Avoiding Chargebacks & Fraud and defending if you do get them

Please find a “credit card authorization form” to be used whenever you think it’s warranted for extra security as for example large orders, new customers you don’t know and if the email address doesn’t match the person’s name. Also for mail order merchants beware if cardholder communication has misspellings and/or bad grammar. If they give you more than one credit card this is also a red flag.

I hate people that do identity theft and cheat merchants. Don’t forget if you are suspect of a transaction to

-make sure the avs and cvv match
-have them sign a cc auth form (attached) and provide a copy of their driver’s license and front & back of cc
-Also call the purchaser’s phone # to confirm the order. You’d be surprised that 90% of the time the phone # is phony and/or disconnected
-also call the issuing bank phone # on the back of the cc. Surprisingly the phone # usually doesn’t match the name of the issuing bank on the front of the card
-google the email address-often fraud will show up in regards to that email address
-make sure you ship to the address you did the AVS check on and get a signed proof of delivery or signature at will call.
-google the purchaser’s name, address & zip to see if it matches and if any fraud shows up.. It will usually show up and oftentimes give you business and other info besides verifying the name & address.

Also use http://www.whitepages.com/person

More below
For looking up a person by name to see if info they gave you matches

http://www.spokeo.com/ This service is free but for only $2.95 per month you can get a much more detailed report.

For looking up location of sender’s IP Adress

http://www.ip-address.org/

How to find sender’s IP Address

http://www.ip-address.org/tracker/trace-email.php

For my ticketbroker clients eTickets comprise the vast majority of chargebacks due to fraud and reneging cardholders. I advise to do Will Call whenever possible as crooks don’t want to show a picture id and sign. Plus most stolen cards are electronic and not wallet theft and they don’t have the physical drivers license, etc. If you do an eticket and its a stolen card there is unfortunately no recourse (personally I think the card issuing banks should eat the charge not the merchant) If dealing with a disgruntled cardholder doing a chargeback make sure your website has a “clickthrough” page that shows your terms and refund policy and the cardholder has to click “agree” to proceed to purchase. If there is a chargeback make sure to send a copy of that page with your reply. If the customer is coming in to pick up their order and you have already charged the card have a manual imprinter and have them sign a cc receipt. Your best chance for chargebacks is with Amex who usually side with the merchant. With MC/Visa you are at the mercy of erratic issuing bank staffing that is often inexperienced and who may make emotional decisions.

IRS says no merchant fees for 1099-K reporting: Who’s listening?

Some of the biggest payment processors in the United States are assessing new merchant fees related to compliance with section 6050W of the Internal Revenue Code (IRC). However, the Internal Revenue Service indicated charging merchants for production or verification of taxpayer identification numbers (TINs) and business names, or for processing and filing 1099-K forms, is not allowed.

The IRS seeks to collect as much as $9 billion in new revenue as a result of new reporting requirements contained in The Housing and Economic Recovery Act of 2008. The act is designed to help the IRS detect fraud and identify revenue. The IRS rule implementing section 6050W shifts the merchant income reporting burden to acquirers.

“Payment processors will need to integrate tax reporting into their customer facing applications,” said The Fraud Practice, a risk management solutions consulting service in a December 2010 white paper. “They will have to change the way they collect and authenticate account holder data, they will have to set up customer service support for tax related inquiries and they will likely have to change the fundamental way they look at account holders.”

Under section 6050W, payment processors and, by extension, ISOs must have valid TINs and business names for every merchant they service for processors to file the newly required 1099-K forms for their merchants in 2011.

The 1099-K is used to report the gross amount of payment card transactions to merchants and the IRS. If an invalid TIN or business name is submitted, the IRS will issue a backup withholding notice (B Notice) rejecting the 1099-K submission. If the B Notice isn’t corrected in 30 days, the merchant is liable, and the processor must withhold up to 28 percent of the merchant’s payments. Processors must also make certain the new information they are required to collect is secure.

