posted on July 23, 2001 09:42:21 AM
Damon: Please clarify whether a chargeback based on a "quality of merchandise" complaint would be passed on to the seller even if the seller fulfills all the "Seller Protection Program" requirements. (This debate is ongoing in the 2 other most active threads here.)
As I read your TOU:
1--The Buyer is NOT protected in disputes about the quality or attributes of delivered goods.
2--The Seller Protection Policy indemnifies sellers from a buyer's unauthorized use of a "credit card and/or false claims of non-shipment of goods", but it doesn't SPECIFICALLY mention or exclude quality of merchandise as a reason to pass through a chargeback to the seller.
Bottom line: Is a seller who has met all your Seller Protection Policy's requirements also protected against chargebacks if the buyer asserts a "quality of merchandise" claim for the chargeback?
Thanks so much for that link! Glad I have the AW box checked to email me when a new posting occurs.
That OTWA discussion board answer that Damon gave is very disturbing about the lack of seller protection.
DAMON: I would have copied your July 13, 2001 answer at OTWA to this post, but I'm not sure if I'd be violating some rule. Please post that answer (or some official terms revision) here so we can all understand this huge loophole in the seller protection program. If all it takes for a buyer successfully to chargeback something is to claim that the "quality" wasn't what he expected, then why would any buyer ever claim anything else??
posted on July 23, 2001 03:08:27 PM
If I read the right thread, it looks like the squeaky wheel got some grease....
PPD can correct me, but my understanding is that PP is the merchant in all these transactions and they or their agent is who shows up on the buyers CC statement. So, if a buyer rightfully or fraudulently files a chargeback, the money comes right out of PP's bank accounts with the same speed as when PP takes it out of the sellers account and with no advance discussion...
The sellers here with merchant accounts can likely expand on this nuance...
The chargeback is a powerful tool which, used responsibly, helps to protect consumers on a multitude of fronts in R/W and online commerce. Unfortunately, those with more creativity and fewer morals are spoiling the party for the rest of us.
Reasonable people, if they have disputes about quality of goods, take them up with the merchant and reserve the chargeback as a last resort to make themselves whole in the event of a misrepresented sale. I use chargebacks routinely in business dealings when a vendor has become unresponsive to my reasonable pleas for redress. Nothing gets their attention better, as has been exclaimed here, than money disappearing out of their account....usually a phone call ensues and meaningful compromise and good old customer service are embarked upon...
As a businessperson for many years, I saw this coming and have never used my PP account. I do believe, as has been repeated here so often, that PP has been very creative in their marketing. I admire their creativity but ulitmately think it will bite them in the long run......most businesses (mine anyway) in the R/W couldn't survive with this kind of word-of-mouth reputation.
I think Damon has made PP's position clear on this issue....the ball is now squarely in our court....
posted on July 23, 2001 03:34:34 PM
Well, Pat, that's the real 900 pound gorilla, isn't it!
Technically, I do believe that all these electronic bill-payment services are the merchants of record when the charge shows up on your credit card. In fact, Yahoo/PayDirect makes it very clear that they do the charging, and that the payment from them to the "recipient" is a totally separate transaction with no chargeback options.
Sound great until you ask PayDirect's bank about chargebacks and are told, "The Recipient of a Payment is responsible if the Payment was funded fraudulently, or the funding transaction is charged back by Sender's credit card company."
So again, who's the "Recipient"? It ain't gonna be deep-pockets if he can help it.
I'm trying to work out the exact phrasing for my auction payment terms that excludes only Paypal credit card payments yet doesn't send potential bidders fleeing into the night.
posted on July 24, 2001 08:44:45 AM
I have been advertising in my auctions "Paypal non credit card only. Exceptions made for high feedback but you must email first." My PP ID is not my auction ID, so I dont get unwanted payments. I did recently get a CC payment from someone who didnt email first, but since he had decent feedback, I let it go.
