Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!


How to deal with fraudulent charge-backs (this is not a question)
New on LowEndTalk? Please Register and read our Community Rules.

All new Registrations are manually reviewed and approved, so a short delay after registration may occur before your account becomes active.

How to deal with fraudulent charge-backs (this is not a question)

randvegetarandvegeta Member, Host Rep
edited December 2017 in General

If you are a provider serving the low end (or even lower end) market and you have to deal with annoying paypal disputes, here is my unsolicited advice on how to deal with them.

Of course every host has different policies, so I should point out that on our LOW END services, we have a policy of No Refunds, No SLA and No Support. So obviously if you are claiming to offer support, up-time guarantees, and do not specifically state that there are no refunds then I guess my advice would be to adopt such policies!

If you do have those policies, make it as clear as possible to the clients prior to their orders. No excuses afterwards then!

Since most hosts already have such policies and already make these policies fairly clear, here comes the advice!

If you get a payment dispute, challenge it! Unless the payment was actually made fraudulently, there is no justification to charge back. This is true for Paypal and Credit Cards! The most common dispute we see is an 'item not as described' dispute via Paypal.

If you ignore the dispute, Paypal will always side with the buyer. If you challenge the dispute, there is a very good chance Paypal will side with the provider so long as you show that the dispute is bogus (which they always are!).

Now you may be worried about the reputation of your hosting business. That's a fair concern. But the angry ex-customer may actually help deter other unwanted clients. And so long as you have a predominantly happy customer base, your reputation should not be affected adversely.

Of course if this is all too much hassle (financially, it is always way too much hassle), you can simply drop this segment of the market, or exclusively accept payments from non-disputable sources (Crypto?).

Just some unsolicited advice for providers going into the New Year :-).

Thanked by 2hostdare ehab
«13

Comments

  • While Paypal may entertain it, that's time consuming and some people may feel their time is better served just refunding.

    IIRC (not 100% certain) for a card chargeback the customer will win regardless, unless the payment was done with 3D secure, or you have a photo of their card signature. You can collect all the logs, ToS, times and IPs in the world, they don't apply. (This is at least from my experience with a couple of eccentric customers). While morally wrong that they are claiming 'fraud', the burden of proof is on you to prove it isn't.

  • ricardo said: While Paypal may entertain it, that's time consuming and some people may feel their time is better served just refunding.

    totally agree on this one.

    just don't bother for the usual $7. hit that fucking refund button quickly and be done with it and with the assh*le client.

    Instead of spending hours on collecting proof, answering in rant topics and such... better calculate your offers including a certain amount of possible dropouts.

    Thanked by 1Aidan
  • cubedatacubedata Member, Patron Provider

    @ricardo said:
    While Paypal may entertain it, that's time consuming and some people may feel their time is better served just refunding.

    IIRC (not 100% certain) for a card chargeback the customer will win regardless, unless the payment was done with 3D secure, or you have a photo of their card signature. You can collect all the logs, ToS, times and IPs in the world, they don't apply. (This is at least from my experience with a couple of eccentric customers). While morally wrong that they are claiming 'fraud', the burden of proof is on you to prove it isn't.

    yep we agree, chargebacks via paypal are the worst and we lost one recently as ricardo stated the buyer in china chargebacked through their bank and well we collected everything from logs to everything and we lost anyway so we just started only accepting bitpay for now.

  • randvegetarandvegeta Member, Host Rep

    ricardo said: While Paypal may entertain it, that's time consuming and some people may feel their time is better served just refunding.

    Yes it is time consuming indeed. Either way, if a dispute occurs, a host will incur some loss. Be it from chargeback fees or time spent challenging.

    ricardo said: the burden of proof is on you to prove it isn't.

    Yes this is true. But if the claim is that the order was made fraudulently, it normally means the client will be claiming the card details were stolen and to claim fraud would also mean having to cancel the existing card and getting a new one. That may seem like a lot of effort for a $7 transaction.

  • randvegetarandvegeta Member, Host Rep

    cubedata said: we just started only accepting bitpay for now.

    That's definitely a way to go. You can pretty much ignore the problem users then.

