Just for the record, you're way off on a lot of things.
#1 - A chargeback does not mean the card was used without authorization. There are approx. a dozen reasons for chargebacks, including (but not limited to) services/goods not as described, credit not received, recurring charges not cancelled, merchandise not received, etc. Also, it can be something as easy as billing error. I've had multiple customers send me copies of emails stating their recurring membership (online, offline, adult, mainstream) has been cancelled yet they still get billed months later.
#2 - These one-click chargebacks don't mean the chargeback is immediately resolved in the favour of the customer. A chargeback is a complicated process. The customer disputes the charge with his bank. A letter is sent to the merchant's bank informing them of the dispute. In most cases, the merchant has 45 days to "represent" the dispute and provide proof that the customer authorized the charge. In the case of goods and services, it's as simple as showing a signed draft. In the case of internet/phone/mail orders, it's as simple as showing a delivery receipt signed by the customer.
#3 - Internet merchants providing an online service (memberships, selling traffic, content, design, etc) take a risk in doing business online. You cannot have a signed receipt and therefore you cannot prove the cardholder authorized the charge. IP logs are not enough. The only way you can prove the cardholder authorized the charge is by tracing the IP address to the customer's ISP. Then you have to subpoena the ISP and get them to release the logs to prove that the IP address you have was in fact assigned to the cardholder at the time he signed up for your site. Without that, you cannot legally prove the cardholder doing the dispute is the one who signed up for your site. With out legal proof, you're representment of the chargeback will fail.
#4 - I don't know how it works in the US, but in Canada, banks require a signed statement from the customer saying they never authorized the online charge. Some banks (ex. my bank, TD) require the customer to send a letter saying they never authorized the charge. Other banks send an affidavit to the customer which the customer must sign and return within 10 days.
#5 - Banks do not make money from a chargeback. Chargebacks cost an average of $25 to each bank involved in the dispute (the credit card issuer and the merchant's acquirer). Not only are there mandatory fees implemented by Visa Intl and Visa USA/Canada/Whoever, there are also paperwork costs and the cost of employees time. Also, the majority of banks will write-off charges less than $15-$25, which comes from their pocket. And sometimes, if the chargeback drags on for too long (ie errors on the acquirer's or issuer's part), they whole transaction is written off by the issuer.
#6 - A customer using his credit card does not necessarily translate to profit for a credit card company. The bank makes money one of two ways on a credit card. When a customer pays interest and when a customer uses his card at a merchant who acquires at the customer's bank.
#7 - Verified by Visa has taken a while to be implemented because it requires two things. Merchants who are willing and ready to implement it, and banks who are willing and ready to implement it. Once both of the above happen, we need customers who are willing to sign up for the service. FYI, the majority of Canadian banks will offer VbV by the end of this year. CIBC already does and TD will this fall.
#8 - I may not have the power to make decisions, but I do have the power to influence decisions. I implemented a pilot project to cut down friendly fraud at my bank, with the help of many IPSPs here. If it's successful, it's something that may spread.
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Originally posted by Carrie
If we could only get someone from Visa and MC in here who has the power to make decisions (no offense, Psyko), we could really get some work done.
One-click disputes are outrageous. Visa's prominent display of no-fault purchasing on their site is outrageous. It all tells the customer "buy what you want, you'll never have to pay for it!"
It completely puts this ALL on the back of the merchant. And the CC companies are just begging the customers to commit fraud.
Rather than making it harder for them to do so, they're making it EASIER! Whomever thought this was a good way to do business really needs to be shot in the head.
3 chargebacks in a year and you get a new card? Screw that - ONE chargeback and you get a new card. As an honest customer who has had my Visa debit card number stolen twice (without ever losing the physical card) in the past year, you'd better believe that the instant I see ONE fraudulent charge on my account, I want my card cancelled!
And so would any HONEST customer.
Make folks write letters? Hell yes - why not? "Sir all we require is a handwritten letter with your signature stating that you did not make this charge (please be sure to include the charge, date, and amount you're contesting), and we will be happy to credit the money back to your account." No forms to fill out, no disputing letters going back and forth three times - just one simple letter and it *does* get credited back. This is very easy for an HONEST customer to do and takes five minutes plus one stamp. Do you realize how much "friendly fraud" that would cut down on? Then couple it with "For your protection, sir, once we receive that letter, along with crediting your account for the amount contested we will cancel your current credit card and immediately issue you a new one so that no further fraudulent transactions can be made on your account."
Do it! Please! Honest customers would welcome this kind of protection, especially when their "visa" cards are tied directly to their bank account as mine is with my debit card. A fraudulent charge is not just a credit that I can take my time paying back - it's immediately money out of my pocket that could mean the difference between groceries or no groceries.
Why the hell don't the cc companies see it that way? Because they have positioned themselves where they can completely wash their hands of any responsibility AND make money from it!
When fraud makes the cc companies money and makes their customers happy, you're damn right they'll do it!
The customer gets to keep what he ordered (or in the case of porn sites he got to enjoy his membership), so the customer is happy. The cc company takes the money from the merchant and gives it back to the customer, so the cc company doesn't lose anything. Then to top it off, the cc company charges the merchant a FEE for that chargeback - so the cc company MAKES money from the whole fraudulent transaction. Hot diggity look we can push it even further... if we get a bunch of these fees then we can start levying daily fines against the merchant and make even MORE money!
They have no incentive to change things and make it harder for fraud to occur. None whatsoever - and by doing so, they'd actually be *losing* money!
You wonder why "Verified by Visa" has taken so long to come about? It's because it would cut into their damn profits, that's why.
Requiring a hand-written, signed letter and issuing a new card EACH time a transaction is supposedly "fraudulent" would wipe out friendly fraud in a matter of months. It would be SO easy to do and wouldn't even require a huge investment in new technology or serious upgrading of any systems.
They simply don't do it because they like the money they get from collecting those chargeback fees.
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