I read your update with an odd sense of déjà vu. Our business had much the same struggle many years ago. We learned our initial lesson when we received a very large web-order from Indonesia for $3,000 in specialty optics. Everything looked fine, but we totally missed the red flags. The buyer contacted us shortly after placing the order to arrange express international shipping. This should have been the first flag. When we quoted the shipping, the buyer showed no concern for the exorbitantly high cost – he was only interested in expedience … the second flag.

Fortunately, the items he requested were special-order. So we got lucky. On the very same day the products arrived in our warehouse, we got the chargeback letter. The (stolen) credit card number the buyer was using actually belonged to someone in the United Kingdom. It was just luck that this particular cardholder reported the unauthorized charge quickly. Had one more day passed, we would have shipped the order and lost everything.

Our initial response was much like yours – stop all international shipping. But we have since learned that was an overreaction. We ship into Canada, Europe, South Africa, Japan, the Middle East, and Australia many times a week, and it has been years since our last international chargeback. But we use extraordinary caution when shipping into Mexico, South/Central America, and particularly the South Pacific Islands.

We no longer accept web-orders for international purchases. Instead, we insist customers contact us via email first. The dialogue that ensues will usually indicate whether we have a legitimate buyer or a potential scam artist. Since many international buyers lack a solid grasp of the subtleties of English, it’s actually quite easy to read their intent in correspondence. If we’re satisfied that the buyer is legitimate (low risk), we provide a secure payment link and allow the order to proceed.

If we are still skeptical, we initiate our high-risk order process which requires the buyer to submit a number of documents before receiving the secure payment link. This usually spooks the scammers – who either don’t have or don’t wish to show the documents we request. Of course, this irritates legitimate buyers, but after a little huffing and puffing, most submit the ID and card scans we request.

So international orders go quite smoothly now – and as much as 16% of our revenue comes from international purchases. Chargebacks just aren’t an issue for the international side of our business. Our issues are decidedly domestic.

On our battlefield, first, is just old fashioned fraud – which we combat with AVS and common sense. When an order looks wrong – it usually is. We too will cancel suspicious orders. Most of the time we’re right and we never hear from that buyer again. But if we’re wrong, a little dialogue with the customer usually resolves our question marks and we reinstate the order without too much drama.

The second is customer service related. As a sporting goods retailer, we have our fair share of customer service issues (broken items, lost shipments, etc.). Most are easily resolved with a little time and patience. But now and then an order “goes ugly” and simply cannot be salvaged.

In our industry, we have a unique problem. I won’t explain all the particulars, but basically the specialized equipment we sell is quite susceptible to human error. Basically if the user doesn’t follow the instructions, he can damage the product. So when user-error comes into play, it goes one of two ways. Either the buyer is honest and we arrange appropriate non-warranty repairs, or the buyer lies and tries to leverage free replacements and/or free repairs via the classic “wounded customer” routine.

This is where things can go south. In spite of our best acts of diplomacy, sometimes we reach an impasse with a customer. Nobody like to pay for repairs. Nobody like to admit they screwed up. And nobody likes to get caught up in a lie. So now and then we run into an unwinnable situation.

And when I say unwinnable .. I mean the rules are written so we cannot win. The language used is very specific, “The customer isn’t benefiting from the product.” THAT’S the standard by which such disputes are adjudicated. The technical fine points and such are irrelevant. Even if the customer blatantly ignores warnings, instructions, directives, misuses a product, etc. … it’s irrelevant. If it can be determined that he customer isn’t benefitting from the product, a chargeback is warranted and we lose.

Fortunately, chargebacks for all reasons are an infinitesimal expense in the bigger scheme of things. We spend 10X more money on stamps than chargebacks cost us in a year. Nonetheless, after 11 years of being a merchant, I still cannot get over the moral outrage. A chargeback automatically sends my blood-pressure through the roof … not because I’m worried about the money, but because it’s so maddeningly unfair.

And then I remember that’s it’s just politics – poor little consumer vs. big greedy company. We aren’t supposed to win a chargeback. The consumer is. So maybe everything is right in retail world. I just have to get use to it.

I’m glad to hear your chargeback problem has improved. But don’t let your guard down too far. No matter if you’re right or wrong, the system still works 100:1 in the cardholder’s favor. And one day, just when you thought you had it all under control …

Mike

However, I don’t how it would have turned out if the customer initially claimed they didn’t receive the items (it’s hard to do after 5 months though).

But keep in mind, this isn’t about who is right and wrong. Forget about that. It matters not. This is a very old philosophical battle: rich vs. poor, David & Goliath, redistribution of wealth, rich man and the eye of the needle, etc. Call it what you want. Chargebacks give the consumer more power and create a vehicle for moving consumer debt onto corporate balance sheets as operational losses (redistribution of wealth). Make no mistake. The law was designed to do just that.

Unfortunately, many consumers are learning that they can exploit these rules into a “get something for free” program. And it WORKS! If you look at the list of chargeback codes, it’s clear that a clever chargeback bandit could generate any number of false claims to procure free merchandise. It’s not even the least bit difficult – and it’s basically legal. All the chargeback bandit has to do is generate a glitch in the system of proofs, and the deed is done.

