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  1. #1
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    Lightbulb Any one have any luck fighting Fraudulent Chargebacks?

    I'm finding an increased amount of charge backs that I would consider fraudulent. I've been able to fight fraud charges by calling each and every cardholder to confirm they were actually them. This has cut down on a lot of fraud orders. However in the last few months, cardholders after using the hosting services for 6 months, using a ton of resources, requesting a full refund for some random reason, and once I offer to refund the remaining balance, they just call their card and charge back. I send documentation, etc to the card company and merchant account. Not once have they seemed to care... Anyone have luck fighting this nonsense?
    Last edited by twhnman; 07-14-2009 at 11:00 AM. Reason: misspelled word
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  2. #2
    Did this happen with a specific merchant account?

  3. #3
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    We are having the exact same problem. This has started happening more and more over the last 2-3 months and its become quite an issue. As always the consumer gets a full refund and we aer left out of pocket.

    Nothing much you can do... if you find anything more about it, let me know as i'd be interested to know what you can do about it.

  4. #4
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    I use www.maxmind.com to run the IP. Chargebacks are expensive.

    And if you get too many chargebacks they can take away your merchant account. Terminated Merchant File lists you for several years which all Merchant Account Providers have access to, and they won't reissue a merchant account to you.

    I found this top 10 list helpful. http://www.merchantseek.com/article13.htm
    Last edited by TechniSmart; 07-14-2009 at 11:29 AM. Reason: typo
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  5. #5
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    I've always had cdgcommerce, and they've been good. The problem isn't fraud orders, it's legit customers abusing the charge back option to never pay. They rarely have a reason they even want to cancel or never request to cancel, they just call up Visa, and Visa gives the money back. Then when you fight it, the receive the documents and they apparently go into a shredder. Never even hear back from the credit card. Problem I assume is all the credit card companies now have the "no risk" deal where they cover any fraudulent or stolen charges, which means if they just charge back they get their money back. Lol, I hate credit cards, all my rates were raised by 10% because the government cracked down on them, and then they are getting me on the other end. Anyone an accountant, are charge back fees considered "bank fees" on tax write offs? I'm seriously thinking about raising my prices a bit, and offering a substantial percentage off for paying via PayPal... any thoughts on that?
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  6. #6
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    Make sure that you have effective fraud prevention tools in place, these help cut down chargebacks tremendously
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  7. #7
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    Make sure that you have effective fraud prevention tools in place, these help cut down chargebacks tremendously
    When the genuine customers abuse the chargeback feature, and the banks don't do anything about it, I don't really see what the merchant can do.

    It's like passing by a smiling mother with her two playful children by the hand, and the next moment having her with a knife at your throat repeatedly screaming like a lunatic "Give me your wallet or I bleed you!". You just can't be ready for that or prevent it from happening by any reasonable means.

  8. #8
    Our experience:

    We verify CCV and AVS from all customers or we reject their order. We also telephone verify to make sure they are providing a legit phone number. We still have on occasions recieve fradulent transactions. Chargebacks are hard to fight in the online service industry .

    We have since started randomly requiring customers to print their invoices out, and sign that they did receive the service as described and that they are the card owner in an attempt to weed out some of these fraudulent orders.

    CCV + AVS + Telephone verification was not enough in our circumstances. To fight the chargeback, in our experience, you need to have a tracking number for the shipped good, or their signature of the person who received the good/service, or both preferably. When providing a online service, you negate sending them a package (although I feel sometimes like mailing them a copy of their invoice as "proof of delivery" and provide that to the merchant providers when fighting a chargeback.

    Chargebacks however do happen, no matter how careful you are. Be smart, and take some of the above advice, and hopefully it will help you out.

    MaxMind also goes a good ways at weeding out OBVIOUS fraud orders, or sometimes alerting you of someone who got through, but a few hours later you will receive a notification that the order is more then likely fraud, giving you enough time to process a refund to avoid the chargeback fee. It's not perfect, but it is something you need in your line of defense as well.

  9. #9
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    One of the reasons it is getting worse is that hosts keep rolling over and doing nothing. Prevention is important, but its not enough.

    I strongly suggest putting something in your terms relating to unwarranted disputes, and then using a collection agency in cases of abuse. The dollar amount in that case is more than sufficient to recover both the chargeback fee and the collection cost. If all hosts would do this then customers would start having the decency to cancel their accounts instead of initiating chargebacks. This would help to protect not only the integrity of the hosting industry, but of the credit card industry as well.
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  10. #10
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    Quote Originally Posted by everity View Post
    One of the reasons it is getting worse is that hosts keep rolling over and doing nothing. Prevention is important, but its not enough.
    It's not just website hosting companies that are rolling over, it's the e-comm industry in general.

    Quote Originally Posted by twhnman
    Lol, I hate credit cards
    Have you been able to get any info out of your legit customers as to why they're chargebacking your service?

    Other payment methods can be just as bad...ie: PayPal. Is your merchant company hassling you without making any sort of suggestions on how to beat these chargebacks?

