get stuck with a chargeback, at least you'll have access with good chance of prevailing in small claims court if necessary, if the loss is large enough to go to the trouble.

                                      Visa USA has a good website with lots of useful info on chargebacks, including tips on how to avoid them. I suggest ALL credit card accepting merchants have a look...find the section on "Chargebacks" in the table of contents.

                                      Barry G
                                      • Re: Dealing with Chargebacks
                                        Excellent Adventurer

                                        I don't understand why you don't have a receipt when you ship something out to a customer. If you go to the the post office you can fill out a form for a signed return receipt and they will give you your copy with a tracking number. When the customer receives the package they will have to sign for it and the signed receipt will go back to you. I realize it will cost you more money, but you'll have to take that into consider when pricing your products. As for damaged items not being returned to you; do you have a policy in place that tells your customers that in order to get credit, they must return the item? Some companies require that the item being returned be insured. Do you provide your customers with a mailing label?
                                        • Re: Dealing with Chargebacks
                                          samuelsegal2 Newbie
                                          If you want some advise please call me at