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    4 Replies Latest reply on Mar 30, 2012 7:18 AM by amspcs

    Send Buyers To Collections For Chargebacks

    mp3downloader Newbie

      There was a post back a while ago about a company that wanted to send buyers to collections in regards to the chargeback fees that they were suffering. Everyone gave his person their own opinions, yes then no, no then yes. Here's the gist of it.


      Its the 2% of your sales that people file chargebacks that can be annoying. People dont listen, they dont read, and they will sate they read and agreed to policies when they never do. Its the 2% of these people that annoy alot of businesses. So the question is, do you send people to collections for chargeback fees, yes or no. We would say yes.


      As long as you disclose this in your company policies and you have a way of making your online store show that the buyer agreed and accepted your terms, then by all means do so. As long as you can prove that the debt is owed, then you can proceed. Whatever fees there are, make sure you disclose them and document everything. Since its an online business, save all emails and communication with these buyers.


      Once the buyer files a chargeback, note their account that they filed a chargeback and ban them immediately from your site. When a person files a chargeback 99% of the time they will make up some lie and stick with it through the whole thing. The problem is that the burden of proof in a chargeback is on you the merchant. Visa and Mastercard are all buyer sided, whereas American Express calls the right down the middle. Amex doesnt pull any punches. But if a buyer keeps on disputing the chargeback, eventually they will win, regardless of what you have.


      People who file a chargeback will purposely lie and make up every excuse possible to justify their actions. These people know it and they want to see what they can get away with. If you go after them through the use of a colleciton agency and try to do something against them to recop your losses, be prepared to get your company name slattered on complaint sites. The first thing they want to do is take a shot at you for standing up for your company. People will slander your company, just to make false alligations against you. When you reply back with the truth and the facts, that person mysteroiusly disappears. If they do respnd back to your rebuttle, they will dodge your facts and come up with some other statements.


      If you do send them to collections, then charge a collections fee ontop of it. Collection agencies will take 30-50 percent of the total. Some collection agencies wont even touch it in saying 30 to 50 percent of 50 bucks isnt worth our time. Then there's the fact of whether you get paid or not from the buyer. If the buyer stole things from you, then there is no way your going to get anything back.


      Like we said before, Visa and Mastercard back the buyer. If you have signed proof of delivery and the buyer keeps on disputing it, you'll loose. Visa/Masterard have the gull to charge the merchant 400 to 700 dollars for something called arbitration if you loose the case. And thats ontop of $50 chargeback fee for each insident thats not refundable. So there's alot to deal with.


      We have to point out as well, people will purposely lie on chargebacks if they are attemtping to con all parities involve. People will notify the BBB and the Attorney General's office in a mere attempt to use them for one purpose, to get you to stop the collections.


      All in all, people have taken the term in business, that the customer is always right, and have abused it say, "im the customer and i can do whatever i want because im always right." So the questions to consider is :


      1. Your going to deal with chargebacks if you run a business, do you sell high priced items in which you can place a percentage of chargeback fees you get into the price of the product?

      2. Are the chargebacks occuring in a demographic part of the country, or do you seeem to get more chargebacks from a particular state than others. Then charge more money for that state then others. Its called risk. Insurance companies charge more in some states an others, so you can do the same.

      3. If you do send the person to collections, is it worth all the time and energy to put into it. Are you prepraed to have your company slammed online in some false revvew the buyer intiiated.

      4. You should diversify your payment options to reduce the risk of chargebacks. Accept money orders, PayPal or Google Checkout, where there are little chargeback fees and its not a "real merchant account". Remember Visa/Mastercard has that 1% rule and they can place things on your credit report. PayPal,l Google and other 3rd party services can be used to breakup the dependency of your merchant processing company. Processing company's charge a non refundable $25 to $50 per chargeback as compared to $10 from PayPal.

      5. If you do send a person to collections, its alot of paperwork that takes away from your main business operations.

      6. Analyze the types of chargebacks your getting and do something about it. You as the company cannot stop people from filng chargebacks. Chargebacks is a 100% expense and it hurts you as the company. So find out what your majority of the chargebacks are about, and fix it immeidately. Too many chargebacks can result in your merchant account being closed, the processing company's risk department assessing holds on yoru funds or establishing reserves they will take.


      In general, if you sell expensive items, then get it insured and make sure you have a direct signature of the cardholder. FIgure out a level of pricing that if a sale exceeds a fixed amount, a signature is required, if a sales amount exceeds another fixed amount then a direct signature is rerquired. Also find a way to remove the bill to ship to secitons. Only allow the buyer to have the produce shipped to the billable address of the credit card. If they file a chargeback for non receipt, you have to prove with signed proof of delivery that it was sent to the billable address on the credit card, if you dont your out the money and the product.


      Its just a whole lof bull you have to deal with. But everything is the truth above. People in general are pretty cool, but there is that low percentage that think they can do whatever they want and not be held accountable for their actions.

        • Re: Send Buyers To Collections For Chargebacks
          amspcs Ranger

          Here is the gist of how I have been training our merchants for nearly 30 years regarding chargebacks:   Depending on the specific circumstances of the chargeback, often the processor's hands are tied and they MUST process a chargeback per Regulation Z/Truth in Lending laws, which are biased somewhat to protect the consumer.  So it is incumbent for the merchant to employ some sort of contractual agreement (written, verbal, whatever--consult a lawyer which I am not) in order to have something to fall back on.  In other words, just because a merchant loses a chargeback dispute  does not necessarily mean the merchant cannot employ other means to collect, such as collection agencies, small claims court, etc.

          • Re: Send Buyers To Collections For Chargebacks
            boonodoh Adventurer

            The only thing I would add is that merchants should make sure that these chargebacks are not legitimate claims first before blocking them from future orders or send them to collections.  Plenty of frausters use stolen credit cards and credential to place orders, leaving actual card holders to file for chargebacks because they did not place those orders.  Automatically placing customers who filed chargebacks on a black list would significantly reduce acceptance rate of orders.  For merchants who sell physical goods, ship to = bill to is a good flag to have when reviewing orders.  Again, I wouldn't block/reject every order that ship to does not equal to bill to, but that flag, once raised, should trigger additional review measures.

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              • Re: Send Buyers To Collections For Chargebacks
                amspcs Ranger

                Please permit me to add a one additional thought on the subject of merchants needing to do everything they can to fight chargebacks.  One of the most important things merchants can do in order to defend themselves is quite simply understand the right way and the wrong way to process payments.  There ARE certain procedural and common sense things merchants can and should do in order to minimize exposure to chargebacks, but sadly many do not for a number of reasons, chief among them is lack of proper training.  As a long time professional in the payment processing industry, one of my biggest frustrations is merchant processors who do not include training in their setup protocol, and merchants who do not insist on receiving training.  All too often, merchants select processors based solely on the cheapest 'rate',  which compels some processors to position themselves to be able to beat the competition by selling cheaper by leaving something out, most often turns out to be merchant training.    Which reminds me of my favorite quotation by John Ruskin:  "  "There is scarrcely anything in the world that some man cannot make a little worse, and sell a little more cheaply.  The  person who buys on price alone is this man's llawful prey."  These words were spoken in 1819, but ring true even today.