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September 27th, 2010, 09:18 PM #1
Need help with Credit Card Authorization form to protect against chargebacks
- Join Date
- October 19th, 2009
We offer a license-based service where the client purchases 1 or multiple license and pays on a monthly-basis in order to continue using the service.
Currently we make them sign a credit card authorization which indicates:
-number of licenses being activated
-cost per license
-total monthly charge amount
-clearly states that we will automatically renew their service every month unless canceled by email or certified mail.
Now what happens is after they sign the form they decide to either:
-activate additional licenses a few days later through their web account (they can simply log in and purchase more licenses)
-cancel licenses throughout the month
For example, a single license costs $100/month, and the client purchases 3 licenses which comes out to $300. So on the CC form they indicate 3 for # of licenses, and $300 for total charge amount. Then maybe 10 days later they log into their admin and pay for 5 more licenses (which gets prorated based on # of days left in their billing cycle) so when this scenario occurs we currently contact them and ask them to send us an updated credit card authorization form with 8 for # of licenses, and $800 for total charge amount.
Sometimes we run into issues where the client gets auto-billed the following month since they never canceled and they decide to do a chargeback. Or they don't need as many licenses as they did the previous month and decide to do a chargeback for however many licenses they don't need. We win 99.9% of our chargebacks because we always have an updated credit card authorization form on file which indicates the amount they get charged for.
The problem we have with this process is that we need to send the client a new credit card authorization form every time they pay for additional licenses or cancel licenses and ask them to update it with the correct number of licenses and monthly charge amount. This way whenever we do get a chargeback we usually just send the bank a copy of the credit card authorization form and that's all we need to do.
This has become way too much work because we are growing and it requires us to constantly chase after the client to get them to fax/email in an updated form. And if they don't send it in a certain period of time we suspend their service until they do. However all of this is just a big mess of manual work because it irritates our clients as we are literally stopping their service even if we have given the plenty of warnings and at the same time it takes up too much time for which we do not have the resources for (manpower) to constantly contact them and ask them for an updated credit card form.
So my question and help that I need from you guys is the following:
What language or how can we protect ourselves in a way where they sign 1 single credit card authorization form where it authorizes us to use that credit card to pay for any/all licenses that they decide to activate. I know there are plenty of companies out ther where there is no credit card authorization form to sign and they rebill the customer unless they cancel, however in our case we are dealing with b2b customers and our average rebill amount is over $600/month so it's not a small-ticket charge. Up until now we have done it our way to protect ourselves as much as possible, but I'd like to know if anyone has experience dealing with such a problem and what your process is like. Is it possible to have 1 single credit card authorization form which we then add to their account for them to log in and use to activate additional licenses at any time? Or are there any better ways of doing this? I would really appreciate any insight you guys might have on this
When we contacted Visa they would not give us a clear-cut answer and Amex told us that our credit card authorization form needs to indicate the exact amount that will be charged every month, which is not true because we fought a chargeback for Amex where we didn't have the proper amount on the authorization form, but we still won after providing documentation. So more or less no one at Visa or Amex really wants to give an accurate answer because there doesn't seem to be one ??
I appreciate any help/advice I can get!
September 27th, 2010, 11:50 PM #2
Why can't you treat each purchase as an individual purchase that does not get turned on until they have paid for it and filled out the form instead of combining separate purchases and prorating the amounts? I would guess that each license has a number and only those numbers are covered in the original authorization so any additional purchases (and authorizations) could be separate. That way you would not need to wait for forms and turn off services. The customer would only have the services that they have authorized billing for.
Maybe there is some reason it can't be done that way, but if I had the situation you describe, that's what I would do.
September 28th, 2010, 12:21 AM #3
- Join Date
- October 19th, 2009
September 28th, 2010, 10:49 AM #4
It's time to seek the guidance of a good accountant and develop a traditional invoicing system. Credit cards are great for consumer purchases or for a one time business expense, but recurring charges are more efficiently handled in more traditional ways and will provide you with much greater flexibility. You can continue to accept credit cards for customers that prefer to pay their invoice that way, but you will effectively remove the transaction based nature of the way that you're currently doing business.
I understand that using credit cards create fewer collection headaches but they're no longer convenient for your business and many potential customers may find that the requirement for credits cards cumbersome and expensive. And since you're selling a service rather than a physical product, collections shouldn't really be a major issue, you simply suspend the service on non-payment and you can always attach a late payment penalty to delinquent accounts.
-rematt"I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon
September 30th, 2010, 07:01 AM #5
If you don't have that signed authorization, you'll probably go from 99.99% to 0.01%. I don't see a way around it if you really want to protect yourself.
September 30th, 2010, 09:14 AM #6
... numbering (serializing) the ‘blank authorizations forms’ adding a separate section (requiring a second signature) that they “authorize all future renewals and purchases resulting in future renewals to be billed under this numbered/signed agreement” and then (for returning customers) make them check off a box that they agree that renewals will be “billed under signed agreement xxxxxx that is on file” with a link to a scanned version of the document (or a link to request a copy of the agreement).. and adding the same exact text and link in the confirmation email to the customer.
You could also have the customer fill in the document number...
Adding the canceling timeframe/renewal date/policy to the checkout as a mandatory check off box and including the same information in the confirmation email fills some more holes.
Making sure you get and exact copy of the customer confirmation email also helps as sometimes the merchant copy is a different format. (make your confirmation email look as much like the screens during checkout as possible..)
Some of the merchant payment systems also allow including a memo/product description field and referencing the monthly billing and authorization document number in this section can fill more holes. (and customers/merchants get a copy..)
If you go this way you’ll need to be sure that the signed documents (if kept online) are stored so they can’t be hacked.Skip/Owner CCBerries.com
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November 2nd, 2011, 10:36 PM #7
- Join Date
- November 2nd, 2011
just make sure you have a signature. 99% of time you will win.
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