In addition to the existing $15 fee every time someone files a dispute, @stripe will now start charging an additional $15 fee for countering the dispute, which you only get back if you win.
Banks constantly claw back legitimate transactions no matter what evidence you show them, so now they'll take $30 instead of $15¹.
This is highway robbery.
¹ - unless you use Stripe's Smart Disputes AI, which isn't out yet
That's the dystopian future I've been scared of. LLMs (Large Language Models i.e. generators of most probable text) will be used to DECIDE if a person gets the money back or not.
People in command (managers) showing the lack of understanding of what an LLM is and misusing it in the worst way (another is to write to people why their insurance claims have been rejected)
I recently have put my CV into ChatGPT and tell it to assess my experience according to the position in the job offer, and give the answer in percentage. It said 80%. With small adjustments I could make it 100%. But if they use another tool (another LLM or whatever), I might fail. Just these are those s/interesting/hard/g times everybody was speaking of.
Probably more like: the claim is rejected by default, then the AI is asked to come up with reasoning why, then review decide if that reasoning is just too silly to fly.
rejecting people's claims when a doctor says it is required is a great example of a conflict of interest. The company is a judge in their own case against the patient. And there is an impartial doctor whose word is just ignored in this "court" case
I run a SaaS business, and whilst disputes are rare, I'm pretty sure most of them are from customers who forget to cancel their subscription. Rather than emailing me asking for a refund (which I'll be happy to give), these customers go straight to the dispute process.
Once a dispute is opened, what are my options?
- Send a super nice email to the customer asking to withdraw the dispute and promising to refund their payment/s
- Contest by submitting evidence. What evidence is there to show that the customer DIDN'T cancel a subscription?
Both of these processes are laborious and rarely worth the time. And regardless of outcome, the original dispute fee is not returned in my experience.
This feels unjust such that the psychological cost of a dispute outweighs the financial cost for me. I get that merchants should be disincentivized from engaging in dodgy businesses, but even when a merchant does everything right, disputes still happen.
I would like to see a simple, penalty-free option for dispute resolution, similar to:
1. Merchant receives notification of customer's intent to dispute. Merchant has 2 weeks to review the claim.
2. During this window, merchant can refund the payment/s, either accepting the dispute, or refunding as a courtesy. If payment/s are refunded, the case is closed, and no penalties are incurred (apart from transaction fees).
3. If the merchant contends the customer's claim or doesn't respond, the matter becomes a dispute as it exists currently. A fee is withheld, and the merchant can submit evidence within a given time. However unlike the current situation, the fee should be borne by the customer if the merchant is successful. If customers risked a penalty of opening an unsuccessful dispute (especially a non-fraud dispute), it would likely reduce the number of groundless/fake disputes.
Users access to a payment system that users trust because it generally gives them the benefit of the doubt, and they don't face liability for fraud.
Merchants get access to a fast reliable system connected to billions of worldwide users, but are forced to adopt extremely customer friendly policies.
If you don't like Visa or Stripe's terms, don't accept them. Use ACH, or crypto, or whatever else other payment system you prefer, but be ready to have a VERY hard time attracting customers.
I get that it's annoying, I used to do payment tech for a subscription box, and people loved to open disputes when they forgot to cancel. But, it wasn't hard to dispute: we would send a copy of our terms of service showing that they agreed to the charge, and a copy of the shipping showing that the item was sent, as well as a log of all communications and interaction with the client (to prove that they hadn't requested cancellation). We had a script that could package all of this info for the dispute, so it normally took almost no time at all. Sometimes we had to eat the cost because the whole process is biased against merhchants.
The reality is that credit cards are one of the most enabling technologies for the internet. Should it be this way? I don't know. But in the real world, it is, so you can either opt in to the most popular payment system that gives you access to billions of people n exchange for disputes, or you don't.
I get people claiming "fraudulent charges" when they forget to cancel. It is very hard to argue against that and the terms of service don't help much as evidence.
We could easily user activity logs that showed their login activity and what they did on each session. You can't prove a negative, but having all of that data for their entire account looks good. We could show that reminder emails were sent a week before fulfillment (with enough time to cancel), as well as shipping notifications.
We really weren't into tricking people, and we would do everything we could to accommodate if you contacted us directly.
