What Legal Power Do I Have Over False Credit Card Disputes?

[Owen]

Since my company's main payment method is credit cards, I'm scared someone is going to pay someone using a credit card, then dispute the charge and get all their money back. Is there anything I can do to prevent this? What legal power do I have over this?

[turboguy]

It doesn't happen that often Owen. I think in the millions of dollars we have accepted using credit cards we have had 2 disputed charges. The last one the customer wanted to return a purchase. We took it back and sent a check for a refund. He filed a claim with the credit card company saying he had not received his money. We had about 3 things we had to fill out with the credit card company and to send a copy showing we had sent a check and he had cashed it and he was denied.

I would not worry about it as long as you are legitimate and not trying to rip people off which I am sure is the case.

[Harold Mansfield]

Since my company's main payment method is credit cards, I'm scared someone is going to pay someone using a credit card, then dispute the charge and get all their money back. Is there anything I can do to prevent this? What legal power do I have over this?

I've had it happen to me by a lawyer out of New York to the tune of $3k via Pay Pal, and I found out that there's nothing you can do about it. The credit card company is going to take the side of their client no matter how much evidence you have in your favor that they are telling a bold faced lie. This is especially true with digital products and services.

In my case I was somewhat lucky in that Pal Pay agreed with me. Even though they had no power to deny Master Card the money, they ate half the cost with me.

Your legal recourse is to take them to court and sue them for the money.

If you are talking about physical products it may be easier to defend yourself with shipping receipts.


If you're in business it's going to happen at least once to you. That's just how it is. There are unscrupulous people out there. Prepare for it. Don't take more in online payments than you can sue for in small claims court. Have a terms of service.

Other payment methods may offer better protection against charge backs like checks and wire transfers. Then they have to sue you to get the money back, they can't simply make a complaint with their credit card company and screw you without your input what so ever.

[Owen]

I've had it happen to me by a lawyer out of New York to the tune of $3k via Pay Pal, and I found out that there's nothing you can do about it. The credit card company is going to take the side of their client no matter how much evidence you have in your favor that they are telling a bold faced lie. This is especially true with digital products and services.

In my case I was somewhat lucky in that Pal Pay agreed with me. Even though they had no power to deny Master Card the money, they ate half the cost with me.

Your legal recourse is to take them to court and sue them for the money.

If you are talking about physical products it may be easier to defend yourself with shipping receipts.


If you're in business it's going to happen at least once to you. That's just how it is. There are unscrupulous people out there. Prepare for it. Don't take more in online payments than you can sue for in small claims court. Have a terms of service.

Other payment methods may offer better protection against charge backs like checks and wire transfers. Then they have to sue you to get the money back, they can't simply make a complaint with their credit card company and screw you without your input what so ever.

Ugh :( I'm sure there's some sort of company that does stuff like this...

[Harold Mansfield]

Ugh :( I'm sure there's some sort of company that does stuff like this...
There are many people who play this game. They don't abuse it so that it establishes a pattern, but for some people doing it once or twice a year to screw some little guy out of a few hundred or few thousand dollars is just business as usual.

[Owen]

There are many people who play this game. They don't abuse it so that it establishes a pattern, but for some people doing it once or twice a year to screw some little guy out of a few hundred or few thousand dollars is just business as usual.

No no no, I mean a company that manages financial payments for credit cards and will handle all problems with false disputes.

[Harold Mansfield]

No no no, I mean a company that manages financial payments for credit cards and will handle all problems with false disputes.
They are not on your side. They are on the card holders side. And with digital goods and services, you as the service provider will always get screwed by the card company. They aren't looking at their card holders to see if they're being dishonest. Their job is to make you out to be dishonest.

[Owen]

They are not on your side. They are on the card holders side. And with digital goods and services, you as the service provider will always get screwed by the card company. They aren't looking at their card holders to see if they're being dishonest. Their job is to make you out to be dishonest.

Ugh stupid credit card companies >_>

[Harold Mansfield]

Ugh stupid credit card companies >_>
Yes, they are. And they spend a lot of money in Congress to get and keep the laws on their side.

[Owen]

Yes, they are. And they spend a lot of money in Congress to get and keep the laws on their side.

I don't understand how lobbying is legal.

[Harold Mansfield]

I don't understand how lobbying is legal.

That's a whole 'nother very long discussion all together.

[Owen]

That's a whole 'nother very long discussion all together.

We all know why it's still legal, it's called Congress doesn't want to start loosing money. No lobbying, no money.

[tallen]

Essentially there are two types of merchant credit-card transactions: card-present and card-not-present. There are also multiple parties to the transaction: the card holder (customer), the card-issuer (customer's bank), the card network (clearinghouse), the merchant's card processor, and the merchant (you).

The card networks set the rules on the types of transactions that they allow and how they should be handled. You want to make sure that you are aware of those rules and that you are operating within bounds, and then you want to make sure that you are working with a processor that's got your back.

If you deal with your customers in person at the time of the transaction, you have swiped the mag stripe of the card or communicated with the embedded chip on the card, and you have their signature and/or PIN. It is harder for customers to dispute these charges. I suppose you could run into problems with stolen/fake cards, so you want to make sure you are following the appropriate protocols to avoid those problems.

It's the card-not-present transactions (e.g. phone or online) that are more problematic. If you as the merchant are keying in the card data (ie. from taking phone orders) or are accepting the card data from the customer (i.e through your own website process) and then passing it on to your processor, you not only are paying a higher rate on that transaction, but you also have no protection from a chargeback. You also have to worry about PCI compliance, etc... Rather, you want to set up a procedure where your customer keys in their own card data themselves directly with your processor. Paypal, Square, and likely others, have ways to do this (e.g. invoicing through the processor). But not all processors are the same in terms of the protections they provide you the merchant. Paypal states up front that they do not cover you if you are providing services rather than goods. I think Square is better in this regard, although I haven't had to test it yet.