Some chargeback information
 

I posted this in another thread, but I know some other people might be interested in this. Yes, it's kinda long. The bold part is especially pertinent.

#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.

<b>#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.</b>

#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.

Is this true? Doesn't somebody make money when they are fining the shit out of someone?

Visa makes money

I didn't mention fines in there. Obviously, million-dollar fines do make money. And the majority of merchants fined are deserving of said fines.

For the record, I don't think Epoch is deserving of the fines.

Psyko you can't tell me that the fines completely cover the banks' processing costs of a chargeback and that there is nothing left over for them.
Your post does make sense and refutes many of the statements I made in that long-ass Visa thread, but I just cannot see these chargeback fees costing the bank as much as they cost us. I believe they make money off of it.

The letter-writing isn't implemented by default down here. In the case of my visa debit getting snatched twice in the past year, the first time there were multiple charges and all I had to do was click a little dispute button in my bank's online interface and specify that I didn't make the charge. The bank got it taken care of.
The second time around, I contacted the various merchants and got them to put the card # into a negative database and issue a refund - and after I told the bank that, *then* they requested a written letter (one letter to cover all of the fraudulent transactions made, not one letter each), but still cancelled my card at my request (I had to request it, they wanted to leave it running).
If they changed it to each dispute being a hand-written letter (one per each "fraudulent" charge made) every time it happened, *and* a new card being issued each time, you'd see that friendly fraud go down.

Why not do this? Are they afraid they might lose a whole 1k lazy customers? Having hundreds of thousands of fraudulent transactions that - as you claim - "cost them money", is better?

See what I'm saying? (I hope so, cuz I think I just confused myself, LOL)

Lets take a step into reality. Visa, Mc, Amex, and any other CC name that you can think of do not do a thing unless they make money from it. If they did they would no longer be in business.


How many banks do you see that are not making cash sideways from your every transaction.?? One way or another they will make their money. To the point that how many times have you found transactions on your statment that you did not make, usually a small one and you call visa and it is removed with no question asked?? I have had it happen several times. I think that they are just pushing off charges.

Like I said, disputing a charge does not mean it's fraudulent. And written letter policy only applies to online charges without signed drafts.

In your case, your card was stolen and there was fraud. All you have to do is say you didn't do them. Some banks will make you sign an affidavit stating that fact.

It's a Catch-22 situation for the bank. When there's only one or two unrecognized charges on someone's account, it's generally not fraud. When someone steals a credit card, they're not going to sign up for a porn site. That would be like finding $5000 cash, buying a porn mag, and throwing the rest away.

Problem is, if a customer says it's fraud, we cannot prove it isn't. And you cannot prove it isn't either. Therefore, the chargeback has to be issued in favor of the customer. It all comes down to the burden of proof. It's on the bank and the merchant to prove the cardholder authorized the charge. And as I said, they only way to prove that is to subpoena the ISP for their logs. No judge will issue a subpoena for a $20-40 charge.

Anyways, intentional friendly fraud is not as rampant as everyone here thinks.

As for the fines, see my above reply to Mr. Fiction.

FYI, I work for Visa.
As stated above, there's only two ways that Visa makes money from a customer.

I'm not too sure what you meant by your first paragraph, so please explain.

As for your second paragraph, re-read my post and you'll get your answer.

"Chargebacks cost an average of $25 to each bank involved in the dispute (the credit card issuer and the merchant's acquirer). [...] Also, the majority of banks will write-off charges less than $15-$25, which comes from their pocket.

I'm curious, why ?

I've heard things like this before, but never from someone actually in the know. In other words if a customer disputes a charge of $14.95 its very unlikely to show up as an actual chargeback?

If it's a one-time charge, yes, it's unlikely. If it's been rebilled, it becomes 2 or 3 or 4 14.95 charges and the bank will usually pursue a chargeback.

But you didn't hear this from me :thumbsup

My number one reason is the absurdity of refunds being considered equivalent to chargebacks.

One thing you left out is that
AVS and CVV2 are very powerful tools to prove a valid charge


i just hate the banks that never tell their customer to contact the merchant first, credits are alot easier done than chargebacks,

for example a customer called me and asked about a charge.
he told me it wasn't him, and he was from alabama but yet a person from russia had bought it. Refunded him the money and told him someone stole his credit card number

if the bank immediately issues a chargeback without contacting the merchant than the customer has chances of being frauded again

That sucks.

I also work for Visa, and I ALWAYS tell clients to contact the merchant first. I will go as far as to find the damn phone number for them in the yellow pages. Because most of the time, by doing that, it's much easier for them to get their money credited, instead of waiting for the sales draft (if there is any) to come from the merchants bank, then for us to send it to the cardholder and then for the cardholder to send the dispute letter back to us signed, confirming the charge is not theirs and THEN finally for us to process a chargeback.



There are a lot of people who call in and right off the bat say 'this isn't mine!!' when i ask them 'so, you've never done business with this place or heard of this merchant?' .... 'NEVER!' they'll answer.

Sometimes it's real sketchy. I had one guy call me once about a charge maybe 2 months old. He said 'this is not my charge, i havent a clue what it is and I'd like to dispute it' He basically has NO IDEA what this is...he's completely innocent to this mysterious charge on his account. So i looked into the file and found that the investigation process was already taking place. After looking at the merchant code, I found out it was an escort company. I told him this and he yelled 'i am a happily married man!!!!! etc...' After doing a little more research, I found out that Mr. Smartass had already written us in a letter about this charge. It went a little something like this:

'I called this company back in January, they sent me a package. When i purchased the actual product, it was not what i had expected and i was not pleased with the service...'bla bla bla. So i came back and told him 'Sir, you've already written to us about this, if you need us to look into this you need to be completely honest with me now and tell me what happened because i have that letter you wrote us RIGHT IN FRONT OF ME.' he responsed with a very angry 'are you calling me a LIAR YOUNG LADY?!?!!?'
'no ! *laugh* sir, i have the letter right in front of me!!!!!' it was a ridiculous conversation. Fine with me if you completely deny the charge, but stick to your lie. SHEESH!!

Well, since the fine is only levied in case the merchant loses the chargeback dispute, I suppose it functions as, well, a FINE and therefore a DETERRENT to help prevent future problems. A lot of guys who are charged back deserve to be charged back.