How to fight a chargeback
Preparation.
When someone does a chargeback, check the transaction for a valid AVS, CVV2. Get the IP address for the ISP and location information. If everything is in order, send a registered letter with return receipt to the customer (who did the chargeback) explaining you’re from the loss prevention department of company X.
Your letter should state this is an investigation of a potentially fraudulent chargeback. The letter explains the validity of the transaction. It states, if the charge was made by a relative or friend, a crime may have been committed. This encourages the customer (who did the chargeback) to call you to discuss the matter.
Speaking with the customer.
If the customer calls, reinforce the message in the letter. Let them know all is forgotten if they send funds (check or money order) to cover the transaction and chargeback fee.
In one case, a lady said her 15 year old son made the charge. It was explained to her that criminal charges could be brought against him for stealing and using a credit card. She decided to pay but wanted an invoice along with the user name and password.
Collections.
If the customer does not respond within 10 to 30 days (usually 30 days), submit their information to an online collection agency. The online collection agency will give you a copy of the customer’s credit report, if you want (you don’t need that). They send collection letters to the customer AND place the information on the customer’s credit report for all 3 credit bureaus. The fee for this is about $20.
Aftermath.
Again, if the customer does not respond, it’s on their credit report. At this point, the matter is closed. In the future, if they try to buy a car, house, refinance, get a job, etc. they will need to address this issue and you will be waiting.
By this point, get the membership fee, chargeback fee, plus the $600. If they pay, drop the interest charges (per your TOS) and provide them with a PFD letter.
The fees.
As stated earlier, you add a $600.00 fee on top of all the transaction fees. This idea comes from an attorney who handles shoplifting cases for department stores. He explained if a store decides to let you go (after arrest), they charge something like a $300 fee on top of any damages.
The fee is basically an hour of attorney time to handle administrative stuff. Using that as a guideline for reasonable fees, results in the additional $600 (1 hour of attorney time at $500/hour plus the $100 to cover phone calls, copying fees, etc.). Whether or not you are using an attorney, it’s a penalty fee to the customer.
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Comments
This definitely seems like a good way to approach customers who chargeback without giving the merchant the opportunity to address there concerns or ofcourse those customers who simply have no morals and want to acquire services without paying.
I am going to try this out and I will keep you posted on how it works out. Over the last 6-8 months, I am going to perform the above tasks for 9 chargebacks. Let’s see how this method works out!
thanks for the tip! Wish I knew about this sooner.
Pretty cool post. I just found your blog and wanted to say
that I have really liked reading your blog posts. Anyway
I’ll be subscribing to your feed and I hope you post again soon!