I cannot stress this enough.

If the company continues to receive chargebacks claiming fraudulent charges (which this really does appear to be) they will find themselves in a difficult place with card processors.

Some processors drop clients if they crack 0.5% a chargeback rate.

I have no idea how complicated this is, but with 76 million in funding, what are the chances they found a way to process credit cards them selves?

Zero.

The credit card processing chain is quite complicated, with banks, card companies, ISPSs, processors and merchants all having fairly clearly delineated roles. A merchant - no matter how big - implementing the whole chain is unheard of.

Visa, MC and other cc companies care a lot more about their reputation than they'll even care about a company like this.

Much larger fish have been put on the bbq over less substantiated claims of fraud.

Hasn't Amazon implemented their own?

Do you have an amazon credit card?

As far as I know they use GE as the issuing bank, they may have other deals in place.

As far as I know - but this may very well be wrong or at least out of date - amazon does not have a banking license and the network used is VISA.

This seems to confirm that:

http://www.cardhub.com/d/amazon-credit-card-1015c/

I've got an Amazon credit card (in the UK) and it's a Mastercard run by MBNA.

I would guess Amazon have looked at replacing as much of the payment chain as they can and done the parts that are profitable to replace. But they have a long way to go before the enormous hassle of becoming a bank is going to be attractive and possible.

It's not nearly enough. Some major conglomerates (If I recall correctly then GE, GM, Samsung and others) do stuff like that in-house by creating bank-subsidiaries in their largest markets, but I'd guess that it would be reasonable at 78 billion revenue, not 78 million.

And even then that's not the whole chain. After all, a GE capital card is backed by another card company:

http://www.gemoney.com.au/en/credit_cards/index.html

Piss off VISA/MC/JCB/AMEX and you're in trouble.

That's just to become an acquiring bank, to save on exchange fees.

Ultimately VISA determines who gets to participate in the VISA credit exchange network and will fine acquiring banks who participate in things like this. No one can force their way in and avoid responsibility -- period.

Even worse are scams that look like a free service (doing stuff like horoscopes) but require you to enter an address and then send you a bill for a 12 month subscription, and threatening legal action if you don't - quite common here in Germany. There's actually new legislation since July that requires all online transactions to explicitly say there's a fee right on the confirmation button, otherwise they're not legally binding.

I definitely second this. I used to work a children's website, where kids would often take their parents' credit card and make purchases, and we'd inevitably end up with many chargebacks (even though we offered refunds, many people went straight for the chargeback option instead of contacting us). The chargebacks not only cost the company extra - even if the company wins the dispute - and if chargebacks happen too frequently, banks may shut down the account.

I have also won 3 chargebacks against companies who never delivered their product or used deceptive practices. The process was not too difficult, and I believe the CC companies tend to side with the consumer. Verdicts on the disputes can take several months to process though.

That's pretty accurate. As far as the verdicts are concerned, yes, they can take a while to process but if a company gets a negative reputation the process tends to be expedited considerably.

Don't forget that doing a chargeback doesn't absolve you from having to pay for services you've legitimately signed up for, it just denies the parties the convenience of settling through the credit card companies.

They can take you to court for breach of contract, and if (IANAL) the subscription contract is found to be legit, you have to pay + fees.

That is true in theory, but in practice, especially in situations like this that does not happen.

For that there would have to be a much more transparent sign up process and actual delivery. Non-performance is not a good basis to start a law suit, especially if you're on the non-performing side.

I agree, but the GP made it sound like a get-out-of-jail-free card.

Well, it's sad in a way but there are consumers that use it exactly like that. They order stuff and then charge back the money in the hope that the merchant won't care enough to fight the chargeback, which can cost a multiple of the original transaction.

Most large merchants have risk mitigation strategies that attempt to detect this before a charge gets processed and goods are shipped but that's a less-than-perfect mechanism.

