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Paypal, Chargebacks and Protection...

by Jason Kanigan
22 replies
So a purchaser told his credit card co. his card was stolen, and they reversed his purchase on my paypal account. Personally, I think he just ran out of money.

I got my handy LBAK plugin to show that he actually logged in many times over many days using the IP from his purchase (thank you, Warrior Plus)...and the only way he could have gotten in was a link & password sent to the email address associated with the paypal account.

So paypal tells me they don't protect purchases of intangible goods, and even though I have the proof, I'm screwed. Then the credit card co. hits them with a $20 charge and they kindly pass that along to me.

The money at this volume is unimportant. However, does anyone know how to protect yourself in this market of info product sales? Will a merchant account do that? Or must I burn everything onto CD and ship? Thanks!
#chargebacks #paypal #protection
  • Profile picture of the author kenmichaels
    Originally Posted by Jason Kanigan View Post

    So a purchaser told his credit card co. his card was stolen, and they reversed his purchase on my paypal account. Personally, I think he just ran out of money.

    I got my handy LBAK plugin to show that he actually logged in many times over many days using the IP from his purchase (thank you, Warrior Plus)...and the only way he could have gotten in was a link & password sent to the email address associated with the paypal account.

    So paypal tells me they don't protect purchases of intangible goods, and even though I have the proof, I'm screwed. Then the credit card co. hits them with a $20 charge and they kindly pass that along to me.

    The money at this volume is unimportant. However, does anyone know how to protect yourself in this market of info product sales? Will a merchant account do that? Or must I burn everything onto CD and ship? Thanks!
    This is what will protect you.

    Nothing. Period. End of story.

    Paypal and merchant acc, if they do a charge back, there is nothing you can do
    about it. You can fight a CB, but it is multi step, and even when you win
    they can turn around and do it again.

    Also with a credit card, regardless of your agreement with the customer,
    LAW says they can refund / charge back upto 364 days from the purchase.

    I am not sure about PayPal guidelines as far as time.

    The most protected you can get is take checks, but then ... even that
    is not full proof and comes with its own set of problems.

    I have done contracts, shipping with at the door signature and complete
    recordings of the sale and button up, with a verbal contract.

    none of it works. If they want to charge back, they can ... and do.

    The best way is pro active steps. its more work.
    but we contact everyone with in a week of the sale.

    Like a warm and fuzzy, at this point we find out real quick if they are
    solid or considering charging back. We try to save them.
    and if that doesn't work, we try to split the cost , by partially refunding.

    Even that isn't fool proof. but it helps a LOT.
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    • Profile picture of the author Johnkitty
      Banned
      Originally Posted by kenmichaels View Post

      This is what will protect you.

      Nothing. Period. End of story.

      Paypal and merchant acc, if they do a charge back, there is nothing you can do
      about it. You can fight a CB, but it is multi step, and even when you win
      they can turn around and do it again.

      Also with a credit card, regardless of your agreement with the customer,
      LAW says they can refund / charge back upto 364 days from the purchase.

      I am not sure about PayPal guidelines as far as time.

      The most protected you can get is take checks, but then ... even that
      is not full proof and comes with its own set of problems.

      I have done contracts, shipping with at the door signature and complete
      recordings of the sale and button up, with a verbal contract.

      none of it works. If they want to charge back, they can ... and do.

      The best way is pro active steps. its more work.
      but we contact everyone with in a week of the sale.

      Like a warm and fuzzy, at this point we find out real quick if they are
      solid or considering charging back. We try to save them.
      and if that doesn't work, we try to split the cost , by partially refunding.

      Even that isn't fool proof. but it helps a LOT.

      THAT IS NOT TRUE ABOUT THEY CAN CHARGE BACK UP TO 365 DAYS. THE LAW IS UP TO 6 MONTHS WHICH IS 180 DAY. I SELL MERCHANT ACCOUNTS TO COMPANY"S,SO I KNOW THIS FOR SURE.

