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Defrauded merchants vs. payment processors, including PayPal, Visa, Mastercard, American Express, Discover, and Amazon

Plaintiffs
Opening StatementProvided by: People C., Plaintiff
We are seeking damage recovery for fraudulent chargeback expenses and penalties from Mastercard, which we believe is complicit in chargeback fraud. Mastercard failed to properly investigate and prevent chargeback fraud from a customer who ordered and used our services but later reported the transaction as "fraud" in order to secure our services without payment.

We provided the customer’s card issuer with indisputable proof – including proof of certified mail delivery – that she had in fact purchased and used the service. We nevertheless “lost” the dispute. The cost of our services was charged back, and a penalty was applied to our account. The Mastercard system is so lacking in transparency that we don't even know which bank issued the customer's card and made a unilateral decision that we had committed fraud.

We believe this is a common and likely illegal practice with payment companies – i.e. to side with consumers who request chargebacks, claiming they never made an online purchase and/or don't recognize the charge. This is known in the industry as "friendly fraud," but it is theft. Credit card companies are very well aware of the problem. In 2014 Visa estimated that “friendly fraud” costs merchants $11.8 billion.

We believe that in many cases, as in ours, payment companies fail to properly investigate reported cases of chargeback fraud, assigning the costs of stolen merchandise and services, plus additional penalties, to the merchant victims without due care. Merchants have no reasonable way to appeal, since the cost of required arbitration is disproportionate.

If you are a merchant who has suffered this kind of theft, please join this claim.

We are seeking system improvements plus damages against those responsible, including MasterCard, Visa, American Express, Discover, PayPal, and issuing banks et al, on behalf of any merchants who join this claim. We also will be requesting criminal charges be brought in cases where these entities have knowingly facilitated chargeback fraud in order to pander to cardholders at the expense of merchants.
vs.
Respondent

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Plaintiffs seeking
System improvements plus damages against those responsible, including MasterCard, Visa, American Express, Discover, PayPal, and issuing banks, on behalf of any merchants who join this claim.
Who can join?
  • Merchants who have been harmed by unwarranted and undocumented credit card chargebacks.
  • Anyone else who's been harmed through credit card processors, PayPal, or issuing banks.

This Trial's Core Issues
1. Issue: Credit card issuers make chargeback fraud easy for consumers
  • 4 Comments
  • 2 Questions
  • 1 Resolution

A “dispute this charge” button is often provided online with each line item. The consumer is usually not required to prove that they have already contacted the merchant to query an unrecognized charge.

2. Permanent chargeback protections provided to some consumers mean that issuers may have little incentive to properly investigate the chargeback.
How common is this?
3. Who's to blame? MSPs, banks/credit cards, or systems like Mastercard and Visa?
1) An MSP (merchant services provider) may fail to allow adequate reporting of proof or fail to properly forward proof. Many merchants report "miraculously" winning every chargeback AFTER switching MSPs. 2) A bank/credit card company may fail to adequately review proof. Some MSPs report that some c
Sort by:
    • [-][+]My resolution
    • 2 months ago
    J S. (Advocate for Plaintiff)
    If the credit card companies do not pay attention to evidence of fraud that a merchant has submitted, they should be responsible for the loss - not the merchant.
      • [-][+]My resolution
      • 2 months ago
      Simon S. (Industry Expert)
      I would state that you need to follow the line of order. The consumer caused you this financial loss. Subsequent to this, you need to sue the consumer. The rules of Mastercard and Visa are consequential to your case. The direct reason why you lost the money was due to the customer's conduct, which is all senses, misleading and deceptive. You should win in any local or tribunal based court against the consumer for loss or damage consequential to their actions. This is my resolution.
        • [-][+]My resolution
        • 3 months ago
        Janet C. (Plaintiff-unverified)
        Very good points have been made - very interesting!! How much of that $11 billion could we save ourselves if all these steps described were implemented? If a customer reports fraud then they should be prepared to prove that they checked with us first, filed a police report, and will destroy their old card and get a new one. That would protect customers who really were defrauded AND protect us! I pay a lot to MC, Visa, Amex etc. so they should also protect my interests. It would save a lot of money for people who are honest but end up paying for all this fraud anyway. I hadn't thought of it this way before but if banks don't insist on these measures they really are "complicit" in so-called friendly fraud.
          • [-][+]My resolution
          • 3 months ago
          Dev A. (Neutral)
          This could be a pretty big case if it goes to court. There are thousands of merchants affected and millions of dollars in illegal chargebacks. I suggest the processors and PayPal come up with a reasonable offer of compensation and a change in policy to better vet cases where merchant's provided strong evidence of charge back fraud. There's no way to calculate the damages without knowing the actual numbers but they would be entitled to 100% recovery of the chargeback and possible punitive damages if its discovered that the processors had an actual policy of selling out the merchants to pander to the card holders. What makes this case unique is that card fraud is a crime. So the card holders have a duty to report it where their are aware of criminal intent- instead they seem to be facilitating it. Not Good, as our President would say....
            • [-][+]My resolution
            • 3 months ago
            Jim W. (Neutral)
            Assuming the evidence supports the plaintiff's statement, Mastercard should give special attention to this customer and refund both the disputed chargeback amount and the penalty – regardless of whether the action was to be considered "final." (Good suggestion from Bob M. for a universal process the industry could adopt to help stop the fraudulent claims by removing "rubber-stamp" decisions in favor of consumers over merchants.)
              • [-][+]My resolution
              • 3 months ago
              Bob M. (Industry Expert)
              Credit card companies should set up an independent review panel for cases where merchant has lost a chargeback and feels that they submitted excellent proof. Chargebacks and fees should be refunded where decision is found to be wrong. Consumers should be required to prove that they have contacted the merchant, filed a police report before claiming fraud. Descriptors on credit card statements should include dispute email addresses for companies.
              Affiliated Plaintiffs Seeking Recovery of Damages
              • Lead plaintiff seeking: $186.00
              • Co-plaintiffs seeking: $21,964.06
              • Total recovery sought: $22,150.06
              Plaintiffs claim
              To be Negotiated
              Estimated $ value sought
              Compensation for chargeback, associated fees and expense
              $186.00
              Cash total : $186.00
              Co-plaintiffs' claims
              Amazon.Com (Seller Services)
              • Amount Involved: $ 4,648.97
              • Claim type: "I Just Feel Ripped Off." & 2 more.
              • Posted on: 01/16/2015
              Dear Amazon.com Representative,