Do you have an official written policy for customers that forget to cancel? It could be as simple as "in case you forget to cancel and are later charged, please email us". You could then add a mention to every renewal email. If the policy is not official, but you're already open to reimburse someone that emails you, then make it official. Why have it as a discretionary unspoken rule that lets your customer guess as to the outcome of them asking for a favor.
Stripe already made this suck with their $15 fee you get hit with for every chargeback.
Let me say that louder for the people in the back:
If a customer buys your product for $10, they use your product, then they issue a chargeback then Stripe will clawback $25. You are out 250% of your product cost without doing anything else.
Before this change you could dispute it and potentially get back your $10 (minus fees) but you just lost that $15 no matter what.
After this change you have to pay an additional $15 just to dispute it and only if you win do you get that back (but you are still "out" that initial $15). So you have to decide if you want to fight for your $10 by risking another $15.
Also, the dispute process is a complete farce. There is zero visibility and you can provide perfect documentation and they will still deny it.
There is a special place in hell for people that file fraudulent chargebacks.
I say all of this as someone who is favor of customer protections but chargebacks are so far tilted in the customer's favor that small businesses can get screwed easily.
* Pulls out soapbox *
And this is why I'm pro-regulation, pro-customer-protection but there /has/ to be a way to advantage the "small businesses" that every politician pays lip service to. Regulations are written blood most all of the time and are needed but treating "mom and pop"-sized businesses the same as massive corporations with armies of lawyers (that often let them avoid the regulation or blunt it) is insanity.
Just about every processor has a chargeback fee that is non-refundable. Frequently they are higher than $15.
You can sign up directly with any bank that offers merchant services and there will be charge-back fees.
The reality is that chargeback-fees are never going to be a massive part of any businesses expenses, since processors will cut you off from the network before that point (anything over .9% of transactions disputed and you are in deep trouble). Just like everything else, small businesses should just plan for a certain small percentage of transactions to be disputed, and build that into their business model, in the same way that they do for all other expenses.
Besides all that, a credit card chargeback does not invalidate a valid debt. If a merchant wants to put that debt into collection, or to go after the debt and expenses in small claims, that's allowed and the CC company can't do anything about it.
The main way merchants push back on chargebacks is to not accept Amex. That brand of credit card attracts customers who chargeback more often.
Mandatory accounts that gatekeep on-going access also discourage chargebacks. If you will lose access to an important brand of taxi service or your $1000 digital content collection you will think twice before charging back even if you are a legitimate fraud victim.
I thought merchants not accepting Amex had more to do with high processing fees compared to MC/Visa. Amex is marketed as a premium card targeted at higher income people so wouldn't that correlate with fewer charge backs?
Man this sucks, just as I spent months integrating it into the payment pipeline of my side business app. Maybe I just shouldn't accept cards, or only through PayPal or something.
The big problem here, as mentioned in the post, is that banks (esp smaller ones) frequently reject legitimate evidence - and stripe don't allow you to go to arbitration. So it's basically asking the banks if they'd like to admit wrongdoing.
For example, we've had a bunch of fraudulent transactions that had 3DS approval - meaning we are covered by liability shift. But certain banks don't care and issue fraud chargebacks anyway!
If stripe allowed you do go to arbitration or at least helped out in keeping the banks straight, this would go down better.
Almost no chargeback will ever go to arbitration though. So it's not like this new fee is the reason behind the change. Patrick Collison is (probably) just exploiting his position in the market to squeeze more money out of merchants.
I sure wish there was more competition in the payment marketplace. During the early Stripe years, I thought Patrick would be above this nonsense (even without competitive pressure). Not so!
If Stripe Radar (has a small fee per transaction) is enabled in an account, then an early warning (before chargeback) is sent via the `radar.early_fraud_warning.created` webhook event, which can be used for a pre-emptive manual review, or an automatic refund and cancellation. No dispute fee on a refunded transaction!
There are services like Chargeblast, ByeDispute etc. which also help avoid disputes and chargebacks.
Banks constantly claw back legitimate transactions no matter what evidence you show them, so now they'll take $30 instead of $15¹.
This is highway robbery.
¹ - unless you use Stripe's Smart Disputes AI, which isn't out yet
Full text of their email from today in the tweet. Or here if you prefer Nitter https://lightbrd.com/ArtemR/status/1902446906640605657
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