I received a telephone call from a friend recently to tell me that she had just turned away a sale on the phone. The shopper that had called in had placed an order with her company before and while she was placing their new order she noted that this particular shopper had done a charge back on their last order. A charge back is when a credit card customer disputes a charge on their credit card with their bank and the bank then disputes the charge with the retailer and unless the retailer can provide real tangible proof that they shipped an order to the card owner then the retailer is charged a fee, sometimes as much as $75, they get a warning from their payment provider (too many and you lose your merchant account), they lose the sales revenue, the shipping revenue, and they also lose the goods and the shipping cost to the 'shopper'... so charge backs are bad and merchants take them very seriously (and personally). So, knowing that this particular person had previously done a charge back she stopped the call, asked the 'shopper' to hold for a moment and went and got the owner. The owner verified the shopper's information and then stopped the order and told the customer that he was not welcome to buy from them any more due to his previous charge back and he ended the call.
This was a case of, "fool me once, shame on you, fool me twice, shame on me". I suspect the caller was shocked. If the caller was a scammer then he might try again and next time their fraud rules should catch him (assuming he uses the same name, address or credit card) but if he doesn't then at least he knows that this friend of mine won't put up with it, nor should they.
For those of you who do not have a way of flagging problem customers you should at least keep a "watch list" of shoppers (I hate to call them customers) who have initiated a charge back against you so you can block them or challenge them. Obtaining the credit card's card verification number is an effective, but not fool-proof, way to protect yourself from this. You should also verify that the shipping address is an approved address for the card holder to avoid them disputing the delivery to someone else and you should, where possible, always obtain a signature. I know in one case the courier did not obtain a signature, even though it was requested by the merchant, and the merchant was able to pass the charge back cost on to the courier company.
One question I was asked when writing this is, "How did your friend know about this person's previous charge back?". Our software has two mechanisms for protecting merchants from this... I didn't ask which one helped in this scenario but one of them did and I was happy to hear (and share) her story.
Do you have an e-commerce charge back story or want to know more about preventing and blocking repeat charge backs? Email me, chris@xmodus.com.
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