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Winning Stripe dispute with "lazy" customers doing chargebacks


#1

Hey!
I am running SAAS subscription via Stripe and recently got few payment disputes from two customers (and each disputed payment, surprisingly, counts as a separate dispute and affects my dispute rate).

It’s clear that customers did not make any effort and reached out to us, asking for refunds, which, we would be more than happy to process, if only we were aware of them.

Having said that, I want to ask you what do you do in this situation? As we all know dispute rate seriously affects your ability to process the payments and anything over 1% will very likely blacklist your service in particular card processor, not to mention, your Stripe account will shut down.

We will very likely submit an answer to the dispute through the Stripe’s dashboard but I wonder how to format it all so we can actually win it. Will letting the card processor know that the customer never asked for a refund (or cancel their subscription) will be enough? Anyone was in similar situation and actually won the dispute?


#2

what do you do in this situation?

I accept the dispute and related charge, let the customer have their money back, swear to myself, and move on.

Although I sometimes feel I can win the dispute, it does take time and energy that I can’t use for other tasks.


#3

Actually, that’s very bad for your business - by simply “accepting” dispute, you contribute to your dispute rate being high and you might even ruin down your business. It’s not about money here but about dispute rate itself.


#4

That’s right, but only if the dispute rate is high. We have a very low rate of disputes. If the rate went up, I’d start investigating what I could do to preempt disputes, such as improving communication before charging customers.


#5

It’s not necessarily bad if it is a low ratio of chargebacks to successful transactions.

Here’s what I currently do at DNSimple:

  1. Attempt to detect fraud early with Sift Science. By catching fraud and refunding the charge, we avoid the issue of chargebacks completely for some transactions.
  2. Contact the customer in any non-fraud case and ask them if the chargeback was intentional. If it was not, ask them to contact their bank and reverse it.
  3. Respond any chargeback that comes from a customer that is claiming they cancelled the service but has not (yes we get these) with a screen shot showing their active subscription. We have won a number of disputes because of this.
  4. Try to make it easy for people to cancel their subscription, provide a clear guide on how to do so in our support documents, and reference people to this document whenever they ask via support.

#6

What is most frustrating is when they do a charge back and they know it was a legit transaction, for example they will have a credit card stolen and do chargebacks for all recent transactions. When asked about it they know it was a legit charge, and are happy to pay again with their new, but thought they needed to chargeback everything!


#7

This is not the case, at least from my experience. If you have chargebacks from only two customers, it’s not a problem at all, even if they make 10-20 chargebacks each. It’s just you lose the money - returned amount, payment processor fee and chargeback fee. I’ve seen periods like this, 2-3 customers issued lots of low-amount chargebacks, the chargeback rate went to almost 4%, but nothing happened. It’s not with Stripe, though, but rules more or less the same everywhere.

There’s little you can do. Proceed with chargeback, return any other payments from the same customer(s), disable their services, ban them from purchasing anything from you (in all your businesses) in the future.

In order to avoid it in the first place: make sure that your offer on the web site is clear - so that people know what they pay for, make it clear the payment is recurring (if that’s the case). Make sure that you send them invoices, received payment notifications, etc. regularly (2-3 emails for each payment) - this will increase the chance of them contacting you about those payments instead of issuing chargebacks.


#8

Hey Dmitry,

Are you sure this is how it works? I hope too. Because currently my dispute rate is 0.37% (5 disputed payments on over 1300 made) so it spooked me out to the point where I started canceling subscriptions of “ghost users” and refunding them last payments.
I am going to write an email to Stripe support now and ask them about this because this seems just too easy for one to hit 1% and damage the business. As you are saying, there must be something more complex involved in the way the dispute rate is calculated (more than just total successful payments made / dispute payment).


#9

This is what I’ve seen myself. Payment processors do not close seller accounts just because couple of customers made a number of chargebacks. They tend to do that if different customers regularly make chargebacks. It also appears the rate is calculated for longer periods, like quarterly. When there are lots of chargebacks, they may thinks what you’re selling is a scam and they’ll want to close the account because of that.