My Merchant Account Blog

Sell Your Chargebacks

Saturday, January 07, 2006

Ever get hit with a chargeback for service or product provided? Are you tired of giving away your hosting services, other services, or products for free? Why not consider selling your chargebacks and NSF checks. There are companies, like CRB Company, that specialize in buying chargebacks and NSF checks. You get paid, upfront, a % of the face value of the chargebacks/NSF's and they are responsible for locating and collecting from the consumer. For those that are selling webhosting plans for $19.95 a month, this might not seem to be worth it to you. Now, with the help of Host Legal, we have come up with new TOS for your company which may allow you to add fees to your chargebacks / NSF's. You have to have the fees listed in your TOS to be effective. These fees will vary from state to state.

Once these fees are calculated, you might be able to get at least the money back for the services rendered as well as the chargeback fee imposed by the Merchant Account Processor (MAP) or Third Party Processor. While it will not help you on your chargeback percentage, it will help on your receivables. Each service, chargeback, and returned check is different – just like a merchant account. I recommend that you contact CRB Company for more information on selling your chargebacks and returned checks since they also have some minimum requirements, which vary from merchant to merchant. They primarily deal with United States consumers. And if you have a webhosting company, check out Host Legal for more information on TOS if you are a web hosting company.

One thing to keep in mind, if the charge is known to be fraudulent, CRB or any other company, will not buy your chargebacks. The easiest way to tell this is if there was a police report filed. If so, CRB Company and most other companies cannot enforce these on the consumer. Feel free to contact CRB Company today for more information. If you provided the services or products to the consumer within your TOS and AUP, and they do a chargeback, chances are that you should be able to get your money back. For example, someone signs up with your hosting company and they use your services for one month. The uptime is well within your SLA. Yet, at the end of the month, they leave and decide to do a chargeback. Consider getting your money back. Or maybe you sell a script to someone. And maybe even help them install it. Then two weeks later - you get the chargeback notification. You know they are using it, but due to Visa's rules on chargebacks and the internet, you really do not have a leg to stand on. Consider speaking with CRB Company to get your money back for that script.

The extra charges that you are able to tack onto a chargeback or NSF check is state sensitive. Unfortunately, the resources to locate each of these numbers are very low. I recommend that before you update your TOS, to check with your attorney or State's attorney.

Now you are probably wondering what fees might be imposed? Well - to only give you an idea, let's say that you have a webhosting plan that is $19.95. After one month, the consumer cancels service and does a chargeback. What happens now? You get charged $15-$50 for that chargeback on top of the $19.95. So you are out $34.95-$69.95 right now. Now here is where it becomes tricky. What to "charge" exactly. You can charge the $19.95 and the chargeback fee. This is a start, but CRB Company and others are only going to give you a small percentage, so right now you are looking at probably only looking at $3-$7.00. Not too much so you will need to determine what your state might allow, possibly 3-5 times the amount of the chargeback along with a not too exceed amount. Let's say you charge 5X the chargeback, $60 recovery fee and your other chargeback fees ($25.00 from your MAP). This would be $204.70. And selling it to CRB could net you about $20.00. This is only an example.

Guess it is about time to update those Terms of Service. Good luck!