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  1. #1
    Join Date
    Feb 2007
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    81

    Paypal and Credit Card scams - Buyers claiming not to have authorized it.

    I am just about to launch a hosting company and sell domains, ssl certificates, shared hosting, colo space, dedicated servers, you know - the usual. Anyway, we are going to be taking payments directly on the site using our merchant account, but we were also thinking of offering Paypal and Google Checkout as secondary methods of payment. This would improve sales, as there are a lot of paypal users out there that trust nothing but paypal, but it opens us up to be buggered about by absolute tossers.

    The latest scam an awful lot of paypal users do is buy something, then either claim they didn't get it, or they didn't authorize the payment. Paypal always side with the customer, give them a refund, and charge it to the seller. Now this wouldn't be so much of an issue with the shared hosting, as we will just suspend the account, and never offer hosting to that customer for those domains ever again.

    But if someone decides they are going to register 100 domains for 10 years, and pull this trick, we would make a very significant loss. Or if someone buys an SSL certificate, gets the code, and then claims they didn't authorize it. Things like domains, ssl certificates, etc, cannot be cancelled or refunded - and always are the property of the person who registered it, and if they transfer it away before pulling this stunt, then we can do even less to make things difficult for them.

    The problem is, it doesn't just happen on Paypal, as people with credit cards can claim they didn't authorize it and get a refund too. How do you protect your business against this? Is there a specific amount of time after a payment has been made that it is guaranteed, and can't be rejected?

    I'm from the UK btw.

  2. #2
    Join Date
    Feb 2004
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    Hmmm... I'm no expert but I would think the only way is to do enough verification to eliminate fraud. If it's a significant order do not place it until the person is verified (even by placing a call to the home phone).

  3. #3
    Join Date
    Jan 2003
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    Phone verification is always a good thing to do and also add a verification service such as maxmind.

  4. #4
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    Dont allow any accounts to be auto activated. I let this happen in the first 1.5 years, and even if the fraud rate was rather low, its still a mess.

    Also dont allow 10 year registration options. go with 1 year most on signup form, and go for longer registrations for already activated and screened clients.

    Fraud orders really stand out anyway. generally its the ip giving them out, totally different from the provided address, or even from countries that do the most fraud. Even after that sometimes domain gives out the fraud. for example eulotterys.eu.com is very probably a fraud domain, and even a lottery scam to boot.

    Get a good provider like enom. In most cases, if you act fast enough, enom cancels out a very recent domain registration if you provide sufficient info. at least this was my experience.

  5. #5
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    Also a good 3rd party processor like 2checkout works well with this. They do good fraud screening, and sometimes go to lengths as to call the customer and try to understand whether the order is real or not.

  6. #6
    Join Date
    Feb 2007
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    81
    Quote Originally Posted by unity100 View Post
    Get a good provider like enom. In most cases, if you act fast enough, enom cancels out a very recent domain registration if you provide sufficient info. at least this was my experience.

    We are looking at Reseller Club (Directi), are they good?

  7. #7
    Try Plimus.com they are very good, they accept many payment types including paypal so you have not to worry about getting a paypal account
    Romio Abboud

  8. #8
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    i dont have experience or info ab out directi.

  9. #9
    Quote Originally Posted by unity100 View Post
    Also a good 3rd party processor like 2checkout works well with this. They do good fraud screening, and sometimes go to lengths as to call the customer and try to understand whether the order is real or not.
    That's not entirely true - we've had numerous fraudulent orders that have passed 2co's screening. At the end it's down to - do you feel safe with the purchase or does it need extra verification. Ah and by the way you can ban some countries that are known for CC scams.
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  10. #10
    Join Date
    Oct 2004
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    Quote Originally Posted by luke_a View Post
    . . .Paypal always side with the customer, give them a refund, and charge it to the seller.
    Actually this is false, almost always. When you are dealing with virtual goods, as it sounds like you will be, if you give PayPal enough and the correct information, they will almost always side with you.

    But there is a flip side. . . Fighting credit card chargebacks - either through PayPal or your merchant account is like pulling teeth. Almost always the issuing bank will side with the customer. There are certainly ways to increase your chances. Faxing and requiring a "receipt" to be signed is one of the most effective methods. Some always swear by the method of shipping something to the customer to have the tracking ID as proof. But that is probably a huge turnoff to most customers who sign up for say, a small shared hosting account.