      HAVE THEM SIGN A FORM ONLINE OR BURN CD AND SEND TO BILLING ADDRESS AND MAKE SURE YOU GET TRACKING NUMBER AND MAKE THEM SIGN FOR IT. AND THEY CAN NOT CHARGE BACK AND IF THEY DO THEY WILL LOSE FOR SURE.
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      • Profile picture of the author Rus Sells
        If they charge back claiming unauthorized us of their credit card but actually received delivery of the product isn't that credit card fraud on the buyers part?

        Originally Posted by Johnkitty View Post

        THAT IS NOT TRUE ABOUT THEY CAN CHARGE BACK UP TO 365 DAYS. THE LAW IS UP TO 6 MONTHS WHICH IS 180 DAY. I SELL MERCHANT ACCOUNTS TO COMPANY"S,SO I KNOW THIS FOR SURE.

        HAVE THEM SIGN A FORM ONLINE OR BURN CD AND SEND TO BILLING ADDRESS AND MAKE SURE YOU GET TRACKING NUMBER AND MAKE THEM SIGN FOR IT. AND THEY CAN NOT CHARGE BACK AND IF THEY DO THEY WILL LOSE FOR SURE.
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      • Profile picture of the author Dan Grossman
        Originally Posted by Johnkitty View Post

        THAT IS NOT TRUE ABOUT THEY CAN CHARGE BACK UP TO 365 DAYS. THE LAW IS UP TO 6 MONTHS WHICH IS 180 DAY. I SELL MERCHANT ACCOUNTS TO COMPANY"S,SO I KNOW THIS FOR SURE.
        I just got 3 chargebacks from Visa transactions in March through my merchant account. That's 7 months ago (over 200 days).

        This isn't really controlled by any law -- credit card payments are international -- Visa, as comprised by its member banks, sets its own operating regulations.

        I dispute chargebacks when possible (though there's really nothing to dispute when you take a stolen card unknowingly), and win more than I lose, but barely.

        Fraud losses just have to be built into your margins, the same way they are at any traditional store.
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  • Profile picture of the author iAmNameLess
    You must burn and send on CD but even then you're not protected.

    1.) When shipping your info product, You will be protected under paypal but that is just while you're fighting the chargeback. ALWAYS fight the chargeback or else your account will end up at risk.

    2.) No merchant account will protect you.. when it comes to credit card processing, the consumer is always in the stronger position.

    3.) Use the information you have to fight the chargeback. You will likely lose no matter what, but you have to.
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  • Profile picture of the author Aaron Doud
    Occasionally you can win a charge back with a merchant account. With Paypal it's a lost cause. But when it comes down to it is it worth fighting? What is your time worth?

    Everything you mention is no proof for you. I am going to show how as a thief I could have done what you say I couldn't.

    1. Paypal account take over. Once I take over the account I set up a new email. Using that email I use the account and the credit card on the account to pay you.

    2. I took over his email first. Used that to take over his paypal and then used the credit card on the paypal account.

    3. I take stolen credit card and attach it to my paypal (or a stolen one) and pay.
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  • Profile picture of the author Rus Sells
    Manage your exposure to a higher level by delivering your product physically, hence CD version. It doesn't give you iron clad protection but you can get sellers protection from Paypal if you do that.
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  • Profile picture of the author Aaron Doud
    Physical delivery would help with Paypal but in this type of situation you are still screwed. Remember the credit card's customer is not you so they have little reason to find in your favor.

    But overall when using paypal I would recommend a physical product being sent as part of the package so you have that extra protection.

    To learn more about paypal horror stories just get onto the eBay forums
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  • Profile picture of the author mhdeaton
    Thats kinda weird paypal fights chargebacks on my behalf all the time and they seem to win at least half the time
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  • Profile picture of the author piney94
    If you, or anyone else for that matter, is shipping a tangible good of any value, make sure you get a confirmation (tracking) slip at USPS. You can then write the buyer zip code on it and keep it as a record of proof.

    Many times, this has been a saving grace for me with Paypal, since if a complaint of non- receipt comes up, I simply plug in the confirmation # in and Paypal resolves the complaint.
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  • Profile picture of the author Aaron Doud
    Now remember depending on the value you can always send them a collections notice and/or sue them for the unpaid debt after the charge back.

