Chargeback database protects merchants–unless you pay to be removed from it

chargebackProtectionSeal.gif

Forgive me, readers, but we’re heading off the gadget reservation for this one.

The Consumerist has a piece today on a custom-auto shop whose contract forbids chargebacks. For those not in the know, that’s when you call your credit card issuer to dispute a charge, a procedure that the auto shop will have agreed to abide by in its own agreements with Visa, Mastercard and the like. Most interestingly, however, another clause in the contract says that if you do so, it will add your name to a “chargeback abuse database.”

The problem, for merchants, is that credit card companies usually side with the customer when disputes arise, even when it’s abundantly obvious the merchant is in the right. That said, the idea that someone maintains and shares an unregulated database of possibly-defamatory information, to which may be added any customer’s personal data (regardless of whether their complaint is merited or not), seems deliciously unscrupulous.

Curious, I googled the phrase “chargeback abuse database.” There are a number of online businesses that threaten to add you to this mysterious chargeback database – but who will happily remove you from it if you pay a cash penalty.

Behind some of them, at least, is a website calling itself Chargeback Protection, founded to “address the problem of chargeback abuse and minimize the related economic losses.”

The odd part: what use would such a database be to merchants if it can be wiped by the very “abusers” it ostensibly tracks? Even those who merely warn a merchant that they’ll contact their credit card holders are targeted for inclusion: Chargeback Procetion’s homepage asks for reports of “chargeback threats” as well as actual chargebacks.

VISA prohibits its merchants from imposing “no chargeback” policies on customers. Read on to read some of the novel anti-chargeback terms and conditions we found.Comersus Cart
This shopping cart firm’s terms and conditions claim that because it has a “clear and explicit refund policy” it doesn’t accept any chargebacks. It solicits payment to remove you from the “abuse” database.

“Since there is a clear and explicit refund policy, Comersus does not accept any type of chargeback or chargeback threat. In case of receiving a chargeback threat the same will be reported to chargeback abuser databases, regardless of the fact that the chargeback may be actually made later on.

“In the event that a chargeback is placed on a purchase, Comersus reserves the right to report the incident for inclusion in a chargeback abuser database. The information reported will include name, email address, order date, order amount, IP address, full address, and phone number. Chargeback abusers wishing to be removed from the database shall make the payment for the amount of the chargeback + $50 for processing fees by Wire Transfer.”

Bingo13
And here was me thinking bingo a polite, relaxing game for old ladies. Again pops up that odd charge of $50 to be removed from the blacklist, and which looks suspiciously like someone else’s boilerplate:

“In the event that a chargeback is placed on a purchase, we reserve the right to report the incident for inclusion in a chargeback abuser database. The information reported will include name, email address, order date, order amount, IP address, full address, and phone number. Chargeback abusers wishing to be removed from the database shall make the payment for the amount of the chargeback + $50 for processing fees by cashier’s check or money order.”

Condom Rave
Chargebacks for condoms? God help me, but I think I’m on the merchant’s side on this one. Nonetheless, take a look at these terms and conditions:

In the event that a chargeback is placed on a purchase, we reserve the right to report the incident for inclusion in a
chargeback abuser database.The information reported will include name, email address, order date, order amount, IP
address, full address, and phone number. Chargeback abusers wishing to be removed from the database shall make the
payment for the amount of the chargeback + $100 for processing fees by Money Order. … If you initiated a chargeback there will be a $25.00 service
fee for each chargeback initiated plus money owed

$100! Plus a chargeback fine!

Anything Animals
These guys are wild about your customer rights:

“Anything Animals will not sell or distribute, any information regarding our customers. This includes but is not limited to: phone numbers, e-mail address, street address, names. We consider your privacy of the utmost importance, as we know you do.”

But scroll down for this legal eagle’s small type:

In the event that a chargeback is placed on a purchase and proof of delivery is present, we reserve the right to report the incident for inclusion in a chargeback abuser database.

Tantrum Free
These folks want to help you raise level-headed kids, but when customers get upset, it’s a different picture.

If I suspect you or the cardholder are attempting to rob me, and if I suspect you are attempting to conceal your theft under the cloak of a chargeback or stop payment, I will pursue legal action against you or begin collections proceedings, and will seek damages and recovery costs including legal fees from you.

Fair enough: illicit chargebacks are a pain in the backside. What better avenue of reproach than the courts? But that’s not all: these guys will go public!

