January 21/28, 2019: Volume 34, Issue 17
By Scott Perron
I want to focus on an issue that will continue to become a much bigger liability to retailers of all kinds: customer chargebacks.
I have been in this industry for more than 30 years and have only had three chargebacks out of tens of thousands of sales. In two of the cases, the customer cited “materials not as agreed” and in one crazy instance a customer purchased and picked up materials, stopped payment with her credit card company and told us a former employee of ours owed him money so we could get it from him. (The sheriff swiftly changed his mind and he made good.)
During the third and most recent sale, however, we had a client who claimed after our job—that entailed floor leveling, moisture mitigation, installation of 2,600 square feet of luxury vinyl plank plus new painted and primed wall base—they began experiencing a smell in the home that was making their family sick. One quick call to their credit card company and without warning they withdrew $10,000 from our operating account. After seven weeks, they have not produced one shred of evidence to support such a claim and yet the issuer of the card is backing the cardholder.
Upon my research with Chase Paymentech—that has now taken many hours and regardless of the fact that we have supplied the customer with every possible MSDS sheet, floor certifications and testing—we were still not able to get Visa to credit our account pending any investigation. The Chase advisor told me chargebacks are on the rise with many consumers learning how to maneuver the system with fraudulent claims and the merchant’s chances of winning a chargeback are becoming increasingly more difficult.
Many retailers think our contracts have a dramatic amount of weight to them, but in reality the major credit card providers are the ones who make the final decision—and typically it is to protect their customer, even if it’s at the peril of a merchant with good intentions.
Some key points to keep in mind:
- A customer needs only to make a simple phone call to his or her credit card company to dispute any charge. Meanwhile, the average merchant does not have the processes in place—or the wherewithal—to refute the refund.
- Include in your contract and process paperwork language that states clearly that the consumer has received and has accepted the quality of the materials and/or labor performed. It must be signed and dated at time of delivery or installation. This is by far the most important document you can provide when dealing with a chargeback.
- Make sure your contracts are in keeping with your state’s individual consumer laws and that the language clearly explains the expectations and possible scenarios, including cleanliness, unforeseen issues, payment arrangements prior to delivery and installation as well as the need for signatures when materials have been delivered or installed.
- Most merchants do not realize that when you charge a credit card and pay the fees associated with using this payment vehicle, those fees are non-refundable. In addition, if you have a chargeback and reuse the same payment form after settlement you once again pay for your credit card merchant fees and, in many cases, a chargeback fee from your processor.
Protect yourselves and consult your local attorney to make sure you have these guidelines in place so you can mitigate the possibilities of this occurring in your business. Failure to do so may result in a very expensive lesson.