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Heads Up for Any Merchant Account Owners

Diane Kennedy

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Aug 31, 2007
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I just went through more research than I would ever wish on anyone regarding liabilities for a business owner with a merchant account. I was shocked!

For example, the current federal statute allows up to one year from a credit card statement for a dispute under the "claims and defenses" statute. The rules are written from the perspective of the customer...just imagine if you were a business owner and 364 days after a sale someone disputed it. Would you be ready to defend with copies of all pertinent data?

Here are the rules:

(1) The disputed amount must be over $50.

(2) You cannot dispute a charge under "claims and defenses" if you notify your bank after you have already paid your credit card amount down to zero. However, if you have paid off only a portion of your credit card bill, you can still resist payment on the unpaid balance for the charge you are disputing. For example, if the disputed charge was for $300 and your balance on the credit card was for $400 and your payment to your bank was only $150, you can still seek a chargeback for the remaining $250 under the "claims and defenses" category. Unlike "billing errors," whatever you have paid the credit card issuer after the charge appears on your statement which brings the remaining balance below the cost of the charge you are disputing, is not recoverable.

(3) The transaction cannot be with a merchant who is located more than 100 miles from your home or outside your state of residence. For example, suppose you go to Chicago for a vacation and while there you purchase an expensive vase using your credit card. When you get back to your home in California, you open the box the merchant gave you and find that it only contains confetti, and no vase. If you notify your bank within 60 days you can qualify for a chargeback under your "billing errors" rights. But if you wait for more than 60 days you will not be eligible for a chargeback under your "claims and defenses" rights because the merchant is outside of your state of residence (and more than 100 from your home). In California and in some other states, transactions on the telephone are considered to take place at your home and not at the merchant's place of business, no matter who placed the call. Similarly, in those states, if you fill out an order form which is to be sent to the merchant, and agree to purchase by writing down your credit card account number on the order form, the transaction also occurs in your home.

(4) Unlike "billing errors," you must make a good faith effort to obtain a refund or credit from the merchant before contesting the charge with the bank. Sending a letter to the merchant or signing a notice of cancellation which is sent to the merchant would suffice as a good faith attempt to resolve the matter with the merchant. Be sure retain a copy of your correspondence.
 

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Allthingznew

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Aug 26, 2007
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Hmm... good info. I wonder if there would be any execptions for those living in cities that are on a state line, such as South Lake Tahoe. Purchases could could be regularly made across state lines in that instance.
 
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Diane Kennedy

Bronze Contributor
Aug 31, 2007
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Hmm... good info. I wonder if there would be any execptions for those living in cities that are on a state line, such as South Lake Tahoe. Purchases could could be regularly made across state lines in that instance.
I'm looking at this from the perspective of a merchant. If people drive from SLT (CA) over to Incline Village (NV), I would be happy as a NV bricks & mortar merchant, knowing that I couldn't get the 1 year dispute.

But if you're not bricks & mortar and do an e-Biz, you could get hit with the one year dispute period.

The other wrinkle that got me is that you can get disputed ONLY if the person doesn't pay their credit card bill in full. So, someone who buys and then has seller remorse 6 months later because they can't afford their credit card bill, could dispute! (All other things being applicable)

On the other hand, as a buyer, my husband and I might be traveling and the rule of thumb is always pay the bill off. My husband is death on credit card fees. Let's say 6 months later (unlikely, but you never know) we finally get around to looking at the bill and there are charges that aren't correct. We couldn't dispute because we paid the bill off!

Geez.....exactly what behavior is this law trying to reward?
 

andviv

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Geez.....exactly what behavior is this law trying to reward?
Easy.... it is to reward the people that use the credit and pay interest. You don't pay interest so no benefits for you. You do have a balance thus making the credit card companies money so you do have rights.

No wonder why Visa and Mastercard spend a lot of money in lobbying congress. This 'little' things add up millions at the bottom line.
 

Allthingznew

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Aug 26, 2007
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I was thinking mostly of locality. Like a California resident goes a couple blocks and purchases a snowboard from a Nevada merchant. Obviously the customer would have to pursue the claim, but since most people don't pay off their credit cards that's not a big obstacle.

I was thinking the customer might make a logical argument that might be heard by a judge, especially if they might have had to drive farther than a couple blocks to buy a snowboard in CA for example. It would only take a sympathetic judge to make an exception, right? Especially if the consumer is a regular at that store. I don't think people who live in those situations necessarily think about what state they're purchasing in, unless sales tax can make a difference for them. But even still, people tend to go for what's convenient.