In the event that you or the cardholder initiate a chargeback for your purchase, I will make public and report specific details of your transaction to a chargeback abuser database, namely, your name, your email address, the order date, the order amount, your IP address, your billing address, your phone number, and other non-identifying information. There will be a $100 processing fee, plus any applicable fines incured by me, plus the original purchase amount payable by cashier’s check or money order to have your name removed from the database.

Ever tried scalping junior with a $100 fee + costs to be removed from the naughty list?

APS Cellular
These fellows win the prize for the most angrily-named T&C clause: “reach of Contract / Chargeback Abuse / Mis-Use, Scam, Defrauder, Deadbeat, Non-Payer Policy”

The information reported will include name, email address, order date, order amount, IP address, full address, phone number and possible other information. Further note that our privacy policy will be null & void. Civil and criminal actions/ complaints may be taken as well as collections and reporting to the credit bureau’s. Chargeback abusers wishing to be removed from the database shall make the payment for the amount of the chargeback + $1000.00 for processing fees by Wire Transfer or other approved method from APS Cellular, Inc.

$1,000! Whoa! The part about privacy policies being voided is a beautiful touch.

Interstate Deals
This gadget shop provides this post with a thin veneer of contextual relevance. Thanks, Interstate Deals! It also has the boilerplate:

In the event that a credit card chargeback is placed on a purchase from Interstatedeals.com, we reserve the right to report the incident for inclusion in a chargeback abuser database and/or a consumer reporting agency database.

No shakedown, this time. Gadget people are just better sorts, don’t you think?

Piama.org has the boilerplate, too.

Thecellpros
This firm has the “privacy policy null and void” clause, and asserts not just passive measures (The Database of Doom) but that you, as its customer, are entering into a contract not to issue chargebacks for any reason:

You understand and agree that the charges for goods / services specified are irrevocable, undisputable and may not be charged back, contested or challenged in the future, doing so breaches your agreement which is a legal contract.

It also aims potentially unlimited penalties at those that issue chargebacks:

You authorize APS Cellular, Inc DBA TheCellPros.com to charge your credit card a minimum of $500.00 per incident plus $375.00 an hour … If you do a chargeback (non-payment, stop payment, withdraw of funds, retract payment or any dispute of payment, etc) and / or it goes to Arbitration you agree to pay us $1000.00 plus an hourly rate of $375.00 plus all Arbitration fee’s are $400.00 plus other charges at $375.00 an hour if you put us in that position forthwith. … Please do not do a chargeback because you will be in breach of contract and be “charged additional fee’s and costs” as in above paragraph.

I have a feeling a lawyer didn’t write that one, or, indeed, the part where the customer is ordered not to use PayPal’s dispute resolution procedure.

You agree to go through us for any and all problems not go to others such as the bank, PayPal, due a chargeback, stop payment, or dispute with your problems without our prior written authorization from us. Violation of this clause is breach of contract.

The store’s terms and conditions consist mostly of about 60 clauses each repeating, with minor variations, the claim it will cut you real good if you issue a chargeback..

Omni Adult Products
It’s good to see that the manufacturers of Robocop are still getting work.

“Chargeback abusers wishing to be removed from the database shall make the payment for the amount of the chargeback PLUS $75.00 USD for processing fees by Wire Transfer ONLY.”

And, of course, there’s the Luxury Car Tuning Store cited by The Consumerist, which has a particularly verbose clause again culminating in the $50 shakedown.

Anyway, here’s the point: while unwarranted chargebacks are a pain in the backside, all these merchants knew what they were letting themselves in for when the agreed to the credit card companies’ policies. Some of these are openly issuing blanket no-chargeback policies, regardless of their validity, in contravention of accepted consumer practice.

Chargeback Protection’s FAQ page has some legal advice for merchants:

My privacy policy bans me from disclosing customer information. Now what?

Abusers are not customers, but criminals. By hiring a lawyer to claim a payment, you are essentially doing the same thing as reporting certain transaction information to ChargebackProtection.org.”

My payment service offers fraud screening. Why would I need your service?

The reason is very simple: chargeback abuse is a fraudulent action carried out by a legitimate customer. That is, no fraud filter will ever block their payments, because they are perfectly legit.

VISA specifically prohibits these “no chargeback” policies” in its rules.

“No Chargeback” Sales Receipts
Independent entrepreneurs have been selling sales-receipt stock bearing a statement
near the signature area that the cardholder waives the right to charge the transaction
back to the merchant. These receipts are being marketed to merchants with the
claim that they can protect businesses against chargebacks; in fact, they do not. “No
chargeback” sales receipts undermine the integrity of the Visa payment system and
are prohibited.”