    You hear of this working for people on eBay at times. Sometimes a letter from your lawyer threatening a lawsuit is all that is needed for them to pay up.
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  • Profile picture of the author Beni1994al
    you should allways use paypal ,is very secure
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    • Profile picture of the author iAmNameLess
      Originally Posted by Johnkitty View Post

      THAT IS NOT TRUE ABOUT THEY CAN CHARGE BACK UP TO 365 DAYS. THE LAW IS UP TO 6 MONTHS WHICH IS 180 DAY. I SELL MERCHANT ACCOUNTS TO COMPANY"S,SO I KNOW THIS FOR SURE.

      HAVE THEM SIGN A FORM ONLINE OR BURN CD AND SEND TO BILLING ADDRESS AND MAKE SURE YOU GET TRACKING NUMBER AND MAKE THEM SIGN FOR IT. AND THEY CAN NOT CHARGE BACK AND IF THEY DO THEY WILL LOSE FOR SURE.
      Why all the yelling?

      Now, for someone selling merchant accounts, you should get your facts straight.

      The federal laws are found in 15 United States Code §§ 1666, 1666i, and 1640(e) and in 12 Code of Federal Regulations §§ 226.12(c) and 226.13.

      You can easily see that under federal law, you can issue a chargeback ONE YEAR after the purchase was made, and they would file the chargeback under claims and defenses.

      Your information is wrong.

      They also will not lose... sending a CD doesn't get you a win, sending a physical item gets you sellers protection in paypal, which isn't permanent. Don't give opinions bro, give FACTS.
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      • Profile picture of the author sandalwood
        I've read all the remarks about charge backs (chbk) so I asked a guy who actually owns a merchant account business and does business all over the world. He sets up the riskiest of accounts ( gambling, adult, etc) as well the mellowest of accounts and also owns several other businesses in the same line. Here is how I put it to him:

        Which statement is correct:

        Also with a credit card, regardless of your agreement with the
        customer, LAW says they can refund / charge back upto 364 days from the purchase.

        or

        THAT IS NOT TRUE ABOUT THEY CAN CHARGE BACK UP TO 365 DAYS. THE LAW IS
        UP TO 6 MONTHS WHICH IS 180 DAY. I SELL MERCHANT ACCOUNTS TO COMPANY"S,SO
        I KNOW THIS FOR SURE.


        Here is the answer he sent back:

        The skinny is that for a face to face signature transaction (180)
        days.....this is about the only one you can bank on.

        If you are outbound telemarketing....you're ****ed.....if you are an
        online retailer, you can install Verify by Visa and & MC Secure.
        This will protect you from the ***kers that say "it wasn't me", but
        you are still open to chbk's for "not as advertised, defective, etc"

        The first guy has ACH mixed up,I think. Banks will typically give
        money back to their customers up to a year for outbound ACH or
        Check21.

        The real truth is that the card associations will ***k the merchant at
        any chance they have. The merchant "needs" them.

        The card issuers and acquirers NEED the consumers. Consumers pay 21%
        interest, a merchant pays 2-3% on his transactions. Do the math and
        you see who will always win the dispute between a merchant and a
        consumer.

        THE MERCHANT NEVER WINS.

        Of course, there are consumer laws, but in reality, the law has
        absolutely nothing to do with it.

        People are using cards issued to them by a bank with unsecured credit.
        The chbk, refund, etc. is governed by the card associations.

        Think of Mob, Inc. when Lucky Luciano, Meyer Lansky and the boys set
        up the families. Same idea, just different product and legalities.
        More profitable, too

        I don't know if that clears up the discussion but I think if you say the merchant never wins you probably will be correct. Set up a reserve for losses and you should come ahead at the end of the year. It is a kissing cousin to reserve for bad debts if that helps.

        Tom
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        • Profile picture of the author iAmNameLess
          Originally Posted by sandalwood View Post

          I've read all the remarks about charge backs (chbk) so I asked a guy who actually owns a merchant account business and does business all over the world. He sets up the riskiest of accounts ( gambling, adult, etc) as well the mellowest of accounts and also owns several other businesses in the same line. Here is how I put it to him:

          Which statement is correct:

          Also with a credit card, regardless of your agreement with the
          customer, LAW says they can refund / charge back upto 364 days from the purchase.

          or

          THAT IS NOT TRUE ABOUT THEY CAN CHARGE BACK UP TO 365 DAYS. THE LAW IS
          UP TO 6 MONTHS WHICH IS 180 DAY. I SELL MERCHANT ACCOUNTS TO COMPANY"S,SO
          I KNOW THIS FOR SURE.


