How can small businesses handle unfair chargeback fraud claims?

[Jarrod88]

I recently was contacted with chargeback request claiming a fraudulent transaction. 

I went to my bank to ask why I, a small business is out of pocket while the ‘investigation’ is underway. 

i had the amount deducted from my bank and was told there was nothing I could do. 

has anyone had this happen to them? 

this is not right! 

[Kitana]

Hi @Jarrod88, thanks for reaching out to the Shopify community. I hate hearing that you're dealing with this situation, but I can confirm that it does happen to all businesses. While they are conducting their investigation the only thing you can do is provide them with all your evidence that the order was shipped and received by the customer. If the bank rules in your favour you will receive the money back, and if not you unfortunately won't. 

There isn't a lot you can do while the investigation is happening, but in the future there are some steps you can take to make sure you have sufficient evidence. I'm sure you already have tracking for your packages, and that's great! Another step would be to require a signature so you have 3rd party evidence that the package was handed to the customer. If you are packaging your orders yourself you can take a photo of the items in the order, and how it looks once it's in the package. If a customer ever complains about an order or a specific item, keep all communication to email or text, and save all conversations between you two. There is a chance that you could provide this information and the bank still sides with the customer, so I always think "the more information the better", even if you don't know how something could be considered evidence, keep it! You never know. 

Every order you receive to your store will be labeled by risk, low to high. If an order is medium or high risk there are some more steps you can take to confirm the order is not fraudulent before shipping it out. Check out the fraud prevention tips here. 

[Jarrod88]

Thanks for the information.

So who I do lodge an investigation with then to recover loss of stock, and an incorrect chargeback claim amount? The chargeback amount is $90 more then the total amount (a partial refund on the order was successfully conducted)?

[Kitana]

Hi @Jarrod88, I know chargebacks can be difficult for merchants especially when you are running a small business. Some payment gateways will allow you to challenge the banks decision in the chargeback, but some won't. If you're using Stripe, they don't allow any challenges to be made, but they would be the company you would contact for more information about the chargeback. If you are using a different payment provider they will be the one you contact and if they do allow the chargeback to be challenged this is called an arbitration. I have to say, these cases are very difficult to win, and can cost a lot of money for the party that loses in the end. You would basically be taking the customer to "court", but it's held by the bank or payment provider, not the law. You can read more about chargeback arbitration's here.  

Chargebacks can be complicated because they are based on rules and regulations that each credit card company, bank, and institution holds. These rules have not had many changes in the last several years, even though eCommerce has increased significantly in that time. I know many Shopify merchants turn to Shopify for help with chargebacks, and unfortunately there is nothing Shopify can do on their end to stop or challenge a chargeback. eCommerce hosting platforms (Shopify, Wix, Squarespace, etc) will not have any say in the final decision, and once the bank/payment provider has made their judgement they must follow the ruling. 

If you are interested in more professional help you can contact a company that specializes in chargebacks. I've found a few you can look at:

• Chargeback Gurus 
• Sift
• Justt

You also mentioned that the chargeback was more than the order/refund. This will happen because there are additional fees when the chargeback is issued. The amount will depend on where you're located and what payment provider you are using. If you are using Shopify Payments you can find the list here. If you're using a 3rd party payment provider you will need to contact them, or find the information on their website. 

I do work for Shopify, but I've also had a few businesses over the last 7 years. I've used Shopify and other platforms, and the processes are all the same. I haven't come across a merchant that was able to fight the decision of a chargeback. Even reading up on the chargeback websites I've shared, they all say the best way to fight a chargeback is to prevent a chargeback.

When I receive a chargeback I know it will be difficult to win, but I have won some cases, and I've lost some too. I try to be as personable with customers as possible, even including a message in my order confirmation that encourages customers to contact my company if they have any issues or questions. If a customer wants a refund, I prefer talking to them and issuing the refund so I don't lose additional money, and your customer service skills can sometimes help connect to the customer on a human level. 

If you have any other additional questions about the chargeback process or even my own experiences don't hesitate to ask and I will try to help as best as possible. 

[Jarrod88]

Who do I lodge an investigation with into loss of stock then?! I am just as much a victim if not more as now I am down $400 plus the stock $400 again. 

[BC123]

I am dealing with the same thing - customer filed a chargeback claiming that they did not receive the product.  I immediately (September 23) submitted screen shots, proof of delivery/tracking, etc. & my account was updated with this message:  "What follows is compelling evidence, and a valid remedy for this chargeback."   It did not matter.  Shopify still deducted the funds (several hundred dollars) from my account along with a $15 fee.  I then had to wait almost a month for a response only to learn that the customer's bank has sided with them..???   What is the solution here?  And why did Shopify wait until October 17 to send my response?  "We submitted your response to the dispute on October 17, 2022 at 7:00 am. The customer’s bank sided with them."

[andydev]

We have 2 fraudulent charges and shopify could care less. Funds retracted even though clients have the product

[Jarrod88]

You your dealing with the fraudulent claims plus the loss of stock?! 

[BC123]

I am dealing with the same thing - customer filed a chargeback claiming that they did not receive the product.  I immediately (September 23) submitted screen shots, proof of delivery/tracking, etc. & my account was updated with this message:  "What follows is compelling evidence, and a valid remedy for this chargeback."   It did not matter.  Shopify still deducted the funds (several hundred dollars) from my account along with a $15 fee.  I then had to wait almost a month for a response only to learn that the customer's bank has sided with them..???   What is the solution here?  And why did Shopify wait until October 17 to send my response?  "We submitted your response to the dispute on October 17, 2022 at 7:00 am. The customer’s bank sided with them."

[Buntiform]

Countless times and you’re right, it’s not fair at all. Have you considered looking into tools like IPQS to help flag the high risk orders so you can avoid them? They have a shopify plugin too to make things easier.