I’ve got questions in with Chargeback Protection. Hopefully, it can clear up some of these issues.

Merchant Tries To Forbid Chargebacks [Consumerist]

Google results for “chargeback abuse database”

About Rob Beschizza

Rob Beschizza is the Managing Editor of Boing Boing. He's @beschizza on Twitter and can be found on Facebook too. Email is dead, but you can try your luck at besc...@gmail.com
This entry was posted in Uncategorized. Bookmark the permalink.

15 Responses to Chargeback database protects merchants–unless you pay to be removed from it

  1. Blackbird says:

    What about the basic human error? Have they forgotten that those still exist? The one that gets me the most is:

    “You understand and agree that the charges for goods / services specified are irrevocable, undisputable and may not be charged back, contested or challenged in the future, doing so breaches your agreement which is a legal contract.”

    A few disturbing things in this:
    1. Irrevocable. Only if you got what you paid for, NOT for substandard products or services.
    2. Breaches agreement. Would that not be ‘our’ agreement, between the two parties…not ‘Your’ agreement.
    3. “Legal contract” – insofar as you can call it ‘legal’ sure. Chances are though, that something in the contract is ‘illegal’ which makes the whole rest of it null and void. Just don’t sign them if there’s a ‘stupid’ clause and take your business somewhere else.
    4. Undisputable…isn’t even a real word.

    But yeah…if my credit card was stolen and purchases made on it before I cancelled, your DAMN RIGHT I would chargeback if there were NO OTHER remedies available.

  2. Anonymous says:

    UK2.net has a £250 penalty for Chargebacks and a mysterious database warning:

    “We also have to contact the customer’s credit card company and the authorities, and also submit the dispute credit card to the Central Chargeback Database.”

    http://www.uk2.net/important_information/billing_enquiries/

    “If a customer requests a chargeback on a UK2 Domain Name the Domain Name will be banned and customers will no longer have access to control panels and any associated websites will be taken down.

    To release a banned Domain Name a customer must pay a £250 inc. VAT release fee and sign an agreement preventing further chargebacks and mis-use of UK2 products or services.”

    http://www.uk2.net/important_information/terms_and_conditions/banned_services_policy/

  3. dculberson says:

    Small merchants get obsessed with losses like this for some reason. They dwell on a $100 chargeback where they feel like they got shafted to end all shafts, and let it color their perception of their entire business and all customers. I would wager that chargeback abuse as a percentage of total credit card sales would be miniscule, even with a small vendor. If you’re doing full address verification, which all internet vendors that accept credit cards should, then you’re pretty well covered.

    It’s just been my experience, from a decade of selling stuff and accepting credit cards, that the total chargeback activity was very small. But people really get incensed by it, and let fighting it take over their lives. Let me put it this way: out of ~$100,000 in sales one year, I had one go south with a $970 bad check. I handed the information to a collection agency, who pursued the party and many, many months later finally sued, got payment, and happily kept 50% of the money for their fee. I didn’t let it color my dealings with other customers, I didn’t threaten to sue every future customer I might have had, I just rolled with it and continued to treat all potential customers like they were my best repeat customer.

    That’s not the only person that’s ripped me off, but again in total it’s been less than 1% of sales. You pay more than 1% for check guarantee services! Same with credit card transaction fees; they’re 1.95% to 2.57% on a bargain rate.

    I also feel that the most suspicious people typically are the most willing to screw other people. I wouldn’t doubt that any one of these merchants is willing to overcharge, sell inferior merchandise, and otherwise willing to royally shaft their own customers. But it’s okay in their book as long as they come out ahead. A legitimate, reasonable business would not be willing to risk breaking their merchant services agreement and alienate their current and future customers in order to (poorly) defend against that 1% loss rate.

  4. umrain says:

    So, if I’m on this list, then merchants who are slimy enough to use a shady chargeback database service won’t do business with me?

    Where do I sign up?

  5. Anonymous says:

    On the other hand, I know an internet business that operates a seasonal service. 1% of their customers use the server for 6 months then call their credit card companies and have the charges undone. The service is expensive enough to incite card holders to steal it in this manner, but not expensive enough to pay the legal fees to extract restitution. One wonders if the sort of people that do this once will do it many times.

