The Expert Podcast

If you are business or merchant you may have seen lately. That the number of credit card disputes or chargebacks, how's it going up? Every business occasionally gets a dispute or a credit card charge back. And some of these are legitimate Some of them are people that had their credit card stolen. Sometimes there are people who, bought a defective product, but more frequently…The credit card companies and the banks are seeing. Come customers actually. cheating businesses according to this article…disputes are on the rise. As consumers cheat businesses How is this happening What is happening? In the business this is called friendly fraud. And it's up 20 to 30. in the last year. This is coming from visa. Chief risk officer Paul Jabara Barra…business or dealing with a slew of challenges You know you have supply chain and inflation, but. Friendly fraud is when a customer buys something from your business. And then does a dispute on that payment. And the dispute is considered to be not legitimate meaning that they actually got the product. It's. As it was described. But they just have some problem or they just want to get something for free. And they figure I'm just going to do a charge back and get something for free. And that category is intentionally spending money with the intent of disputing the charge after the fact…In one example somebody interviewed for the article was a guy who has a restaurant. He's experienced a 30% increase in disputes costing thousands per month. It's brutal. Because people will go they'll eat out they'll order a door dash or Uber, and then dispute the charge…When a merchant does fight back against the dispute. They typically win about 40% of the time. Depending on the nature of the charge back. So if you're a merchant. What do you do? Well the main thing to do is make sure that you're eliminating the easy chargebacks, making sure that it's not out of a mistake. Sometimes if the customer doesn't know the name of your business They don't recognize it on their credit card statement They're going to dispute it They're going to say I don't know this company, maybe it's your. LLC name on the credit card bill but your DBA name is on your store Let's say it's, you know Joe's, baseball cards on your store, but your. Your actual company name? Is, you know Joe investments LLC. Well maybe they don't recognize that name. So that's one way to make sure you eliminate it also. Be very cognizant of customer inquiries and complaints If a customer complaints about something or they say I didn't get my product or it was no good or the wrong color address it. You don't necessarily have to refund it or you know, Fall over for a request but just at least address it. A lot of chargebacks come from somebody who just. feels like they're entitled to take something from you for free because you didn't handle their customer response properly or you were mean to them or you were rude or you took too long to reply. So make sure you have good customer service, also make sure that the description of your product. it doesn't leave anything to the imagination So you describe exactly what they're getting You don't want to leave anything to chance. one of the things we saw in. some…notices from the federal trade commission is. Merchants are responsible for the cognitive. Defects of a customer. So if your customer is cognitive, defective and can't understand what they're buying. They can charge back and they win. Your fault for not describing it properly. Right. So make sure it's very clear Your terms and conditions are clear Your product is clear. And you may still have some charge backs when that's the case have good documentation. Put together. The receipts put together the shipping put together the proof that you did business with that person. And also. Look to contact the consumer if possible. Hey, I noticed you did a dispute. We'd like to hear more about it. here's the evidence we have looks like you bought the product. We have a, email from you afterwards saying, how do I open this box Or how do I assemble this So it looks like. We have the records. what gives? Sometimes a Consumer. Isn't aware that when they do a dispute or a chargeback that it comes out of your pocket the merchant sometimes they think the bank just pays it and you just got you still have your money. Right. Many consumers don't know that the money comes out of the pocket of the merchant. They think that the bank just writes it off and they eat it and everybody's happy So they don't think there's a victim. If they know that you as a store. Are losing that money. Sometimes they'll back off and you can ask them Hey can you, can you withdraw? Your dispute here you know here's the information. in some cases we've had clients that have actually. taking legal action. It's a, it's an extreme step. But, you know if you have a, a consumer that purchased something from you that. You legitimately sold fair and square and you know that they have it And you know that they're just trying to get something for free. We've had clients take legal action Again get good advice from an attorney before you do that. But be aware as a merchant If you haven't seen it yet, you may see charge backs and disputes increase over the next year. More consumers are under financial pressure with inflation and maybe job loss where consumers. Are trying to recover some of that. Anyway they can, and you might be an easy target because once they hear about a charge back. They know that it's a way for them to put money back in their pocket.