I have no idea how many other cities are in two or more states, but I just was observing it could possibly open pandoras box if a consumer chased it and a judge agreed.

And it only takes once for the door to be opened and the laws changed, and that could be potentially bad for merchants.

And what if the business were actually on the state line, actually in both states? I worked for a restaurant owner that had one building in two counties. He paid property tax in both counties by percentage. I suppose the same could happen for a state.

I guess I wondering about that "one" that ruins it for everyone. Probably too much effort for a what if anyway.
 

Bilgefisher

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Based on the telephone criteria. Calling someone makes them within 100 miles. Wouldn't ebay and any other ebusiness be pretty much SOL?
 

TaxGuy

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Easy.... it is to reward the people that use the credit and pay interest. You don't pay interest so no benefits for you. You do have a balance thus making the credit card companies money so you do have rights.

No wonder why Visa and Mastercard spend a lot of money in lobbying congress. This 'little' things add up millions at the bottom line.
Ahh didn't this issue come up more recently with all the credit limits being reduced for "responsible" borrowers who actually pay off their bills and try to maintain their FICO by having a low % debt to available credit only to find that the % can be changed at any time thanks to those updated terms of contract that no one ever reads anyways, one of the results of those lobbyists....

But now if you hold a high % balance and your credit limit remains the same and thus your FICO stays around the same level(let's say 650-700), you are technically irresponsible, but suffer no penalty versus someone who is and does get penalized and their 750-800 that they worked so hard to achieve gets knocked down to 700 :huh2:


I had one chargeback in my 7 months in business and it was AFTER I had stopped conducting business, worst of all the disputed claim was on an order that had shipped, yet the customer(most likely a "professional" customer, similar to and also probably a "professional" tenant) stated on their dispute that they did not receive the product and wrote down a future order and shipping date and successfully got the chargeback before I could even counter, in fact, the only notification I got was on my monthly statement and by the time I actually started to take action it was too late and I was out the money and the customer got a free product :nonod:
 

biophase

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I had one chargeback in my 7 months in business and it was AFTER I had stopped conducting business, worst of all the disputed claim was on an order that had shipped, yet the customer(most likely a "professional" customer, similar to and also probably a "professional" tenant) stated on their dispute that they did not receive the product and wrote down a future order and shipping date and successfully got the chargeback before I could even counter, in fact, the only notification I got was on my monthly statement and by the time I actually started to take action it was too late and I was out the money and the customer got a free product :nonod:
Chargebacks are a bitch. They are definitely made to help the consumer. I have had one so far. You get 2-3 days to respond. They take the money from your account before you even get a chance to respond anyway so it's on you to get your money back. Even with all the paperwork and proof, you don't win as the banks err on the side of the consumer. In addition, you are charged $25-$75 just as a chargeback fee no matter what the resolution.

One the other side, since I've gone through this process I feel much better using my credit card and I know that I'm easily able to get my money back if I ever get ripped off or feel like I was cheated with a product.

If ever you want to piss a company off, just make a bunch of $5 purchases and request chargebacks on them all. It would cost them hundreds of dollars just in fees.
 

Chitown

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That's a damn shame. You'd think people would be honest in their dealings but that is a lost convention in this day and age. The few times I've ever requested a refund were due to a faulty product, not because I was looking to get over on someone.

I hope this person's karma follows him/her around like a glass encrusted anvil, itching to hit its target. My two cents.
 

wildambitions

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That's a damn shame. You'd think people would be honest in their dealings but that is a lost convention in this day and age. The few times I've ever requested a refund were due to a faulty product, not because I was looking to get over on someone.

I hope this person's karma follows him/her around like a glass encrusted anvil, itching to hit its target. My two cents.
I agree it is a shame. Very sad. I have to hold faith that "what goes around comes around." And until it does, I attempt (although not always successfully) to apply the Golden Rule "treat others the way you would like to be treated." In doing so though I do always have to be vigilant of those who will be looking to take advantage of that. It is often a difficult balance but no one said life was fair.

My husband often jokes that he follows the rule "treat others the way they treat you." Think how quickly the world be become more ugly if we all did THAT! I try to keep that image fresh in my mind before determining the actions that I choose to take.
 

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