Authorities have suggested they are essentially unaware of chargebacks being a problem for SMEs, with business owners implored to report dodgy practices.
A spokesperson for the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has told My Business that it is interested in hearing from affected SMEs, but that to date only a tiny number of complaints have been lodged.
“The Ombudsman’s office has received two calls for assistance on this issue, which has been raised with ASIC as the responsible regulator,” the spokesperson said.
ASIC has not provided comments on the outcome of those reports, with a spokesperson saying it is policy not to discuss operational matters including “confirming or denying whether we are looking into a particular matter”.
However, the spokesperson did note that chargebacks were generally governed by the card scheme’s conditions.
“The ePayments Code provisions about unauthorised transactions are distinct from the chargeback framework, which is set out in the relevant card scheme rules and the Terms & Conditions between the merchant and their financial institution,” the spokesperson said.
“Accordingly, the rules for fees charged by banks for the processing of a chargeback sit outside of the scope of the code. We understand that chargeback processing fees are generally disclosed in or with a bank’s merchant agreement.”
Of the other financial and payments-related watchdogs, AUSTRAC has declined to comment at all, while the Financial Services Ombudsman was not immediately available. My Business has also reached out to card provider Visa for comment.
It comes after Westpac has denied it is responsible for determining when a chargeback will be made, instead saying that “chargeback rules are determined and set by the card schemes themselves, not the bank.”
The issue has been a hot topic among business owners, however, with many sharing examples of substantial losses at the hands of fraudulent transactions, fees added on to the actual chargeback and time spent trying to fight unfair chargebacks.
“This action of purchases being written back has influenced me to close the doors of the business by the end of the year,” one My Business reader said.
“It has grown as an issue as clients become aware how easy to write back even for an online purchase that has been shipped to an address. Even though we are a $2m turnover business, previously it was about $2,000 per annum but this year it has risen significantly and the merchant providers are unwilling to help or provide a method to stop the practice”
Another added: “I’ve run an online store selling cosmetics for over 10 years and can say that we have dealt with almost $100k+ in fraud during this period.”
Said a third: “My business has lost $1000s to cc fraud. I suspect one group [was] hitting me repeatedly even going as far as doing legit orders first to establish trust then the next order a stolen card … I even heard of instances where the customers wait a few months when tracking details are no longer showing up on postal services sites then claiming they never rec[ei]ved the goods.”
Yet another criticised their bank for imposing the chargeback without warning, resulting in a tangible hit to the business’ cash flow, and raising the prospect of it being unable to pay staff wages.
My Business understands that despite the number of regulatory authorities and oversight bodies, complaints about chargebacks arising from fraudulent card purchases should ultimately be reported to police, since it ultimately involves the theft of goods.
Indeed, the ASIC spokesperson said: “I'd suggest contacting state police or consumer affairs about fraud.”
However, the ASBFEO spokesperson expressed interest in receiving evidence of wrongful chargebacks from affected business owners, so that it can determine whether to launch a full investigation.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.