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www.ecommerce-guide.com/solutions/secure_pay/article.php/345671
By Alexis Gutzman April 21, 2000 Have you ever had a charge you didn''t authorize appear on your credit card statement? If you have, then you probably called the credit card company to get the charge removed. In all likelihood, you found that you had to sign some form the credit card company sent you, they investigated and reversed the charge, and that was the last you heard of it. It was something of an inconvenience (after the initial outrage passed), but since it was resolved to your satisfaction, you probably didn''t give it another thought. Congratulations. You successfully executed a chargeback against a merchant! Of course, you were in the right, your card was used fraudulently, and that''s the exact reason why we have consumer protection laws. As a merchant, the shoe is on the other foot. You''re a merchant that provides products and/or services via your Web site and you''ve been told by the merchant bank that issued you your precious merchant account - your permission to accept credit card payments online - that Visa and Mastercard are tightening up their rules about chargebacks. From now on, companies that deliver immediate fulfillment online - which includes real-time software downloads, real-time downloads of books and articles, real-time access to restricted content sites, such as pornography, sports information, and financial news, and subscription sites such as dating services - will be subjected to much tighter rules about how many chargebacks their merchant accounts can process before they start incurring fines from Visa and Mastercard. Merchants can even lose their merchant accounts, altogether. Chargebacks are usually measured as a percentage of volume. So, for example, if $100,000 goes through your merchant account in one month, and $1,000 gets charged back against your account, you''ve got a 1% chargeback rate. The magic number is now 1%, which is pretty low in the world of the Web, where fraud is often a problem.
Reasons for High Chargeback Rates
Why Do Consumers Have All the Power? 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
What Can Merchants Do?
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. The proper place to direct merchant ire is at the four Congressional Committees that govern consumer protection and banking:
Perhaps "ire" is too strong a word. I spoke with the spokesman for the House Committee on Commerce''s Subcommittee on Telecommunications, Trade and Consumer Protection, Eric Wohlschlegel, who told me that the issue of Web merchants losing merchant accounts was "on the radar" of the subcommittee, but it was not yet a real issue. He indicated that the jurisdiction for this issue would be shared between his committee and the banking committee. I also spoke with the spokesman for the Chairman of the House Committee on Commerce''s Subcommittee on Telecommunications, Trade and Consumer Protection, Rep. W.J. "Billy" Tauzin (R-LA). He said that while there''s no time for action this year, it "could be an issue next year if it''s a problem for small businesses online, but we''ll wait until there''s a hue and cry."
Put Up or Shut Up The answer lies in the current laws on the books. Congress is not unsympathetic to your problems, and is waiting for you to tell them where it hurts (I warned Mr. Wohlschlegel that you would). This column gives you everything you need to do something about a situation that could potentially shut down the Web to many, if not all netrepreneurs. I''ve given you the laws; I''ve even given you the Web sites of the committees so that you can find the phone numbers and fax numbers of the Representatives and Senators who have the power to swing the pendulum in your favor. What are you waiting for? (Tune in next week for a column on Alternative Payment Methods - I did mention that the Congressional route would be slow.) Alexis D. Gutzman is an E-commerce Technology Author and Consultant and author of The HTML 4 Bible and ColdFusion 4 for Dummies. She holds a Master of Public Affairs degree from the Lyndon B. Johnson School of Public Affairs of the University of Texas, and she always knew that education would come in handy some day. She can be reached at agutzman@internet.com |
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