They'll argue you checked the checkbox. You'll argue you didn't. It's their word against yours and they will lose, because they can't prove you actually checked the checkbox.

First: You're in court. That's a whole lot more than you bargained for.

Second: Are you a lawyer? Is that the guaranteed outcome of such cases? Will it really carry no weight that they can (probably) substantiate their claim that you checked the box with a technically sound argument that their website actually works? A manual release test plan, unit tests, cucumber scripts?

That one, single checkbox, and the fact that you have to manually check it, is the legality upon which the entire business hinges. Especially if they're a little shady, they'd be sure to have their stuff in order around this.

The first is certainly true, but won't happen if they are bound to lose.

I'm not a lawyer, but I am a programmer. I would never swear that my software works so correctly that I will use the actions of the application as proof that a user did check a box. If he claims he didn't, well, he just may be right. I've seen enough weird things happen not to trust any software to behave correctly all the time.

Now my technical reasons may not be relevant for a judge, but I doubt judges are very trustworthy of technology (they should have heard plenty of cases where technology failed and they will be users of all kinds of awful consumer technology, that sometimes, suddenly fails for no clear reason) and won't think favorably about a company with these kinds of practices. Perhaps I'm naive, but those things combined will lead a judge to believe you over the company.

  That one, single checkbox, and the fact that you have to
  manually check it, is the legality upon which the entire
  business hinges.

It can be entirely legal, while at the same time anyone that claims otherwise should immediately be refunded and let go. In fact, it would be smart to do that, as it prevents bad publicity. Any user that is dissatisfied should be compensated and should be free to leave, always. That saves money.

How hard can it be to retain this data upon registration? Site operators would be insane not to. It's one bit per user in a database: Checked box or not?

However, be careful and only do a chargeback when you are sure you never want to deal with that merchant again. Many will blacklist you if you do a chargeback, because of that high chargeback fee (which they have to pay even if they have sufficient documentation to successfully fight the chargeback).

I'm kind of surprised no one has started a service for merchants to warn them of chargeback prone customers (there are people who go straight for the chargeback without even trying for a refund first).

> I'm kind of surprised no one has started a service for merchants to warn them of chargeback prone customers (there are people who go straight for the chargeback without even trying for a refund first).

There are plenty of such services. You don't see them because they don't normally operate on the merchant level, they operate on the IPSP / processor / card company level.

The reason why they don't usually operate on the merchant level is because that would allow a merchant to pollute the pool with their 'known good' cards to stop people from buying a product with competitors. You have to wonder when you buy this information as a merchant whether it is clean or not. But when an IPSP / processor or card company uses their aggregate knowledge then it starts to be really useful.

You can do AVR checks and so on all by yourself as a merchant but most if not all reputable IPSPs will have an anti-fraud system in place that does all kinds of checks.

There is a service that warns merchants of fraud-likely customers. Precharge. I was surprised to not see it anywhere on HN to date.

You can learn more at http://precharge.com/guaranteed_chargeback_protection/

Essentially you pay Precharge to qualify the customer and if it passes their fraud checks, they will reimburse or fight the chargeback.

They might be maintaining their own repository of problem customers here: http://www.chargebackfile.com/

Hope this is helpful to anyone considering mitigating chargeback risk.

Look into MaxMind MinFraud. In addition to providing a 'risk score' for your online orders, it's also a kind of collective blacklist like you described. Any MaxMind customer can report an IP or e-mail address as associated with a fraudulent order, and any other MaxMind customer who recently scored an order with the same IP or e-mail gets a warning about the increased risk.

There was one, it was called BadCustomer. I don't think it's around any longer, since the people running were running shady rebill scams like Fab.

Also, if 1-2% of your charges through a merchant result in a chargeback, the merchant will drop you completely. However, a good scam company will have a few merchants lined up just for this reason.

> the merchant will drop you completely

You mean processor/bank/merchant account, not merchant. In the parlance of the payment industry justfab is the merchant in this story.