    Risk management departments can be useless, but it never hurts to ask the question and then document their answer. Put their feedback into action and be sure to let them know that you've been doing what they told you to do if additional chargeback issues come up.

  11. #11
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    It's pretty rare for us to deal with these days.

    It used to be more common for us to encounter people who started an unethical chargeback before even contacting us about a refund. They'd claim they never placed the order, and we had transcripts of our conversations with them. By having that documentation we were able to reverse most of them (and keep our rates low) with MerchantConnect/Authorize.net.

    As I've mentioned in similar threads, we still issue a refund to those people. We have nothing to gain by holding their cash hostage if they aren't satisfied. To me, it's simply an ethical issue about people abusing the chargeback system as a money-back guarantee. It would be nice if people's credit card interest rates went up (instead of my merchant account rates) when they were caught abusing chargebacks. A guy can dream.
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  12. #12
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    Quote Originally Posted by jstanden View Post
    ... It would be nice if people's credit card interest rates went up (instead of my merchant account rates) when they were caught abusing chargebacks. A guy can dream.
    Ah, yes, I've been dreaming about that for years as well.
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  13. #13
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    We prefer people to use PayPal rather than credit cards as there seems to be far less fraud.

    We're about to implement MaxMind GEOIP + phone activation with WHMCS. Fingers crossed this works out well, considering we like to have everything automated.

    At this stage though, all clients are manually checked.

  14. #14
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    Phone activation?

    Quote Originally Posted by SonicVPS View Post
    We prefer people to use PayPal rather than credit cards as there seems to be far less fraud.

    We're about to implement MaxMind GEOIP + phone activation with WHMCS. Fingers crossed this works out well, considering we like to have everything automated.

    At this stage though, all clients are manually checked.
    Sonic, can you tell me what phone activation is?

    We set WHMCS not to activate the account automatically. Even with Maxmind we get fraud orders, but they never get provisioned because fraudsters don't generally use their the real phone number.

    THanks
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  15. #15
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    Quote Originally Posted by everity View Post
    One of the reasons it is getting worse is that hosts keep rolling over and doing nothing. Prevention is important, but its not enough.

    I strongly suggest putting something in your terms relating to unwarranted disputes, and then using a collection agency in cases of abuse. The dollar amount in that case is more than sufficient to recover both the chargeback fee and the collection cost. If all hosts would do this then customers would start having the decency to cancel their accounts instead of initiating chargebacks. This would help to protect not only the integrity of the hosting industry, but of the credit card industry as well.

    Yeah very few hosts have any sort of backbone what so ever. A customer issues a charge back they just let it fly. As a result customers expect everyone to be the same. I mean we get people who use our services for a year and on the last day they say something like "I did not make money I'd like a refund". We say no they say we're the first provider to not give them a full refund when their web site did not pay for the hosting. Some of them then do a chargeback if via cc or dispute in paypal.

    Those are not even my favorite the ones that are the best are the people who chargeback transactions from 6+ months ago while still using the service. Disable their account then they demand their account be enabled again.

    I would just send every single one of them to collections. It's not even about the money at that point it's about standing up to the fraudulent chargebacks.
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  16. #16
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    Quote Originally Posted by TonyB View Post
    I would just send every single one of them to collections. It's not even about the money at that point it's about standing up to the fraudulent chargebacks.
    I completely agree. We have to work together to do something about this.

    If you just roll over and let fraudulent chargebacks happen, then you lose your right to complain.
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  17. #17
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    Anyone here uses a signed and send back CC authorization form ?? Does it help ?? We use Chase Bank own merchant and gateway so things are pretty much smooth in terms of resolution.
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  18. #18
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    We actually call our clients with orders over $150 to prevent fraudulent orders. This method works for us well.

  19. #19
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    Quote Originally Posted by twhnman View Post
    I'm finding an increased amount of charge backs that I would consider fraudulent. I've been able to fight fraud charges by calling each and every cardholder to confirm they were actually them. This has cut down on a lot of fraud orders. However in the last few months, cardholders after using the hosting services for 6 months, using a ton of resources, requesting a full refund for some random reason, and once I offer to refund the remaining balance, they just call their card and charge back. I send documentation, etc to the card company and merchant account. Not once have they seemed to care... Anyone have luck fighting this nonsense?
    Hello,

    Have you tried using MaxMind or Telesign?

    Regards,
    Kevin

  20. #20
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    Quote Originally Posted by CH-Shaun View Post
    We actually call our clients with orders over $150 to prevent fraudulent orders. This method works for us well.
    Quote Originally Posted by R393 View Post
    Hello,

    Have you tried using MaxMind or Telesign?