          Here is the answer he sent back:

          The skinny is that for a face to face signature transaction (180)
          days.....this is about the only one you can bank on.

          If you are outbound telemarketing....you're ****ed.....if you are an
          online retailer, you can install Verify by Visa and & MC Secure.
          This will protect you from the ***kers that say "it wasn't me", but
          you are still open to chbk's for "not as advertised, defective, etc"

          The first guy has ACH mixed up,I think. Banks will typically give
          money back to their customers up to a year for outbound ACH or
          Check21.

          The real truth is that the card associations will ***k the merchant at
          any chance they have. The merchant "needs" them.

          The card issuers and acquirers NEED the consumers. Consumers pay 21%
          interest, a merchant pays 2-3% on his transactions. Do the math and
          you see who will always win the dispute between a merchant and a
          consumer.

          THE MERCHANT NEVER WINS.

          Of course, there are consumer laws, but in reality, the law has
          absolutely nothing to do with it.

          People are using cards issued to them by a bank with unsecured credit.
          The chbk, refund, etc. is governed by the card associations.

          Think of Mob, Inc. when Lucky Luciano, Meyer Lansky and the boys set
          up the families. Same idea, just different product and legalities.
          More profitable, too

          I don't know if that clears up the discussion but I think if you say the merchant never wins you probably will be correct. Set up a reserve for losses and you should come ahead at the end of the year. It is a kissing cousin to reserve for bad debts if that helps.

          Tom
          He should have explained there are different classes of chargebacks that range anywhere from 60 days to 1 year. "Billing errors" are only up to 60 days. Claims and defenses up to 1 year.
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          • Profile picture of the author sandalwood
            Originally Posted by iAmNameLess View Post

            He should have explained there are different classes of chargebacks that range anywhere from 60 days to 1 year.
            Yeah, probably but it was a general question - at least the way I put it - so we got a general answer back. The bottom line does seem to be the commonality. The merchant loses and that's that. I know he makes over a million a year from his business so he must know something.

            He even knows how to fight chargebacks and win. Now there is material for a WSO if I ever heard of any. Can you imagine winning on chargebacks? He doesn't win every one but who does?

            I'll have to ask him his batting average. I would suppose even if it was 50% that would be pretty good. What do you think?
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            • Profile picture of the author kenmichaels
              Originally Posted by sandalwood View Post

              Yeah, probably but it was a general question - at least the way I put it - so we got a general answer back. The bottom line does seem to be the commonality. The merchant loses and that's that. I know he makes over a million a year from his business so he must know something.

              He even knows how to fight chargebacks and win. Now there is material for a WSO if I ever heard of any. Can you imagine winning on chargebacks? He doesn't win every one but who does?
              I'll have to ask him his batting average. I would suppose even if it was 50% that would be pretty good. What do you think?
              I know how to fight and win.

              This is the problem, you can win, and then the person can call right back
              to the card company, get another rep on the phone, sing another BS
              story, and bam... into the same cycle with the customer.

              why is that bad? beside it being a pain in the kiester.

              the point system.

              I will get to that in a moment. Tom your 100% correct about
              being screwed if you do outboud sales. Nothing is in the vendors favor.

              All a person has to do is lie, and say they were pressured.

              There are half a dozen other words they can use to that will
              guarantee them a instant charge back as well.

              The merchant account lives and dies by the point system.
              anyone who doesn't understand the point system,

              will not have a merchant account for long.

              Your curious about your friends batting average on winning charge backs?
              I will tell you right now, its above 50% ..
              it has to be, or he would have been pointed out a long time ago.

              A signed contract , shipping a physical product, recording the
              entire sale, and allowing the merchant provider listen to the sale
              does not guarantee a win.

              And when you do win, it does not guarantee removal of points.