              My name is Mustafa Amir. I was active seller on Amazon until my account was suspended with 90 days hold on funds $4623 and with over $2000 of inventory in Amazon FBA. My funds were supposed to released after 90 days although now after logging into my account I coul....
              • Amount Involved: $ 7.99
              • Claim type: Commercial / Other Dispute
              • Posted on: 09/20/2013
              I was seller on amazon.com for 2 months, my id was "katehotdeals" and I was doing pretty good I guess, no negative feedback, no complains.To make my business growing I decide to use FBA (fulfillment by amazon), amazon claims that 18% more buyers use FBA cause their trust amazon. I borrowed money fro....
              • Amount Involved: $ 47.00
              • Claim type: "I Just Feel Ripped Off." & 2 more.
              • Posted on: 03/23/2013
              I have been a seller for Amazon.com for over 1 1/2 years now. I have sold several items and I have done a very good job. I have only a total of 80 people who gave me feedback. Unfortunately, most of the people who file are the ones that only want to complain. And, one thing that I had happen was....
              • Amount Involved: $ 561.45
              • Claim type: "I Just Feel Ripped Off." & 5 more.
              • Posted on: 12/10/2012
              I am a seller on amazon. Basically I found a deal on google, and wanted to make some money by selling it. So I put it on the amazon. Then when someone bought it, I ordered a nexus 7 on google.com and shipped it directly to the buyer. (Order 104-1969409-1780231). The buyer wants to return it to me be....
              First Data Merchant Services Corp
              • Amount Involved: $ 169.00
              • Claim type: "I Just Feel Ripped Off." & 2 more.
              • Posted on: 01/17/2012
              I hate when a service can deduct money from your account when they feel like it. Credit card merchants are the worst I can't believe that someone has not stopped these companies from taking money for any reason that they can think of one companie was insurance this one was some kind of compliance I....
              Ignite Payments / FDIS / First Data
              • Amount Involved: $ 5,207.99
              • Claim type: Bad Business Practices & 5 more.
              • Posted on: 06/30/2014
              They are holding funds from me $7,256.00 I'm small business, they been holding all my credit cards transactions I can keep processing transactions with my credit card terminal and they don't toll me a amount they going to hold and until when. My bank account is in red they keep trying to charge me f....
              • Amount Involved: $ 1,460.00
              • Claim type: "I Just Feel Ripped Off." & 5 more.
              • Posted on: 01/21/2012
              I was trying to start up a small company, of my own.. I needed a gateway Company, that would allow me to take Credit Card, orders, over the phone. They did a back-ground check & said OK.
              After about 2 months. Everything was working perfectly. I was making about 1 to 3 thousand dollars a month.....
              Square, Inc. (Merchant services)
              • Amount Involved: $ 600.00
              • Claim type: "I Just Feel Ripped Off." & 3 more.
              • Posted on: 04/24/2016
              I started using a square to take debit and credit cards at my business. I changed my checking account at my bank but unfortunately forgot to tell them immediately. When I did inform them it still wasnt deposited/ I can not reach them by phone so I have emailed them numerous times with my phone numb....
              • Amount Involved: $ 8,786.66
              • Claim type: "I Just Feel Ripped Off." & 5 more.
              • Posted on: 10/05/2012
              I signed up with Square to do my retail Store's credit card processing on August 9, 2012. With almost no questions asked of me or my business they started doing my store's credit card processing within 2 hours. All went fine the first week, they did what they advertised & deposited all monies from....

              Timeline

              October 28, 1974

              The Fair Credit Billing Act (FCBA) is enacted by Congress as an amendment to 1968's Truth in Lending Act. Today's electronic chargebacks derive from FCBA Section 161, "Correction of billing errors," which established rights of consumers and obligations of creditors provided a purchase by credit card (or other "open-ended" credit account) is disputed in writing. The new law took effect in 1975, one year after enactment.

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