Just this morning I had a long conversation with the fraud manager at a major bank and just yesterday I had a conversation with a similar person at another bank. It was very depressing. CC rules are so ridiculous that any con man with half a brain can easily scam folks for thousands of dollars with very little chance of getting stopped. This makes even a successful bank robber an idiot. Why go out and rob banks and take a chance on getting shot or arrested when you can steal from the safety and comfort of your own home?
PP is not responsible for the stupidity of the CC rules. They are responsible for providing a false sense of security with their weasely protection policy that protects no one except scammers.
posted on July 24, 2001 09:03:34 AM
Interesting...
The very framers and enactors of such "stupid" laws, if one is to read other threads on AW, are the same ones who are in the pockets of big business.
Now, I would ask myself, why would big business promote legislation that could ultimately return to bite them financially?
Traditionally, businesses, with, for most, their sole motive being that of profit, have been the entities requiring regulation to protect the "innocent" public from their schemes. CC rules were enacted to prevent such abuses.
Of course, "crooked" businesspeople aren't the only ones with fraudulent minds...and, in a society with increasingly lax morals, the average citizen now has much less inhibition against bending and breaking the rules of law and just plain decency.
As in the old addage, a few bad apples spoil the bunch...
I submit that we should more aggresively pursue and punish the criminals and not erode the rights and confidence of the average, law-abiding citizen, whether they be cusomter or business owner. When white-collar criminals stop getting sentences at country club prisons and join the more traditional "prisoners" in captivity, they might give pause to their pursuits.
Also, both business owners and consumers should further educate themselves about fraud, its methods and what the average person can do to try to avoid such occurances in their lives. I submit ignorance is no longer a valid defense.
posted on July 24, 2001 09:23:44 AM
>>I submit ignorance is no longer a valid defense. <<
The problem is that for a seller, there is NO defense.
My feeling is that sellers need more protection than buyers. Buyers can always check a seller's feedback or for diret sales get references, ask the BBB, etc. Just look at some of the buyer complaints on the boards. In almost every one, buyer did something silly, like send a large sum to an unknown seller with low or no feedback. While I don't believe that anyone "deserves" to be ripped off, it is silly to trust an unknown stranger with a large sum of money and then expect PP to cover it. When using a payment service, stop and think for a minute "Is this a seller to whom I would send a money order?" If you can't trust him with a money order, don't trust him with PP either.
Sellers have no way to check out their customers. For a seller to commit fraud, he usually has to get a false address, one of those "quickie" bank accounts and he has to hit and run. Customers can be educated to stick with an established business that has been around for a while, a real email ID (not hotmail or yahoo), someone you can contact and get quick response. If buyers treated their payments like it was THEIR money at risk, there would be far fewer buyer complaints.
For a buyer to commit fraud, all he has to do is use his credit card and claim "quality of goods." It's that simple. The CC company has no incentive to dispute it when they can just charge it to the seller. The CC company will not tell the seller that this buyer has already done this 100 times. The seller has validated the card, shipped to the correct address, what more can he do?
But the problem is even worse. Sometimes the CC companies will do a charge back even when the customer did not dispute it! If the customer has problems paying their CC bill, the CC company will do a charge back just to keep more money in their pockets. If it a mail order or Internet sale where the seller does not have physical possession of the card at the time of purchase, seller almost always loses.
After my eyes were opened, and after three false charge back attempts (which I fortunately won), I cancelled my merchant account. With third-party payment systems, the rules are a little murkier over who is the customer and who is the merchant. I haven't had a problem yet, but when the day comes, I believe I know enough about the rules to make them work for me.
That's a well-phrased PP acceptance term--mind if I end up using a slight variation of it in mine?
Also, if I understand PP's fee structure, you can now revert to a personal account (or establish a second, personal account) and get unlimited payments WITHOUT seller fees as long as the payments aren't credit-card funded...?
Pat--Seems to me the only way out of the chargeback heartburn is to accept only non-credit card payments via PP, and offer Bidpay as the sole credit card option.
posted on July 24, 2001 10:06:27 AM
Be my guest...
