Some Ontario businesses say credit card chargebacks are leading to scams

A credit card chargeback is something a consumer can do if they want to dispute a credit card charge because it was fraudulent or they didn’t receive the item.

While it can be a helpful tool for consumers, some businesses say the chargeback process used by credit card companies also creates a loophole for customers to receive an item, dispute the charge and then keep both the item and their money.

Toronto resident Eka Maysyuk said she has a custom stonework business called KM Haus Solutions in Etobicoke, which sells custom-made stone products for home interiors and exteriors.

He said that over a year ago, he sold almost $ 90,000 worth of products to a client to install on his house.

Fourteen months later, the client requested a chargeback through his credit card company seeking a full refund.

“I was shocked. They want to take $ 90,000 dollars from me a year later, “Maysyuk said.

While Maysyuk said she did agree to take back some of the stonework to help the client sell it because he didn’t need it all, the majority of it is currently on his house, still he is seeking to get his money back and keep her product.

“I can’t understand how this can happen, you use the product, it is clearly installed on your property and one year later you come back to the company and you want all your money back. It doesn’t make any sense, ”Maysyuk said.

Bradley Williams operates Northern Games in Lindsay, Ont., Selling collectibles and sports memorabilia.

Two buyers used credit cards to purchase high-end sports cards and all the transactions went through, but weeks later they did a chargeback on all the purchases they had made which totalled $ 120,000.

The chargebacks went through and they got to keep Williams sports cards and the $ 120,000.

“They bought roughly 30 boxes of cards. They purchased about $ 120,000 worth of product off me and now every dollar has been charged back to my credit card, ”Williams said.

Williams says if the credit card company does not return the $ 120,000 he may have to close his business.

“They are telling me I am liable for their cards being fraudulently used. I shouldn’t have to investigate every person who uses a credit card at my store. That’s not my job, “Williams said.

Geocomply is a fraud prevention and cyber security company based in Vancouver, which helps businesses combat chargeback fraud.

“Not all chargebacks are fraudulent, however we have seen a massive growth of chargeback fraud since the onset of the pandemic,” said Isabella Edmonds, government relations associate with Geocomply.

A study by Juniper Research found customers who have had a successful chargeback are nine times more likely to repeat it. The study also found that 43 per cent of merchants believe they have no chance of winning a chargeback dispute.

Chargebacks are now also used by fraudsters, who are trying to take advantage of the system by buying products with credit cards and then requesting chargebacks.

“Unfortunately if the merchant ends up losing this chargeback dispute, they end up losing money to the fraudsters who end up keeping the product they have purchased as well as the return of the funds,” Edmonds said.

Maysyuk is now in a legal dispute with her customer over the terms of the purchase of the custom stone, as well as the chargeback of $ 90,000 and has decided to close her business.

“My amount was so large I decided to fight for it, but if customers do smaller amounts, businesses may not be prepared to get into lawsuits for those amounts, so they are just out of pocket,” Maysyuk said.

The Juniper Research study also found a lot of chargeback fraud happens when a credit card is not physically present and it found between 2019 and 2023 retailers worldwide will lose about $ 130 billion to chargeback fraud.

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