And yes, there are scammers that have processors / banks lined up but they burn through them at a rate of about 1 every 8 weeks or so, and each time that happens they forfeit a large amount of cash. There are not that many merchants willing to play the game that way.

50 chargebacks or 0.5%, whatever gets hit first and you're in trouble. Reputation damage to the CC companies and you're out for good. Merchant account hopping is not a long term viable strategy.

Another little known fact about chargebacks: You lose some of your rights if you pay charges before disputing them.

Try it, absolutely still try it, and good luck!

That's nonsense. The only time a chargeback makes sense is after the payment has already gone through.

Nonsense? You're a real charmer, tisme.

There's a bit of mis-information here.

First, while credit card companies and banks can chose to honor disputes of any age, your rights under the FCBA protect you for only 60 days -- and the FCBA doesn't apply to debit cards at all.

My tip -- that you should never use a debit card and with credit cards you should dispute charges before paying the bill -- is correct in spirit but not in the letter of the way I worded it, so mea culpa on technicalities but the point is correct. The FCBA only grants you 60 days to dispute a transaction (after the statement cut, not the transaction itself).

Also, CC disputes have some consequences. Companies aggregate & share lists of customers that have charge-backed. Finding yourself on the list can see you turned-away from legitimate, good businesses that have to protect themselves against dispute-prone customers.

He means after you've paid your credit card bill with the included charges on it.

I see 6 month chargebacks on a regular basis (dealing with consumer fraud is fun), so these definitely happen, they're possible and if consumers can do it when they are the ones defrauding the merchants there will be a lot less trouble when it is the merchant doing the defrauding.

In many cases the cc company debiting your checking account is automated and there is no step for you to verify other than to periodically go through your statements to see if you have taken on any ghost charges.

What the parent meant was "after you paid the bill". It's hard to go back later and say the charge was fraudulent after you received the bill and opted to pay it. In theory, payment = acceptance of charges.

Theory doesn't matter much here. Especially not with automated debiting of checking accounts to pay the balance or some amount of interest or a combination of those.

As a customer of the card company you have the right to dispute charges as far back as you want, whether they'll honor that or not is a different question but typically up to 6 months in a card-not-present situation should give you no problem at all. And once the complaints about this company start rolling in it will get even easier.

Mass chargebacks are a very powerful weapon in the hands of organized consumers.

> It's hard to go back later and say the charge was fraudulent after you received the bill and opted to pay it.

Not when it's lumped into a single balance that you pay significant monthly interest on.

This is the best suggestion, but unfortunately may not be possible for them to recover everything depending on how they paid/their credit card company. Most banks only allow you to do a chargeback for charges within the last 1-2 months on debit purchases and 6 months on credit card purchases.

Do the 1-2 month chargeback, and then when you've got that, take the company to small claims court. The chargeback may bring you extra weight (or not, IANAL).

Banks and, at least VISA, are not as quick to do chargebacks they used to be. Now, they'll only do them if the customer says their card was stolen. Found this out when my mother was scammed by a moving company for the 50% deposit (company never showed). She called the number on the back of the card to dispute the charges (I believe its the bank's customer service number, not VISA's). But the bank told her they couldn't reverse the charges since she was the one who authorized them. To get her money back, she'll have to take the moving company to small claims court.

I have used AMEX since the last 9 years, precisely for things like these. They are REALLY good at processing disputes and chargebacks, and in the last 9 years, there has never been a time when I 'lost' a claim against such fraudulent charges (I've had around 5 such claims).

On the other hand, both Visa and Mastercard are pretty much useless to 'protect' you against charges like these.

Debit cards (which from the way you're talking about a bank it sounds like this was) are like that. It's why your best practice is to always use a credit card when buying things (it's not like it costs you anything, as long as you have the discipline to not run up a bill you can't pay).

(disclaimer: I'm not from the US)

There is a huge difference between a card present, authorized charge and a card-not-present unauthorized rebill.