I have both a personal and business account. I sell a lot of small items but also digital cameras, where folks want to pay with CC. I send folks the email of my personal account and tell them they cant pay by CC unless they email. Once in a while someone tries to pay for a digital camera with CC but it gets rejected because of the limit. Then he emails and I decide if I want to risk it. So far, no problems. All other payments go to my personal account with no fees.
I also have a 3% handling fee which I charge all my customers (to get around ebay and PP rules) and an equal discount that I give anyone who pays via PP non credit card, check, money order, C2it or achex. It's amazing how many customers love PP and refuse to use C2it until THEY have to pay the 3%. I guess $5 only buys so much loyalty.
posted on July 24, 2001 10:33:53 AM
Thanks guys for keen observations....
Experience is often the best teacher....
Many of my business collegues accept the risk of CC transactions because the payoff in convenience has improved their net bottom line.
I have chosen to forge alliances with these businesses where they handle the few transactions by CC that come my way for a mutually aggreeable profit. Additionally, it promotes contact with my customers from the credit card users, which opens opportunities for additional sales.
This is in the real world (machine work and industrial sales) and my customers (who I've formed the alliances with) are not direct competitors....
I would submit, in my business, that the risks often far surpass those of the online sellers I read about here....we extend unsecured credit on the basis of the customer's creditworthiness and reputation in the business community. These "accounts receivable" have our services and merchandise and all we have is a PO and a signed invoice as promise to pay. I've been very particular about who we do business with and have had very few court actions and collection problems in my business career. However, it is a risk that I must assume to be a player in my marketplace. With nearly 100% of my sales being accounts receivable, my solvency every day depends on my judgement of the customers I do business with.
As was mentioned, one can always choose not to accept CC payments through PP....that is a choice I would heartily recommend. At some point, a balance must be struck between increased sales, competition and collection headaches; each business owner must strike that balance for themselves.
yisgood
I've followed your posts on AW for some time now and applaud you for bringing some sticky subjects to the surface and educating the average user about many of the things people who have been in business for many years have learned from experience.
Keep up the good work!
BTW, what do you think of a policy like Ibill uses regarding chargebacks where they blacklist the credit card for future transactions? I believe PP has a much more lax version of this policy but maybe you can elaborate...
posted on July 24, 2001 01:52:15 PM
>>BTW, what do you think of a policy like Ibill uses regarding chargebacks where they blacklist the credit card for future transactions?<<
This is the merchant's only defense. Several clearing houses have formed which merchants can join for a fee. Merchants report customers who charge back and the cards get blacklisted. If the same person charges back a large amount, the scammed merchants can pool together and hire someone to go after the scammer for fraud. This approach has had some success.
What I dont understand is why the CC companies would want to have a cardholder who causes so much aggravation. Even if it doesnt cost them the charge back, it still costs them time and effort.
>>I believe PP has a much more lax version of this policy but maybe you can elaborate<<
I was surprised when Damon said that if a buyer makes a charge back, his account will not be affected. To me, doing an end run around the service and hitting them with fees should be grounds for account closure. But PP will probably act if the same person does this more than once. Billpoint and Paydirect however, will happilly allow the same scammer to do this over and over for months as long as they can charge back the seller.
posted on July 24, 2001 05:09:45 PM
Yisgood: Why would you be surprised by anything Damon says?
Just a couple weeks ago, over on the other major discussion board, Damon told a seller that, if s/he followed the guidelines, s/he would be protected against a quality of goods chargeback. Later in the same thread, he made a U-turn, and said there was no protection.
To his credit, he actually admitted that Paypal had been deceiving its members about seller protection from quality of goods chargebacks; if only Paypal had been as forthright about all its other deceptions.
Camachinist:
The credit card processing arrangement you describe sounds like "factoring", and is almost certainly a serious violation of your customers' agreement with their merchant services provider. (At least it was when I had a merchant account a decade ago.) If your customer loses their merchant account because they processed charges for you, will they remain your customer?
posted on July 24, 2001 05:23:41 PM
>>Yisgood: Why would you be surprised by anything Damon says?