“Merchants and consumers will ultimately pay for this,” Security Metrics President Brad Caldwell said. “The problem is when you submit the DBA or TIN information, you don’t know what is wrong until something is wrong. The forms are just rejected. They don’t say why. The process is costly. … This is going to cause a lot of grief to merchants.”

Can’t pass on costs

The IRS seems clear the law does not allow processors to recover costs related to 6050W compliance. In a frequently asked questions publication issued on the topic in July 2011 (www.irs.gov/pub/irs-utl/irdm_section_6050w_faqs_7_23_11.pdf), the IRS posed the question, “Can the parties responsible for filing the return pass the costs of collecting and processing the information on to their clients?”

The answer: “No. Because federal law requires payment settlement entities or electronic payment facilitators to file information returns and to furnish payee statements, such entities are precluded from collecting fees for costs incurred in fulfilling these requirements.”

An IRS agent stated on background the IRS believes this prohibition is contained in the broker requirements of IRC section 6045, a reporting rule covering real estate brokers. “The regulation makes really clear the broker can’t shift the financial burden to people making the report,” he said.

Some believe the IRS’ position is not a formal ruling. “The IRS commented informally that you can’t charge for TIN matching,” Electronic Transactions Association Director of Government Relations Mary Bennett said. “There are a lot of other components that go into this outside TIN matching. There is the ISO’s relationship with customers and other business costs associated with TIN matching.”

Still, Paula Porpilia, a TIN compliance consultant and member of the IRS Information Reporting Program Advisory Committee, confirmed “the IRS doesn’t believe processors will be allowed to charge for these services.”

Companies passing on costs

According to First Data Corp. spokesman Andy Payment, First Data has instituted a new fee for a Regulatory Product Bundle. “The fee is for a new suite of services related to IRS 6050W regulations, as well as proposed legislative changes, which encompass much more than processing the 1099 forms,” Payment told The Green Sheet.

First Data pricing is tiered from $3.95 per merchant per month for acquirers with one to 2,500 merchants to $1 per merchant per month for clients working with more than 10,000 merchants.

Sage Payment Solutions President Greg Hammermaster said his company has an optional service to help merchant customers with 6050W compliance. “While we recognize that merchants can monitor their own usage, Sage is providing an optional service for those who prefer assistance,” he said.

“The service monitors merchant activity monthly and confidentially reports to them their gross transactions so they can prepare their 1099 submission when needed. … This service is available as an option for a fee of $9.25 per year plus $2.10 per month.”

An acquiring executive at a bank in the western United States (who agreed to speak with The Green Sheet if he would not be identified) said he knows of one large ISO with 20,000 accounts and no TINs. “They are going to have to go back and manually get the data and fill it in,” he said. “If we pass the costs on, the merchants complain, and they are right to complain. These are new fees not in their contract.”

He added that ISOs are innocent bystanders getting hurt. “We’re getting resistance from ISOs on these new fees, [which] may not sound like a lot, but added to other fees like PCI compliance and such, it’s not competitive with others who are not imposing fees this year and are waiting until next year,” he said. “It helps that First Data took the lead. … They have half the market. If they are charging, it makes it easier for everybody getting out of the water.”

Pushing back

Cynergy Data LLC Executive Vice President Sales Kevin Smith said ISOs are being cautious. “I don’t think ISOs are prepared,” he said. “The ramifications are not such that you want to be on the wrong side here. There are three ways to look at the impact: a revenue opportunity, a customer service opportunity or a sales opportunity. Every ISO is going to have to decide for themselves if this is a revenue opportunity.”

Impact PaySystem President Dee Karawadra stated he will not charge merchants for 6050W compliance. He said he understood the need when PCI compliance fees were introduced, but in the last three years, additional fees have proliferated. “These are BS fees – Internet fees and cross-border fees – passed through to merchants,” he said. “It’s a short-term deal. Those who have a fee will see a big hike in residuals at first, but it won’t be long before they see a big dip in them as the competition comes in with lower pricing.”

About his clients, Karawadra added, “These are people I know and people my agents know. If we start changing merchant fees, we are going to lose these people.”