*RAMPANT* Fraud. Any thoughts?

force-11

force-11

PHP |㋛
Jul 27, 2009
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I've been involved in 5 major software products. Every single one of them has had something in common: people from all over the world attempting to purchase - get a refund - then chargeback (effectively stealing 100% if they get away with it and no matter what subjecting me to chargeback fees).

For my new projects I have been using merchant accounts from Avangate who has an (too) effective fraud department.

This has stopped completely some of the problems but just today I got an email from a customer who had paid via PayPal (credit card, I think) and who's order had been held for fraud investigation angrily demanding she was honored her refund policy (the way my setup works, you get delivered the software whether its held or not, because I can always deactivate the license key).

I obviously immediately sent an email to the fraud department at Avangate instructing them to reverse the order, to which I nearly immediately got a phone call indicating that the order appeared to be a similar scam to the one I mentioned above.

Using Avangate this doesn't cost me anything so that's good. Does anyone have other good solutions to this? Its widespread (1 real order:0.25 fraud orders), but it isn't a single country or pattern of any clear sort.
 


Only thing I can think of is to deactivate the S/W once someone refunds. That too can be cracked but it should decrease the problem dramatically. The only downside is that they'll need to be online when logging into your program.
 
Don't capture payments right away.
Get an authorization, and then wait 3-4 days to capture.
That way, they can't really request a chargeback, and voiding/expiring an authorization is cheaper than issuing a refund.

That would work if most of your refunds come right away. If people wait 30+ days, then obviously it won't work.
 
A buddy of mine sells leads on a retail level and was having this problem BAD for a while. People buying lead packs then charging back.

He added maxmind telephone verification to the order process and cut the chargebacks down quite a bit from what I know.



Might be worth a look....

http://www.maxmind.com/app/ccv_overview
http://www.maxmind.com
 
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You can always try someone like Chargeback Guardian who we use to reduce, manage and prevent our chargebacks. Also, when arguing for a chargeback, a buyer has to state that either the charge was fraudulent (they didn't make it) or that the product wasn't delievered.

If you can show the credit card companies that they asked for a refund, then they clearly bought the product. Also, we use a log tracking backend we had built that tracks members log ins, downloads, and general usage. This means we can pull any member by email, and show the CC companies the IP, email, phone and name of these guys.

Once they see the logs, they know for sure it was them who ordered it, had it delivered, used it, and then fraudulently charged back. It's not foolproof, but we usually win. I'm not 100%, as I don't manage the CB area of the company, but I'm pretty sure if you can prove you did everything, and refunded quickly, then the CB fees will go on them.
 
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