              BTW, having a huge reserve doesn't do much for you either
              except mean its even more money you will lose when they
              freeze the account.
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      • Profile picture of the author sandalwood
        Excellent research. Not many people know about the Code of Federal Regulations so you did your homework. Also in this particular equation is the Card Associations. Check them out and you will find that they are the final arbiter in ALL disputes. I believe Dodd-Frank even guaranteed that but I don't know that for sure as I didn't read the whole damned thing.

        I use to have both the VISA and Master Card Manuals but computer explosion caused a bit of a problem. Probably can get another copy but who the hell actually reads that crap anyway?

        I said in my other post to set up a reserve account and still believe it is the best way to go. A friend in TX operates under that system and gets a check every 3 months as the accounts age. He uses it as vacation money.

        Again, great job in quoting the code and cfr's. Your next research project should be 26CFR. I bet that'll jingle your nerves...

        Tom


        Originally Posted by iAmNameLess View Post

        Why all the yelling?

        Now, for someone selling merchant accounts, you should get your facts straight.

        The federal laws are found in 15 United States Code §§ 1666, 1666i, and 1640(e) and in 12 Code of Federal Regulations §§ 226.12(c) and 226.13.

        You can easily see that under federal law, you can issue a chargeback ONE YEAR after the purchase was made, and they would file the chargeback under claims and defenses.

        Your information is wrong.

        They also will not lose... sending a CD doesn't get you a win, sending a physical item gets you sellers protection in paypal, which isn't permanent. Don't give opinions bro, give FACTS.
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  • Profile picture of the author chrislim2888
    I heard many cases that paypal is not protecting the intangible goods. Nothing much you can do about it, unless you are offering purchase via credit card, there are ways for you to prevent it or reverse the chargeback with the proof submission. This can minimize the chargeback loss.
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    • Profile picture of the author sandalwood
      @Ken

      BTW, having a huge reserve doesn't do much for you either except mean its even more money you will lose when they freeze the account.

      I didn't mean to have the reserve account with them. That is plain dumb. You have a reserve account set up via a money market account at another institution. Granted they pay pee poor interest but at least they are paying. I don't want to go into the mechanics of setting up this reserve account so all I'll say is put some money aside in an interest bearing account.

      Everything you say about losing is spot on but unfortunately that is part of the game called being in business. Here is a stock tip so you can make some serious buckaroos. Buy the near term calls on DCTH and sell the Jan puts. You probably will make enough to fly me down to Daytona if you do it in 20 contract lots.

      Dear SEC: This is not investment or financial or medical advice. It is the ramblings of an old man with nothing to lose.

      Have a good day and be sure to execute the trade at market open on Oct 8th. Sorry SEC couldn't resist...

      Tom
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  • Profile picture of the author Voasi
    I've fought lots of chargebacks and won. Actually, there aren't many that I've lost. My gal who handles it has our paperwork down to templates now.

    It's different for different businesses, of course. For our company, if someone is claiming they didn't get what was stated in their contract and chargesback, we'll use a combination of showing signed contract (along with Statement of Work), showing conversations via Basecamp and showing email trails. This usually amounts to about 10-20 pages we fax over. Then... we see the money back in our account.

    But that's our process. Like I said, it's different for different types of businesses.

    BTW, AmEx is the one card company that is nearly impossible to win chargebacks. They don't care about businesses (that's not their customer) they care about their customers, so watch out if you want to fight chargebacks and take AmEx.
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    • Profile picture of the author M42
      Originally Posted by Voasi View Post

      I've fought lots of chargebacks and won. Actually, there aren't many that I've lost. My gal who handles it has our paperwork down to templates now.

      It's different for different businesses, of course. Of our company, someone is claiming they didn't get what was stated in their contract. So we'll use a combination of showing signed contract, showing conversations via Basecamp and showing email trails. This usually amounts to about 10-20 pages we fax over. Then... we see the money back in our account.

      But that's our process. Like I said, it's different for different types of businesses.

      BTW, AmEx is the one card company that is nearly impossible to win chargebacks. They don't care about businesses (that's not their customer) they care about their customers, so watch out if you want to fight chargebacks and take AmEx.
      Good advice mate
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