What should I do if I suspect fraudulent order?

[jerberson12]

Note: This is for merchant account, not Paypal.

I have read a couple of articles about what to do with fraudulent orders and somewhat each of them have different recommendation.

There is a common process that each of the articles I have read in things to do for possible fraudulent orders. You can verify there identify by asking for a photo of there ID/driver's license, a selfie of them holding the ID, and the photo of the credit card they used. Another thing, is to call the card processor to verify there information, and there's more way.

But my question is, what should I do after that?

If I have confirmed that it is fraudulent order, my big question is:
Should I issue refund or wait and absorb the risk later on if it happens (chargeback).

Some article says is to refund for the reason to avoid the chargeback that may happen later.

Some articles says, don't do the refund, just wait for the chargeback if it happens because, if you refund, the cardholder can still file a dispute and you may incur double charges , the refund and the chargeback.

I am confused in what to do at the moment.

[Jamsym]

Personally i would choose the second option every time.

[jerberson12]

Originally Posted by Jamsym

Personally i would choose the second option every time.

CHeck your PM thanks

[rsot]

If you have CONFIRMATION of fraudulent order, why would you put yourself at risk of a chargeback AND losing product?

[Jamsym]

Hey,

Ill post here for others aswell rather than use PM.

(this is only my personal opinion)

The reasons id choose the second option:

1. You risk refunding money to the thief in control of the paypal account which they can then possibly still cash out or use to hurt other sellers.
2. If a double charge back is possible then it costs you money
3. If its an instance of a hacked paypal account, the original owner might contact you first without filing a chargeback. ( this has happened to me before) Once you are sure the account is in the correct hands then you can refund.

It seems by just refunded you are giving yourself a negative freeroll, plus enabling the thief to possibly walk away with the money still.

[jerberson12]

Originally Posted by rsot

If you have CONFIRMATION of fraudulent order, why would you put yourself at risk of a chargeback AND losing product?

Hi there,

Ofcourse, If the order was confirmed fraudulent, none of the product will be shipped. The thing I was asking is that do I refund or wait and absorb the possible risk later which is the chargeback if it occur.

I posted this on Payment Processing because this is not Paypal, this is for a merchant account.

[Jamsym]

Hey,

I just re-read the thread and realised it wasn't paypal specific.

However i still think my points make sense if you swap Paypal for (another payment processor)

There is no way you should be refunding money to a thief who can potentially harm others.

If you are certain of misconduct and want to cover yourself in the best way possible then id suggest emailing your payment processor, explaining the situation and letting them handle it from there. At least that way you have been fully transparent and the risk is out of your hands. I cant imagine a scenario where refunding the thief is better.

[jerberson12]

Originally Posted by Jamsym

Hey,

Ill post here for others aswell rather than use PM.

(this is only my personal opinion)

The reasons id choose the second option:

1. You risk refunding money to the thief in control of the paypal account which they can then possibly still cash out or use to hurt other sellers.
2. If a double charge back is possible then it costs you money
3. If its an instance of a hacked paypal account, the original owner might contact you first without filing a chargeback. ( this has happened to me before) Once you are sure the account is in the correct hands then you can refund.

It seems by just refunded you are giving yourself a negative freeroll, plus enabling the thief to possibly walk away with the money still.

Thank you.
Just to clarify that this is not Paypal, this is for a merchant account thus I posted it in the Payment Processing discussion.

The dispute process is similar.

My only concern about this method is that when you get chargeback, you pay fee and you get hit with negative points on your merchant account. Just like Paypal, they will freeze your funds when you have more than 2% of chargeback.

My big concern on refunding the cardholder is the double charge, you issue the refund plus the cardholder can still file dispute chargeback and take funds from your account, thus doubling the charge.

I need to figure out which one weighs more pros.

[Jamsym]

See my post above yours,

Don't forget, you pay these payment processors a fee for them to deal with this kind of thing. As long and you're being transparent then this is not your problem. Pass it over to them and let them decide the outcome.

If you have strong reason to believe a transaction is fraudulent and report it to the payment processor then you should not be penalized.

[jerberson12]

Originally Posted by Jamsym

See my post above yours,

Don't forget, you pay these payment processors a fee for them to deal with this kind of thing. As long and you're being transparent then this is not your problem. Pass it over to them and let them decide the outcome.

If you have strong reason to believe a transaction is fraudulent and report it to the payment processor then you should not be penalized.

That is somewhat the problem - when you open merchant account and start accepting credit cards online, you take full liability, that is the stupid rule.

You have low liabilities on Paypal but with merchant account, your risk is higher and you take some of the responsibility.