    Using common sense and contacting the client via phone is one of the most effective methods. There are services like MaxMind that attempt to make things a bit more "automated", but can always see things that you sometimes may forget about. But on the flip side, don't rely completely on a piece of software. Manually activation can be a wonderful thing, but if you do it, be sure to be ready to activate within a reasonable timeframe. Some people get really unhappy if they have to wait awhile.

    In short, PayPal will almost always side with the seller. If a chargeback occurs, you have to really step up to the plate and have some concrete proof to win that baby.
    Last edited by Tyler; 03-28-2008 at 04:13 PM.

  11. #11
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    Quote Originally Posted by maiahost View Post
    That's not entirely true - we've had numerous fraudulent orders that have passed 2co's screening. At the end it's down to - do you feel safe with the purchase or does it need extra verification. Ah and by the way you can ban some countries that are known for CC scams.
    yes fraud orders may by chance pass through their fraud screening. but it happened too little for me.

    but which are you talking about ? the actual process of getting the order, or fraud screening ?

    you got to wait for 2co's own 'orders approved' email that comes a while after every order. fraud orders may pass the initial order phase, but they almost always fail in their fraud screening.

    i just wait until their fraud screening email comes for most new clients.

  12. #12
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    Jun 2006
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    dont forget sometimes, these measures annoy and push away genuine customers
    Damien

  13. #13
    Join Date
    Oct 2004
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    You can always take elgal action against the parties too. If yu get a chargeback, and you have valid information of where the person lives or etc (you shuld basicly verify the address)

    You can always legaly submit them to a collections agency, whom after awhile, can decide to take it to court. Even if they do a CB, they are liable to pay you not only the orginal amount, but you can charge them a CB fee as well, AND you can also charge them a collections fee (assuming you got this established in your TOS)

  14. #14
    Well,

    This is one of the flaws of doing business online. What I do is that I try to not think about the people that would cheat me but rather I would focus on those who would truly appreciate my services. I believe that most people out there are actually good people and if you trust them they will trust you. Of course that is you believe them to begin with.

  15. #15
    Quote Originally Posted by unity100 View Post
    yes fraud orders may by chance pass through their fraud screening. but it happened too little for me.

    but which are you talking about ? the actual process of getting the order, or fraud screening ?

    you got to wait for 2co's own 'orders approved' email that comes a while after every order. fraud orders may pass the initial order phase, but they almost always fail in their fraud screening.

    i just wait until their fraud screening email comes for most new clients.
    When we started accepting orders online (some 2 years ago) we've had some 10 orders from Nigeria every day. 5-6 passed. Nowadays we get 1-2 (not from there) that pass the test (no call to the person that purchased from 2co unless we request it) and are due for ID/phone verification. Keep in mind people tend to use proxy scripts/VPNs from the country they order and there's less chance of catching them. We've already had a few people with false ID (I can attach them) confirming their account. Last night we got 3 orders from Brazil with Brazilian CC that confirmed with 2co and the second we opened the accounts we got over 30k spam emails sent. Bottom line is : verify orders that seem suspicious.
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  16. #16
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    Jun 2006
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    Giving them a telephone call normally results in them stopping the chargeback. Simlpy pointing out that they are liars, cheats etc soon gets them to back down
    Damien

  17. #17
    Join Date
    Feb 2008
    Location
    Soho, London
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    We was in the same situation as you, we have a merchant account and personally did not want to use any other payment gateways however due to demand we had to introduce Paypal and Google Checkout - it's more hassle than it is worth, but who said business was easy?
    Lucy,
    Tagbridge
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  18. #18
    Join Date
    Feb 2003
    Location
    Cumbernauld, Scotland, UK
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    I always ensure the transaction is covered by the Seller Protection Policy
    This checks that the shipping address exists
    In all these cases where the buyer has disputed the purchase I have been paid

    If it does not exist then I contact the buyer directly, also asking them to confirm their postal code
    I allow 48 hours for a response
    If there is no response or the postal code is different then I take the appropriate action
    For no response I suspend the transaction, and deem it to be fraudulent
    If the postal code is different then I ask the buyer to update their account to verified

    So far this has worked very well, just one fraudulent transaction sneeked through in 12 months
    I caught the other two and have one pending

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