Just a couple weeks ago, over on the other major discussion board, Damon told a seller that, if s/he followed the guidelines, s/he would be protected against a quality of goods chargeback. Later in the same thread, he made a U-turn, and said there was no protection. <<
I am not surprised when Paypal weasels out of their promises in order to protect themselves. I am surprised when PP protects scammers at their own expense. The TOU states that customers must first attempt to work out disputes with the seller, then contact paypal. So you would think that a customer who violates the TOU and does a charge back immediately would have their account restricted. Sellers get their accounts restricted for far less.
posted on July 24, 2001 06:12:51 PM
Hi yisgood,camachinist,booksbooksbooks;
1. Chargebacks are rare items. There is very little we can do to prevent a user from filing a "quality" dispute.
2. We offer more protection from chargebacks than any service.
3. We offer some level of protection to buyers that no other payment service offers.
4. Account restrictions are rare items, be it as a buyer or seller.
Accepting credit card payments does carry some level of risk. This risk needs to be evaluated by the seller and additional consideration should be given to the benefits of accepting credit card payments.
The Seller Protection Policy is not perfect, but it does offer some measure of removing liability for chargebacks. The issue that we were referencing (messaging)had to do with several factors:
1. Policy interpretation
2. Marketing interpretation
3. Actual enforcement
The issue is in line now and I can only apologize for the confusion that this may have caused.
posted on July 24, 2001 06:34:02 PM
>>1. Chargebacks are rare items.<<
Not any more. Now that the net has let scammers know how easy it is, they are becoming epidemic. And buyers have learned that in "quality" disputes, it is nearly impossible for the seller to defend.
>>There is very little we can do to prevent a user from filing a "quality" dispute. <<
Stop making such grandiose promises that fool users into thinking that if they use paypal they are protected. Stop promising sellers that if they follow some steps, they are protected and then weasel out of it. And stop freezing funds in sellers' accounts and making them jump through hoops every time a buyer makes an unconfirmed complaint. If sellers have to offer proof, so should buyers. And if a buyer violates the TOU by making a charge back without going through PP, that buyer's account should be immediately restricted.
>>2. We offer more protection from chargebacks than any service. <<
Yes, to scammers. An honest seller who plans to stay in business has his account or funds frozen on the word of a scamming buyer. A crooked seller who plans to take the money and run is given 30 days' advance warning and then the buyer is told "too bad, there is no money left in the account. And we won't give you the seller's name and address without a subpoena."
>>3. We offer some level of protection to buyers that no other payment service offers.<<
Yes, if they're scammers and go straight for the charge back. But if they follow the PP procedure, they're told "sorry."
>>4. Account restrictions are rare items, be it as a buyer or seller. <<
Being mugged is also rare, so I guess victims should just accept it when it happens and not hold it against the mugger.
Rarer still is expecting any honesty from Paypal.
posted on July 24, 2001 07:39:05 PMbooksbooksbooks
You pose an interesting point as the CC using customer is the largest bankrupt utility in the US and my customer is one of the largest industrial forklift dealers in the western US...
The answer, likely as not, will be no...
My customer purchases my products and services on Net 30 terms and marks them up for the end user, who is aware of this arrangement and fully co-operates. It is a somewhat strange relationship but one that allows my small shop to econimically deal with a very large coporation on terms that are mutually beneficial.
The rub lately has been when they haven't gotten the few million dollars each day wired to the bank to cover the CC charges, as mandated by the bankruptcy court, and their CC gets kicked back.
I have used this arrangement with other end users as well but it is primarily in place for this one customer. Nearly all of my customers are on net 30 terms but, for a few, the process of issuing a PO for each job is so time consuming that they've chosen to use a CC for small (under 1000.00 last I checked) invoices...
As I've been doing business with both these customers for nearly 20 years, I don't forsee that relationship changing on account of anything related to credit cards....lousy work, maybe
Pat
edited to fix UBB flub
[ edited by camachinist on Jul 24, 2001 07:51 PM ]