  • The problem i have with these kind of "black and white" outlooks is: at which point does "No Refunds, No SLA and No Support" actually fail? If you sell a product and its offline for 99% of the time is that still no valid reason for a dispute?

  • randvegetarandvegeta Member, Host Rep

    @MagicalTrain said:
    The problem i have with these kind of "black and white" outlooks is: at which point does "No Refunds, No SLA and No Support" actually fail? If you sell a product and its offline for 99% of the time is that still no valid reason for a dispute?

    Technically true. But that's also true in the real world when you buy some second hand stuff without warranty. If you buy a used car from a private seller, and it breaks down after 1 day, that's not the responsibility of the private seller.

    Now obviously a service is different, in that the payment is part of a contract for a service to be delivered over a period of time. So there is more responsibility on the provider than there would be in the case of a private seller of a second hand car. However, normally at the low end, you're talking about a few bucks that could barely pay for a cup of coffee.If you see something that says 'no refunds/sla/support' then you expect the price to be cheap. And normally the price is cheap enough for most people not to care that much if they lost it.

    I think we've all had an experience of going to a coffee shop, restaurant or shop and bought something that was far below expectations. Most rational humans will simply accept the loss of their few bucks and move on. Not contact the credit card company and claim it was stolen to pay for a $5 cup of bad coffee.

    If a host does not fulfil their obligations, then the punishment will be public vilifying.

  • MagicalTrainMagicalTrain Member
    edited December 2017

    In my real world, second hand stuff comes with warranty if sold by a commercial seller. 12 months of it.

    And you are decidedly a commercial seller.

    The difference to your coffee is that if I buy a shitty coffee I still have my shitty cheap coffee at the end of the day. If a server goes down half the time or even disappears completely then I do not have that server anymore.

    Not contact the credit card company and claim it was stolen to pay for a $5 cup of bad coffee.

    And I obviously was not talking about fraudulent chargebacks. I was talking about disputes or chargebacks in situations where the provider technically has a "no support/SLA" rule, but obviously isnt providing whatever service at a reasonable level and what that "reasonable level" is for you .

  • IMO the "no SLA" combined with "a service provided over a time" means that if your service is down for 1 month, your service gets extended for a month for free.

    At least, that's what I'd read into that, and would like my provider to do as well in case of (extended) downtime. No need to worry about it for that 1-day-a-year downtime though.

  • rick2610rick2610 Member
    edited December 2017

    I miss the pre order check. I use an IP reputation service and block all bad IPs and VPN/public proxies. And i have some additional rules for CC payments like country CC must match IP country. This will reduce fraudulent orders to almost zero.

  • randvegetarandvegeta Member, Host Rep

    rick2610 said: I miss the pre order check. I use an IP reputation service and block all bad IPs and VPN/public proxies. And i have some additional rules for CC payments like country CC must match IP country. This will reduce fraudulent orders to almost zero.

    You're talking about actual fraud orders. I'm talking about charge-backs from customers who are disputing a payment even when the product was delivered.

    MagicalTrain said: I was talking about disputes or chargebacks in situations where the provider technically has a "no support/SLA" rule, but obviously isnt providing whatever service at a reasonable level and what that "reasonable level" is for you .

    I think the point is not that if a provider does not provide a service that the client is not entitled to a refund (or partial refund), but that a high level of service should really not be expected. Depending on the exact service you're ordering, for example a $3 /year NAT VPS, I would consider it extremely good if t he up-time was 99%. Baring in mind that 1% downtime over 1 year would be 3-4 days.

    I suppose a host could simply offer a very low SLA... like 50% uptime, 1Kbit/s etc... but that to me is no better than having no SLA. Heck, even if you say 90% uptime, over a 1 year period, that's over a month of downtime.

    Which do you think is better? A shitty SLA or no SLA?

  • @randvegeta said:
    Which do you think is better? A shitty SLA or no SLA?

    A shitty SLA. You can point to where it's linked in your checkout pages, and where it's on your website. You can then show that to PayPal/etc in the event of a dispute.

    Your best bets for avoiding chargebacks are to only allow buttcoin/etc from known fraudulent order areas like the UAE/China/etc...

  • deankdeank Member, Troll
    edited December 2017

    I don't care for SLA if a deal is shitty to begin with. But then I know what to expect.