    Regards,
    Kevin
    I think you guys have mis-read the OP's post. These are legitimate users who used the service then demand they be refunded for all their payments 6 months later or some time in the future. If they're not refunded they issue a charge back. There is nothing wrong with the service they just know CC providers will side with them so they can get free service from any provider anytime they want. The reason these sort of people are not scared is providers give in or they do not fight back in any way.
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  21. #21
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    Quote Originally Posted by TonyB View Post
    Those are not even my favorite the ones that are the best are the people who chargeback transactions from 6+ months ago while still using the service. Disable their account then they demand their account be enabled again.
    Nice!

    So what do they think ... That you're just going to let it roll into next year? Or that you're not going to notice the chargebacks from months ago.
    Last edited by TowerOfPower; 07-18-2009 at 07:43 PM.

  22. #22
    Quote Originally Posted by TonyB View Post
    I think you guys have mis-read the OP's post. These are legitimate users who used the service then demand they be refunded for all their payments 6 months later or some time in the future. If they're not refunded they issue a charge back. There is nothing wrong with the service they just know CC providers will side with them so they can get free service from any provider anytime they want. The reason these sort of people are not scared is providers give in or they do not fight back in any way.
    Exactly. We use Maxmind, Telesign, etc as well. Its someone using someone else's credit card. Its the customer that nows the bank stays on their side.

    We have lately received this as well. They just now they have to chargeback before 6 months or they cannot do it anymore. So they get a free ride for a couple of months. Yes, to require a signed paper is fine, but you cannot request that on small orders, below 50$ a month.

    I know PayPal actually is on the side of hosting providers. Since most merchant accounts don΄t cover protection for internet orders. There are ways with PayPal that you win a dispute. If this goes on and on, and Visa or Mastercard don΄t take action we are all going to drop accepting credit cards. They should have a law or rule, that a customer cannot chargeback more then 2 time in 3 years or something similar without canceling their card.

    There is such a law, but for Internet orders, there are always on the side of the cardholder. This just a paradise for fraud as the only one that loses is the business that has to even cover the costs of chargeback.

    If banks had to lose even 1$, they would never be on the side of the customer. Its just business for them. The consumer is always right. I suppose we have all to require signed papers and record the clients voice where he accepts the order.
    Last edited by PYDOT; 07-18-2009 at 08:17 PM.

  23. #23
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    Quote Originally Posted by twhnman View Post
    I've always had cdgcommerce, and they've been good. The problem isn't fraud orders, it's legit customers abusing the charge back option to never pay. They rarely have a reason they even want to cancel or never request to cancel, they just call up Visa, and Visa gives the money back. Then when you fight it, the receive the documents and they apparently go into a shredder. Never even hear back from the credit card. Problem I assume is all the credit card companies now have the "no risk" deal where they cover any fraudulent or stolen charges, which means if they just charge back they get their money back. Lol, I hate credit cards, all my rates were raised by 10% because the government cracked down on them, and then they are getting me on the other end. Anyone an accountant, are charge back fees considered "bank fees" on tax write offs? I'm seriously thinking about raising my prices a bit, and offering a substantial percentage off for paying via PayPal... any thoughts on that?



    Sadly, this is a bridge that all too many hosting companies have to cross. We had to back in the day, at least, and it was not easy to resolve, and there was no 'one thing' that fixed it. It was a combination. The solution is going to be different for everyone. I recommend looking at the reason codes, maybe contacting some customers and very calmly asking why. Often they simply don't recognize the charge, and that means you can help mitigate by making things easier to recognize. Other times it may be a policy you have that customers do not like that is causing charges to be refunded. Look at your service--are most of the disputes over, say, design stuff? If they are, then you have a service issue.

    Good luck, this is never an easy thing to resolve but once you get over it you'll be for the better

    Dan
    ---
    Dan Ushman
    Co-founder & CMO
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  24. #24
    Quote Originally Posted by TonyB View Post
    Yeah very few hosts have any sort of backbone what so ever. A customer issues a charge back they just let it fly. As a result customers expect everyone to be the same. I mean we get people who use our services for a year and on the last day they say something like "I did not make money I'd like a refund". We say no they say we're the first provider to not give them a full refund when their web site did not pay for the hosting. Some of them then do a chargeback if via cc or dispute in paypal.

    Those are not even my favorite the ones that are the best are the people who chargeback transactions from 6+ months ago while still using the service. Disable their account then they demand their account be enabled again.

    I would just send every single one of them to collections. It's not even about the money at that point it's about standing up to the fraudulent chargebacks.
    Hah! Yeah I have seen quite a few of them. It is almost worth the chargeback to see the ridiculous stuff they say to you.

    You ever have any luck sending it to collections?

    It is kinda pathetic that processors don't give a crap about their vendors. To this date, I dont think I have ever wonder a single chargeback regardless of the amount of proof I have.

    If you dont have their signature, you are pretty much screwed right from the get go. These people really do make me sick though - I wonder their thought process behind issuing a chargeback.

    They have probably jaded themselves overtime by continuously convincing themselves that issuing a chargeback is not wrong thing to do. However, it is just another form of stealing in my opinion.
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  25. #25
    In my experience, the fraud rate for credit card orders is higher than for Paypal orders.
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