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10 Replies Latest reply: May 24, 2012 2:16 PM by boonodoh RSS

Insuring Against e-Commerce Fraud?

Gregman2 Newbie
Currently Being Moderated

We sell computer items on E-Bay and have had a number of problems. Here is the typical scam: A customer orders a product using Paypal or a credit card. We then ship the product. The customer upon receipt proceeds to place the order in dispute saying it's not what he ordered. Then ships the product back to us. Yet, when we open the shipment back our site we discover that key components have been removed from our product and replaced with something different. It then becomes our word against theirs. Any clues on how to prevent or redress this type of fraud via product modification? We proceed to block these types of customers from doing any further business with us, but we really have no means to winning these disputes or recovering for our loss, unless the buyer makes a mistake in his claim submission. Any advise on this is appreciated.

  • Re: Insuring Against e-Commerce Fraud?
    LUCKIEST Master
    Currently Being Moderated

    Wow Greg, Thanks for sharing this scam.

    When you go so many web sites, like Craigslist, they tell the buyer to be aware.

     

    Advise or suggestion:

    Talk to your Insurance Agent.

    Talk to the Federal Trade Commission or your shipper.

    Once your shipments cross state lines, all kinds of NEW  laws apply.

     

    At this point, I would normally suggest talking to a SCORE Counselor (online). Yes SCORE is FREE

    and SCORE has insurance agents, business owners who ship goods etc.

    You pick the counselors with the background you NEED, write to them and they do solve problems.

     

    Please let us know how you make out, LUCKIEST

  • Re: Insuring Against e-Commerce Fraud?
    amspcs Master
    Currently Being Moderated

    Greg, unfortunately this is all part of the landscape of non face-to-face payment processing.  That's why processors consider the risk of loss to be higher, and that's why non face-to-face credit card transactions (including internet, mail/phone order etc) processing rates and fees are considerably higher than 'card-in-hand rates and fees.  "Item not received as ordered" is unfortunately for you a legitimate reason for dispute.  And because you have neither proof of card in hand nor original signature,  you wlll lose every dispute--that's the way Reg Z and other regulatory agencies have designed the system.  There ARE several common sense policies and strategies merchants can and should implement to minimize (but not avoid altogether) this type of scam. which your payment processor should have provided  you during training.  If you have an internet merchant account and your processor has not trained you, then you have been severely shortchanged---time to find a new processor?  If you rely strictly on Paypal for payment processing, then we already know the answer to the 'did you receive training' question, which is 'no'.  Again, the old proverb 'you get what you pay for' proves to be true.  A couple of words of wisdom I'd like to share with you based on many years working with small business:  #1-- you need to resolve the chargeback problem.  It's much more than just a financial burden to you.  If it keeps up,  your merchant provider will shut you down and place you on the industry "Match File" which, for all intents and purposes, will put you out of business.  So you need to take some decisive steps yesterday.  #2--don't let anybody try to sell you chargeback 'protection' or 'insurance' or whatever.  All  you'll accomplish is add another "Ive been scammed' trophy to your collection.    #3--unfortunately, bad debt, in your case chargeback loss, is a part of every business model.  You need to take control and limit the losses to an acceptable percentage of sales just as you would budget for any other overhead expense item, and utilize that number when computing your overhead factor for purposes of pricing your product or service.  I'm not suggesting you should throw a celebration party everytime you get a dispute, but if you can hold it within your projected limits, then just accept the inevitable as a cost of doing business.  That said, if  you cannot control it and it continues to persist and grow, then  you need to deal with it on another level, per my comments above.

  • Re: Insuring Against e-Commerce Fraud?
    boonodoh Novice
    Currently Being Moderated

    Have you analyzed the user data? Do you know if these are repeat customers or random scammers using the same scheme? The key is to find patterns (if any) to prevent future fraudulent orders.  An internal blacklist in this situation might be very useful.

     

    The only company that I know close to an "insurance" for chargeback is a company called PreCharge.  Under their program, they tell you what orders to accept, and would cover for all chargeback resulting from those orders. The obvious downside is that they might be very selected, effectively reducing your order acceptance rate and still might not cover this situation.

     

    Rita

    • Re: Insuring Against e-Commerce Fraud?
      Gregman2 Newbie
      Currently Being Moderated

      Thanks, Rita, for the PreCharge info. We'll look into them. Once this happens we place that customer on a block list so we don't do business with them. As I said, it has only been on E-Bay. When you deal in systems that have many componenents it's hard to document everything in a way that totally

      verifies beyond our word against theirs. We are attempting to do that. But it's analogous to selling a car and having it returned with an old engine in it. If the buyer says that the old engine was already in it most credit card companies will side with their customer. So, thanks again. We will look into PreCharge.

  • Re: Insuring Against e-Commerce Fraud?
    vnavguys Expert
    Currently Being Moderated

    I love Paypal, but sometimes they are unreasonable because there are so many people that are not truthful.  If this is your only product you sell on Ebay, I would NOT accept Paypal for a payment.  This may hurt, but I would advertise the reason right in the product listing.  An understanding person will be ok with it, the haters you probably do not want as a customer anyway.  This way if you were only paid by money order or check, you would be in control.  I wish law enforcement would help, but they are too busy for ecommerce.

     

    Ken

    • Re: Insuring Against e-Commerce Fraud?
      Gregman2 Newbie
      Currently Being Moderated

      Thanks for this. It actually seems that there might be some form of "derivative" that could help insure these types of case losses since they involve re-use/re-furbed network gear/appliances. Statistically there is a large aggregate data set, albeit perhaps not in easily accessible spots. It's not too dissimilar to IP infringementor unauthorized cloning. Yet, this mostly amounts to an initial misrepresentation (qua solicitation) to purchase...subsequently followed up by a criminal act (of alteration). How to prevent...how to repair?

       

      Thanks again.

       

      Greg

  • Re: Insuring Against e-Commerce Fraud?
    Moderator Jim Master
    Currently Being Moderated

    Quite a few great answers in this thread, keep them coming!

     

    Jim

    • Re: Insuring Against e-Commerce Fraud?
      Gregman2 Newbie
      Currently Being Moderated

      The answers thus far have been very helpful. One thing we are doing now is focusing more on our process so we can actually document and track the key components, such as mother noards, drives, video cards, etc. This way when something is returned "swapped out" we can immediately go to the file and see exactly what happened. This said, we have yet to see how E-Bay and/or Paypal responds.

       

      ~Greg

  • Re: Insuring Against e-Commerce Fraud?
    boonodoh Novice
    Currently Being Moderated

    Just met another company called eFraud Security.  They provide insurance for transactions, including international ones.  They don't accept every transaction, but the ones they accept are insured.

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