Here’s a quick example. If you would like a new laptop computer, the chargeback system will provide that for you. It’s easy. Just find a popular internet store and order yourself the best laptop they have. Be sure to get the whole works with extra software and accessories. Remember, this is going to be free.

You’ll need to be smart about a couple things. When you place your online order, don’t give them any red flags. Make sure the billing and shipping address match and that they are AVS accurate. If the merchant calls to verify your order, tell them the order is valid and you’re looking forward to your new computer and make small talk. Nobody at the computer store will think anything is amiss.

Now … when the items ship, pay attention to your tracking numbers. FedEx and UPS will always give you an estimated delivery date. So watch it carefully so you’ll know just what day to expect your merchandise. On the day your laptop is due to be delivered, make sure someone besides you is home to sign for the package. And ask them to sign hurriedly and sloppily on the screen and accept the package without being memorable. In most cases the driver will not even ask for the signer’s name, and they certainly won’t ask for ID. The driver will go on his way to the next stop, forget about you and your package, and your new laptop is almost free. You just have a few things left to do.

Wait about 10 days after delivery and then send an email order status inquiry back to the store. Tell them that you ordered a laptop 2 weeks ago and you haven’t received it yet – and ask about why your package has been delayed. Say you never got their emails. Be sure to keep this email correspondence from here forward. It will be your supporting document later.

The store will tell you that your package has already shipped and was signed-for at the point of delivery. Seem surprised and explain that you hadn’t signed for any packages. Tell them you haven’t received anything. At this point the store will know they’re about to get screwed, so expect them to get snippy. If they insist delivery has been made, ask them who signed for a package (information they probably won’t have or won’t be able to read). Whatever they say, just respond by saying you don’t know that person.

Suggest that the package might have been misdelivered to the wrong address. Explain that you weren’t home that day, etc. Be polite and patient. Ask that they send you a replacement order – since you still need that new laptop. Ask them to put a “tracer” on your order. Seem like you are genuinely working with the retailer to resolve the issue.

At this point, one of three things will happen: the retailer will refund your purchase, the retailer will replace/reship your purchase, or they will “investigate” your claim and ultimately deny it. If the retailer gives-in easy, you win … you get a refund, or they reship your order (which you will accept and then later return for a refund).

Sometimes a retailer will do a package trace with FedEx or UPS. They may actually send the driver back out to verify where he delivered the item. Of course, by now over 2 weeks has passed. So the driver really won’t remember the particulars. But of course, FedEx and UPS drivers obviously won’t admit any fault, even if they delivered the package to a dumpster. As expected, they’ll claim your laptop was delivered to your address. But what’s funny – is that doesn’t really matter.

Once the retailer denies your claim and sticks to their story that the package was delivered, continue to deny receipt and do your “wounded-customer” routine via email (you don’t appreciate being called a liar, you’ll never do business with them again, you’re going to report them to the BBB, etc.).

Now you’re ready to call your credit card company. Simply tell the story. You ordered some equipment, you were charged for the merchandise, and you never received it. Tell them you have all the documents and emails to show that you did everything you could to resolve the issue … but the retailer refused to help you. Get it? NOW you’re the poor little victim of a big greedy corporation. The rest is just protocol.

Since YOU didn’t sign for the package and you don’t know who did, the game is over. You win. You’ll be asked to sign a couple documents and submit your supporting evidence, but the fact that you didn’t sign that little FedEx/UPS electronic scanner will be the key. Your bank will take your side (you are THEIR customer). The mystery of the lost/misdelivered/stolen laptop will just have to remain a puzzle. You get the money and the merchandise, and all it cost you was a little of your time.

While you were busy defrauding this company, Visa and Mastercard were standing by to help you, thanks to liberal legislation. After all, you’re the poor little consumer.

We had similar problem, with “fraud/does not recognize” chargebacks.
So we changed the sales tactics. What we did is we enrolled in Verified by Visa/MasterCard SecureCode programs. During the “enrollment validation”, if the card is not enrolled in the 3D program – we deny the transaction, asking to use a different card.

Results: not even a single fraud chargeback. There were few people from Italy stating they have not received the stuff, however Fedex proof of delivery was sufficient to prove that services were rendered.

Hope it helps!

Thanks for the comment. I’m sorry to hear about your chargeback experience. Unfortunately it seems pretty in line with what we’ve experienced. I don’t know how much you’ve clicked through some of those posts just above your comment, but we eventually did away with international shipping for the same reason. While it sucks to not be able to fulfill orders to a customer who wants to pay you, we just had too many issues with too high of a percentage of orders for it to be worth our while to continue on with it.

Adam

I am in the US and the customer was Canadian. The Chargeback processor said “MasterCard does not recognize AVS for international cards”.

There is no recourse except to stop accepting International Credit Cards for us.

We have won chargebacks but only when we shipped to a USA address.

It is unfortunate that we can no longer ship internationally but we can not continue to stay in business when the consumers learn to say “I did not authorize it” even though they paid custom fees on a large order they did not authorize. How totally disappointing.