  6. celia says:

    So, I’m confused here–they’re basically saying that if, for example, someone stole my card and used it to run up charges which I then rightfully complained about/refused to pay, they’d penalize me and refuse to do further business with me, even the real me, not the stolen card me? Or, for that matter, if they charged me in error and refused to resolve the issue on their own?

    Do they really get so many people abusing the system that this would be necessary?

  7. Pip_R_Lagenta says:

    I believe that the word “extortion” applies here.

  8. technogeek says:

    Any merchant who uses such a list or has such a policy probably isn’t one you really want to do business with anyway, unless they have a stellar reputation otherwise and/or are selling for an ungodly low price.

    I’m inclined to let them use such a list, *IF* they announce it clearly before the customer places the order and *IF* the credit card company announces clearly on their own marketing material that they permit vendors to do so.

    Then it would be up to the consumer to decide whether to do business with a vendor or lender who considers this a reasonable way of doing business, and market forces should Do The Right Thing, Mostly.

  9. maxgraphic says:

    I’d agree that this is slimy on the part of merchants. However, internet/mail order merchants in particular have next to no recourse to deal with chargebacks. Once a customer disputes a charge, it’s up to the merchant to try to prove it was valid, and because the credit card industry lives in 1980, that means a signature.

    If the customer didn’t sign on delivery, the merchant loses. Collections/small claims court is the next step, and in my experience it’s just not worth it. Note also that the merchant pays a fee when you dispute a charge, regardless of outcome.

    For large orders, we email people a form to sign and fax back. This is annoying for customers, and we’ve lost orders because of it. But we’ve never had a chargeback on an order we’ve gotten a faxed signature on.

    If a chargeback database existed and was reasonably-priced, I’d use it, even if it included people who just threatened chargeback (which, for a lot of people, is Step One). I wouldn’t reject orders from chargebackers, but I’d require a signature for sure.

  10. Phelyan says:

    I would guess that this “no chargeback” trend did not necessarily start at the dealer level. It sounds more like someone finding-slash-creating a market through exploiting business concerns.

  11. LarryD says:

    Most of the comments seem to be thinking of chargebacks as simply occurring in cases of theft.

    My use of chargebacks has been when I receive particularly sub-par products or services and the merchant refuses any good-faith efforts to remedy the situation.

    A recent example would be my threatening to do a chargeback on the second night of a hotel stay if they didn’t let me out of the reservation. Why did I want out? In addition to the room being in the middle of a remodel, and thus incomplete in many ways, there would also be a live band playing two feet from the bedroom window into the wee hours of the morning. The manager was insistent that I would have to pay for the second night until I made it clear that I would do a chargeback.

  12. Rob Beschizza says:

    “Guess what, we won’t allow phoned in credit cards anymore. Any of you young, without money and drive junk? Hope you can come up with cash!”

    I think this is really the right solution, though. Good for you for dumping credit cards!

  13. Ryan Waddell says:

    I have to agree, that anybody who would use such a list and refuse my business, is somebody who I would not like to do business with. There is no legitimate reason for a business to use such a system.

    How many cases of credit card chargebacks are from people who are trying to scam, with their own credit cards? I’m willing to bet that it is a fairly small proportion. A much larger proportion of chargebacks would be stolen credit cards, methinks. So the only reason for having this list is for vendors to threaten you with it, to prevent a chargeback. And that’s just slimy.

  14. 2wheels says:

    If this turns out true and starts to spread, then I hope that they all use that seal so I can know to turn my metaphorical butt around while giving the “you’re number one” salute. The cards take advantage of their customers every chance they get, the last thing consumers need is an arbitrary list to take away one more “right.”

  15. Anonymous says:

    You should not be so quick to judge these companies. I work for a towing/repair company. If you breakdown on the side of the road at 2 am and need to be towed and all you have is a credit card, we have to process that by phone. What if we’ve had too many charge backs and we just tell you sorry. We recently repaired a vehicle for a customer out of town. He called in a credit card so that he could have someone else pick up the car (this also happens for college students when mom and dad pay). He charged back and he said “hey, it wasn’t signed.” Just because he could. Guess what, we won’t allow phoned in credit cards anymore. Any of you young, without money and drive junk? Hope you can come up with cash!

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

 

More BB

Boing Boing Video

Flickr Pool

Digg

Wikipedia

Advertise

Displays ads via FM Tech

RSS and Email

This work is licensed under a Creative Commons License permitting non-commercial sharing with attribution. Boing Boing is a trademark of Happy Mutants LLC in the United States and other countries.

FM Tech