    A lot of lurkers on LET do not. They genuinely want a solid hosting for 1 buck / year.

    Thanked by 1WSS
  • @deank said:
    I don't care for SLA if a deal is shitty to begin with. But then I know what to expect.

    A lot of lurkers on LET do not. They genuinely want a solid hosting for 1 buck / year.

    So far, I've been quite happy with all of my NAT VPS, and my $1 @Cam and @MCHPhil hosting (I haven't used either one because that'd take effort).

    Thanked by 2Cam MCHPhil
  • @WSS said:

    @deank said:
    I don't care for SLA if a deal is shitty to begin with. But then I know what to expect.

    A lot of lurkers on LET do not. They genuinely want a solid hosting for 1 buck / year.

    So far, I've been quite happy with all of my NAT VPS, and my $1 @Cam and @MCHPhil hosting (I haven't used either one because that'd take effort).

    Thats me as well....

    @randvegeta thats a different ballpark then. I understood your first post very differently with how you phrased it. "the dispute is bogus (which they always are!)" etc.

    I think the worst host (other than hosts where the service completely disappeared) Ive had here was Northhosts with like 95-96% uptime. I didnt chargeback, but I also didnt renew, because it was just so much worse than other options in that price bracket. (I think I paid 14$ a year for 512mb?)

  • randvegetarandvegeta Member, Host Rep

    MagicalTrain said: @randvegeta thats a different ballpark then. I understood your first post very differently with how you phrased it. "the dispute is bogus (which they always are!)" etc.

    In our case, we mainly have problems with mainland Chinese buyers. We try to make clear that certain services include NO CHINA ROUTE, and we often remind them prior to payment. After a few days, they open a dispute claiming "item not as described", and complain the bandwidth is poor. Bit of a joke really.

  • As mentioned before easiest solution would be to use a non chargebackable payment method. Like:

    Good old wire transfer but those are not exactly ideal since payment isn't instant. You could still look for services like sofort.com, ideal or eps which seams quite popular and afaik don't do chargebacks.

    Crypto currencies but buying them might not be that conveniant depending on where the costumer is located. There are countries where you can buy bitcoins at gas stations though so that probably widely differs. Bitcoin seems rather useless atm anyways.

    Various cash cards like paysafecard or ukash which are rather easy to obtain at least in europe i think but iirc fees for cashing them are quite high.

    An ewallet that does not support chargebacks. Not sure how many costumers would bother with signing up with perfect money and the likes.

    Gift cards. These are tricky as you basically need a side business for cashing them.

  • @mksh said:
    Gift cards. These are tricky as you basically need a side business for cashing them.

    This is going to be problematic for many reasons, and unless you actually test/use the cards immediately, there's no real way to know that someone else doesn't have/will use it. Plus, I seem to recall there being an issue taking these as payment methods, as it skirts several tax laws. Prepare for audit.

  • @WSS said:

    @mksh said:
    Gift cards. These are tricky as you basically need a side business for cashing them.

    This is going to be problematic for many reasons, and unless you actually test/use the cards immediately, there's no real way to know that someone else doesn't have/will use it. Plus, I seem to recall there being an issue taking these as payment methods, as it skirts several tax laws. Prepare for audit.

    Yeah, it would only work at all for cards that can be more or less insta-redeemed. As for tax stuff i have zero clue. That would be up to anyone interested to check up on. Probably differs from place to place anyways.

  • @WSS Hang on, the UAE is considered as high risk country for fraud? Can any providers chime in on this?

  • @ElliotJ said:
    @WSS Hang on, the UAE is considered as high risk country for fraud? Can any providers chime in on this?

    It (was) enough for some gateways to automatically punt them as a will-not-process unless you explicitly allowed it. That might have been more politically motivated - I don't know offhand.

  • jarjar Patron Provider, Top Host, Veteran
    edited December 2017

    @ElliotJ said:
    @WSS Hang on, the UAE is considered as high risk country for fraud? Can any providers chime in on this?

    Off the top of my head: carding operations ran wild there for a bit of time... In 2016 I think? Haven't seen anything significant in a while.

