Why Do Consumers Have All the Power?
The obvious question to ask at this point - if you''re not a merchant, of if you''re a merchant, and you never bothered to read your lengthy merchant agreement - is why it matters that customers instigate chargebacks so often? Shouldn''t merchants just be able to prove that the goods were delivered, even if customers forget about it, or don''t recognize the merchant''s name? In theory, yes. However, that 60 days or so timeframe that elapses between the customer initiating a chargeback and actually seeing the credit on his bill (referred to as the investigation by the merchant bank) is usually little more than the length of time it takes the merchant bank to notify the merchant that it''s out the full amount that''s being contested.
The reason that the investigation (unless the card is physically swiped at a register and is not later reported as stolen) is usually just pro forma is that consumer protection laws give consumers all the power. In most other countries, consumers have to go to much greater lengths to prove that they were the victims of fraud, and the merchants have a fighting chance to contest a chargeback.
Big Bad Corporate America
I''ve read a lot of outrage in the past week and a half from merchants and columnists about how the new chargeback policies of Visa and Mastercard are evidence of corporate greed and evil corporate America. Although a Dudley Do-right view of the world (this week, the role of Dick Dastardly is being played by Visa and Mastercard) has its own appeal, I think that merchants who are affected by this should be doing more than crying in their beer about this situation. I agree it is deplorable. Deplorable, but perhaps remediable.
What Can Merchants Do?
Merchants should want to resolve the problem with the attitude "how do I continue to accept credit card payments online?" rather than "how can I take revenge against Visa/Mastercard/my merchant bank?" If you look at the relevant laws governing liability of consumers for purchases made (http://www4.law.cornell.edu/uscode/15/1643.html), you''ll see that Visa and Mastercard have no choice about their "customer is always right" chargeback policies. They have a brand to protect and fraud against their card holders tarnishes that brand. They have competing goals of:
- Having as many consumers as possible using their cards
- Having as many merchants as possible accepting their cards
- Having as many transactions as possible going through their network
- Maintaining an attractive brand (by keeping chargebacks - thus disgruntled consumers - to a minimum)
Rather than taking aim at the credit card networks that are bound by the laws, merchants should be taking action to see the laws modified so that all power does not lie with the consumers. I''m not talking about repealing consumer protection laws, but perhaps reviewing the laws with an eye to an appeal process for the merchant might be a good start.
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