Both Visa and MasterCard have risk management divisions that monitor merchant chargeback rates
This is a statement I found to be very interesting as found in the Federal Trade Commission, Plaintiff v. Jesse Willms complaint:
http://www.ftc.gov/os/caselist/1023012/110517jwillmscmpt.pdf
Federal Trade Commission, Plaintiff v. Jesse Willms; Peter Graver; Adam Sechrist; Brett Callister; Carey L. Milne; 1021018 Alberta Ltd., also d/b/a Just Think Media, Credit Report America, eDirect Software, WuLongsource, and Wuyi Source; 1016363 Alberta Ltd., also d/b/a eDirect Software; 1524948 Alberta Ltd., also d/b/a Terra Marketing Group, SwipeBids.com, and SwipeAuctions.com; Circle Media Bids Limited, also d/b/a SwipeBids.com, SwipeAuctions.com, and Selloffauctions.com; Coastwest Holdings Limited; Farend Services Ltd.; JDW Media, LLC; Net Soft Media, LLC, also d/b/a SwipeBids.com; Sphere Media, LLC, also d/b/a SwipeBids.com and SwipeAuctions.com; and True Net, LLC, also d/b/a Selloffauctions.com, Defendants.
(United States District Court for the Western District of Washington)
Case No. 2:11-cv-00828
FTC File No. 102 3012
“Both Visa and MasterCard have risk management divisions that monitor merchant chargeback rates. A merchant's chargeback rate is calculated as a ratio or percentage. The numerator is the number of transactions passing through the credit card system in a particular month that are charged back to the merchant bank by the consumer or by the consumer's bank.The denominator is the total number of transactions processed by that merchant through the credit card system in the preceding month. The permissible chargeback ratio for Visa is 1 %; the permissible chargeback ratio for MasterCard is .5%. Credit card associations deem chargeback rates exceeding these rates as an indication of a problem involving the merchant, including unauthorized charges to a cardholder's account or deceptive business practices. For much of the time that the Willms defendants marketed products using a trial offer enticement, their chargeback rates far exceeded the chargeback ceilings set by Visa and MasterCard. During some periods, the Willms defendants chargeback rates for some products were as high as 10% to 20%,”
Tags: Commission, Federal, Jesse, Mastercard, Trade, Visa, Willms
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Permalink Reply by Justin Asking on -
Why do I find this interesting? Well I had a bad experience with a Jesse Willms online penny auction early in 2010 (April as a matter of fact). After $150.00 was extracted from my Visa credit card without my consent or immediate knowledge, I though it would be a simple matter of contacting my local Visa customer service and report this as unauthorized by myself and attempt to have it reversed. After I was stonewalled at customer service I asked to speak with the Visa risk control people to ask if this company had any history of complaints and to report my experience.
You can imagine how that went if you have ever tried to summit any company or business to the fraud department of any credit card processor like Visa. I was told flat NO!, you can not, and if you investigate any of the credit card websites you will find that there is no method provided to the public to make a complaint or to report any suspected fraudulent charges on your statement. Why do you suppose that is?
That began my journey from novice complainer to a jaded buyer of anything online either by a known well established business to any of the fly-by-night smash and grab merchants like the Swipebids type as described in the FTC complaint. What I later found out about my abilities and consumer rights that were denied me by credit card processors like Visa still has me boiling mad. I found not only that I could not dispute a claim on my credit by any merchant that I had haplessly disclosed my payment information to, but also that the credit card processor had no control over these same demands and had to release the funds to “clearing houses” to the full extent of my credit limit!! A further insult to my intelligence was being told by all service representatives from Visa that there was nothing I could do about the situation, that I was stupid for providing my payment details, and even if I were to close my long standing account with Visa (25 years) I would still be responsible for any and all charges made by that same merchant that they would still honor and come after me for!!
For informational purposes only: Credit card companies were reportedly nearly four months into what they described at an effort to restore the consumer’s confidence in using their payment methods for e-commerce when I was stung. An announcement of a crack down on worst offenders by suspending merchant processing of credit online was made in January 2010. I do applaud Mastercard because of their lower threshold for merchant charge backs at .5% vs Visa’s 1% ratios. Mastercard did drop Swipebids long before Visa did. This is an inconsistency for me as the press release of the credit card processor’s crack down indicated it was a joint effort between all processors and even a sharing of information with the BBB. I question why Visa was the last financial institution that remained faithful to these many dubious offers in the face of the astronomical numbers quoted in the FTC complaint against Jesse Willms’s many enterprises. (10% to 20% rates were claimed for brief periods!)
I have come to the conclusion that online scamming of the type described in the FTC complaint against Jesse Willms will be perpetual as long as the role of the banks and credit card processors remains as it is. As long as it remains profitable for these bankers who apparently face no penalties for not protecting their clients, I feel that there will be no appreciable change. The names, faces products, and methods of scammers continue to change into infinity, the names and faces of potential victims to fleece will be continually renewed, but the one factor that facilitates all e-commerce abuses and fraud is the denial of our civil, legal, and consumer rights by financial institutions like our banks and credit card processors.
How much longer do we need to forfeit our rights to control our finances by disputing a payment to any merchant and to have the right to put it to arbitration by a third, independent party? Why do we now accept that our banks and credit card companies have the right to decide what “contracts” with merchants are legitimate and legally binding?
Why aren’t we, as consumers and clients of these bankers and credit card processors, provided a method to file a complaint or to report a suspected abuse by a merchant of our credit? Why was I denied the basic right of knowing where my credit card company was sending my money by way of merchant name and account? In my opinion the whole system “stinks” and is in need of an overhaul, with appropriate legislation.
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