    To me that's all it really ever means when one region is more fraud heavy than another, just lack of government action against criminal activity for a period, namely carding operations. This year it was Mexico but the operations were subtle, don't think many people noticed it as the efforts were to steal local cards so geographic location always matched.

    Thanked by 1WSS
  • Ah fair play. Interesting as the punishments for fraud are err... Relatively severe in that neck of the woods

  • qpsqps Member, Host Rep

    jarland said: Mexico

    Orders from Mexico have been incredibly toxic for the past year or so. We had to stop accepting orders from Mexico. I made an exception a few times and each time I got smacked with more fraud/spam/etc. Even an order from a long-time LET member ended up sending out tons of spam.

    Thanked by 1jar
  • jarjar Patron Provider, Top Host, Veteran

    @ElliotJ said:
    Ah fair play. Interesting as the punishments for fraud are err... Relatively severe in that neck of the woods

    Maybe that's why I suddenly never saw it again ;)

  • @ElliotJ

    https://en.wikipedia.org/wiki/Judicial_system_in_the_United_Arab_Emirates Is an interesting read. Then put https://en.wikipedia.org/wiki/Camel_racing#Child_jockeys into the picture and i guess it isn't that hard to imagine that stuff like internet fraud might not be that hard to pull off down there.

  • hostdarehostdare Member, Patron Provider

    I got hit xxxx usd by Indonesian carders during 2014-15 period during novice time .I still double check all orders from Indonesia.

  • raindog308raindog308 Administrator, Veteran

    I don't know why people make these things so hard.

    You have the guy's address, right? Drive to his house, beat him to death, take your cash. Help yourself to anything else in the house as payment for your transportation expenses.

    Hence you've solved your problem, and prevented it from reoccurring.

    Also, you've made the world a better place.

    Thanked by 1quicksilver03
  • @MagicalTrain said:
    The problem i have with these kind of "black and white" outlooks is: at which point does "No Refunds, No SLA and No Support" actually fail? If you sell a product and its offline for 99% of the time is that still no valid reason for a dispute?

    My very thought on that subject ....

    @randvegeta said:
    Now obviously a service is different, in that the payment is part of a contract for a service to be delivered over a period of time. So there is more responsibility on the provider than there would be in the case of a private seller of a second hand car. However, normally at the low end, you're talking about a few bucks that could barely pay for a cup of coffee.If you see something that says 'no refunds/sla/support' then you expect the price to be cheap. And normally the price is cheap enough for most people not to care that much if they lost it.

    .... yes, the price might be low but that should not serve as an excuse to ServerHand the hell out of their customers.

    If you offer a service at a very low price that might have some gotchas, but there should be no discussion about the service itself.

    @rick2610 said:
    i have some additional rules for CC payments like country CC must match IP country.

    That could be a problem however for people living abroad. I had that exact problem with a provider who cancelled my services (months into the service) because they realised my country of payment did not match my address and IP address.

  • zevuszevus Member
    edited December 2017

    @randvegeta said:
    If you get a payment dispute, challenge it! Unless the payment was actually made fraudulently, there is no justification to charge back. This is true for Paypal and Credit Cards! The most common dispute we see is an 'item not as described' dispute via Paypal.

    If you ignore the dispute, Paypal will always side with the buyer. If you challenge the dispute, there is a very good chance Paypal will side with the provider so long as you show that the dispute is bogus (which they always are!).

    I order "Dual E5-2620 Xeon", "... dedicated server ... form of a virtual machine" (maybe someone can identify based on this, laugh). It is provisioned with one core.

    I write ticket to support, support tells me specs it's supposed to be. I write back to support and say support didn't address the fact that I've been provisioned with one core. Support forwards it to 'higher tech' (forgot the term used).

    Another 24 hrs passes, and my server now shows as having 6 threads. I write back to support. No answer for about 48 hours. I create a new ticket & say I want a refund. No response for 24 hr. I write back and say I'm going to have to do a charge back on Paypal, and that I'll wait another day. Another day passes, so I initiate the chargeback. Provider never responds.

    I've done less than a handful of chargebacks on Paypal since I started my acct in 1999.

    The last one I tried, it didn't qualify for buyer's protection, but Paypal just offered me the money as 'goodwill gesture' anyway. They are able to do so up to $10,00 or so,

Sign In or Register to comment.