educational

Chargebacks: The Industry Strikes Back

Bruce Decker

Over the last few years, the rules surrounding chargebacks and adult credit card processing have continued to make our business more difficult. Adult sites already assume all the costs from Visa and MasterCard’s failure to provide a truly secure online payment method. As Visa/MC continue to side with consumers, providing them with zero liability guarantees, they also continue to clamp down on the adult industry, imposing ever stricter chargeback requirements and registration fees. It has also been suggested that adult companies will not be allowed to participate in the new security programs, such as Verified by Visa, that give online merchants some degree of chargeback protection.

Pick Your Battles Wisely
Although a few high profile lawsuits have been filed by the third party billing companies, it could be years before a settlement or resolution. In the meantime, Visa and MasterCard will continue to toughen up with adult merchants. Posting on message boards and complaining about chargeback policy will not solve any problems, however. It is time for pay sites to start owning up to this issue and going after the root of the problem – fraudulent customers.

AdultRep has been offering chargeback resolution services to pay sites with merchant accounts for some time now. In many cases we’re able to reverse chargebacks for our clients after obtaining a signed authorization form from customers. Some customers can be reasoned with and will cooperate with us, allowing us to resolve disputes outside the chargeback system. In the past, our clients who utilized IPSP-based processing have been uninterested in this service, since IPSPs assumed the risk of chargebacks. Today IPSPs, forced by Visa and MasterCard, are passing chargeback responsibility directly to their merchants. They are also passing through hefty chargeback fees, the same fees that merchant account owners have been dealing with for some time now.

The problem of out-of-control chargebacks is now very relevant for everyone in this industry. Since IPSPs are no longer content to pay the banks’ $25 chargeback fee out of their own pockets, all pay sites, whether they use a merchant account or IPSP, need to come to terms with this question: What can be done with customers who chargeback? The answer is… start fighting back!

Hit Them Where It Hurts
AdultRep is now pursuing vigorous collection activity against all customers who submit chargebacks to our clients, even our IPSP-based clients. Customers who chargeback at our clients’ sites will soon find out that they can no longer hide behind their credit card’s "zero liability" guarantee. They may not face any liability from their bank, but they will face liability from us, along with the very real and serious consequences that come as a result.

Shortly after charging back, the customer will receive a letter in the mail advising them that their account has been turned over to a collection agency and they will be advised of their rights under the Fair Debt Collection Practices Act (FDCPA). They will have 30 days to submit a written response or AdultRep will assume the debt is valid. If they do provide a written response, they will be sent documentation substantiating the debt and they will be informed that collection activity will continue, despite their challenge. They will also receive follow-up phone calls within 5 days of receiving the letter. The phone calls will continue at a rate of three to four per week until the debt is paid.

The consumer will be instructed to remit payment for the amount chargedback as well as all fees the merchant has incurred (such as their IPSPs $25 chargeback fee). AdultRep will assist clients in adding the specific terms to their user agreements so that fees can be recovered in addition to the actual amount of the chargeback. Depending on the customer’s state of residence, back interest can also be added at varying interest rates.

Continued refusal to pay the debt will result in a charge off being reported to a major credit bureau. Imagine the consumer’s shame and embarrassment when he has to explain the CumGuzzlingWhores.com charge off when he applies for his next credit card or goes to refinance his house. And no, we do not need the consumer’s social security number to add items to his credit report. If Visa and MasterCard are not going to protect merchants against fraud, the industry needs to protect itself

It is Time to Stand Up and Fight
We would like to challenge every pay site, large and small, to fight every chargeback they receive. Make it difficult for customers to get away with this kind of fraud. If Visa and MasterCard are not going to protect merchants against fraud, the industry needs to protect itself. Until the industry takes a stand, en masse, things will only continue to get worse. If you choose not to engage AdultRep, either fight the chargebacks yourself or find another company to do it for you. Just stop letting consumers get away with defrauding your business and our industry.

AdultRep is going to take the lead on this issue by offering our chargeback collection services to every pay site – no matter the size. Whether you have 1 chargeback each month or 1000, whether you have a merchant account or an IPSP, we will hunt down your debtors and we will make them pay up. It is time to stand up and fight. It is time to start getting your money back – this is your money.

AdultRep has the ability to collect from deadbeat customers in all 50 states. For states that we do not hold a collections license, we have a reciprocal collection agreement with a local collection agency that does hold a license to perform collections in that state, so no chargeback will ever go unchallenged. We are well versed with the terms of the FDCPA and state equivalents. Additionally, we can skip-trace to locate the current address and phone number of a customer who has moved since signing up with your site.

It is certainly about time that deadbeat customers face the music. Contact AdultRep toll-free at (888) SITE-HELP or e-mail info@adultrep.com for more information.

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