Bad business practices can cost your business. Steps you can take to keep yourself from being a victim of fraud or bad business abuse.

Credit card chargebacks are part of business. You can, however, prevent most credit card chargebacks. There are even times when they are proper. But charging back a product and returning that product and charging back services that have been delivered as promised are two different things.

In my business, for example, I put a number of statements in my FAQ and my contract telling the client the position my company takes regarding these issues. For example, chargebacks or stop pays on checks or any attempt to stop a payment is considered theft and treated as fraud. Services once done cannot be undone. It's not like merchandise which can simply be returned. In addition, a client is buying my time and my skill and not a certain result or tangible item like in the case of software or a book or a toy.

My agreements further state that any issues regarding my work will be resolved through negotiation, but in no case by refund. Chargebacks and stop payments will be publicly blacklisted and reported to the appropriate offline and online authorities. Clients responsible for chargebacks will face severe legal consequences and penalties.

I have only had one client hit me with a credit card chargeback. It was for around $5000.00 so it was quite costly. It created a good deal of trouble for me. I've only had one client not pay the balance of what he owed me. (That was when I allowed clients to pay in two payments rather than in full, in advance.) I've had only two clients (a father and son) stop pay on a check after the copy was completed but before they saw it.

It could have been worse. Fortunately I don't have many bad clients. Odd the ones I've had are in California. I've had thousands of clients and the majority have been just a pleasure to work with. The majority of them have not tried to screw me out of money. I think that three or four bad apples out of as many clients as I've had amounts to very little in the scheme of things. But they are an annoyance. They are costly. And they will go to other businesses and create problems. They may be headed your way next!

When we see lots of chargebacks and refunds, stop pays and the like happening to lots of other online business people, we begin to see a pattern of bad business practices.

Many online businesses are getting tired of this sort of thing and taking action.

Even government, not known for being a smart entity, is taking to the net to shame people who owe money. According to an article in Stateline.org,

"More than a dozen states are banking on public humiliation on the World Wide Web to shame businesses and individuals into paying millions of dollars in overdue state taxes. Using catchy names such as CyberShame and Debtor's Corner, states are electronically publishing the names of tax delinquents.
Publicly embarrassing taxpayers in cyberspace is one novel tactic cash-strapped states are using to come up with enough money to balance their books."

Bad clients cause us to change our ways.

I no longer let clients pay in installments. I no longer accept credit cards except with an iron clad agreement including a notice that a chargeback will result in public publication. And should a client stop payment on a check, I take legal action. Fortunately, that has only happened one time so it's pretty much a non-issue. And now that I've stopped taking chances, I don't get bad clients, at least as far as the money issue is concerned.

I don't necessarily advise you to do this. It may or may not work for you. But I'm more than happy with this method of business.

Here is a policy about chargebacks that Venturecapitalguru.com has on their site. I found it a good one. Again, whether it would work in your case, I don't know. You always need to clear these things with your attorney.

No tolerance policy with charge back requests.

We reserve the right to file civil charges against bogus charge back requests based on the the digital identity law as used in Texas. This new law accepts IP addresses as legally binding proof of your identity and your order. By ordering, you agree to pay any and all civil damages (which are considerable) if you dispute the charge with your credit card company. Disputes concerning charge backs will be resolved by a board of arbitration of our choosing in New York, NY.