Established in 2009 PaintAccess is the first commercial online retailer for paint accessories, the #1 paint accessories retail website in Australia, many of the top paint brands like Uni-Pro, Oldfields, Purdy, Dulux, Graco and Rust-Oleum choose PaintAccess. Our aim is to provide quality paint and accessories along with great customer care at affordable prices to everyone.
Being an online business fraud was definitely something we were aware of and tried to safe guard against, but when it happened, it got us big time. What we weren’t prepared for was a double whammy – out of pocket and product! We felt sad and angry; fraud is a nasty reality to every business (every Australian online merchant needs to have a merchant account with some financial institution) we experienced feelings of distress when we knew that it was highly unlikely that the perpetrators would be caught. Luckily for us it didn’t ruin us, it is something we are still battling and are hyper vigilant against. Online fraudulent transactions are not something you can spot straight away; sometimes you don’t know that it is fraud until 3 or 4 weeks later when you receive a letter in the mail from the bank saying that they will issue a charge-back against you. (A charge-back is when the original cardholder or their respective bank notified your bank, that the cardholder did not authorise that specific transaction.) The cardholder’s bank usually accepts these claims, issues a refund and tracks down the merchant for those funds.
Good for the cardholder, not so great for the merchant.
It was when we received a letter that we became embroiled in circumstances involving police, our bank and the Ombudsman. The letter stated that “only if we have proper documentation that the original cardholder has authorised the payment, would the funds not be deducted for the charge back.” The only way to prove that is by having a written statement from the original cardholder that the payment was authorised.
This is a Catch-22 situation, as the original cardholder has already put in a claim stating the opposite. How on earth is a Merchant supposed to prove that the cardholder who paid for the order was the original card holder and that they have in fact authorised this payment? We don’t know who the fraudsters are and have no resources to track them down and hold them accountable.
The onus is on the Merchant to detect fraud, prevent it, and pay for it when it does happen. The current law states that the merchant has to change the customer’s mind to decide to pay for a fraudulent transaction; there is no incentive for the banks to act on behalf of the merchant. When we tried to debate with the bank about not giving us any real options for appealing the charge-back claims they forced us to pay or have our merchant account closed. Our argument was that the banks should take at least partial responsibility, as they’re more capable of absorbing the costs than small businesses. We were blind sided by our bank when they closed our account with no warning. We were left scrambling to set up another merchant account (now with PayPal it is a lot friendlier when it comes to dealing with claims. Any orders paid with PayPal are actually covered under their Sellers Insurance, which protects us from charge-backs, and any orders made with Credit Cards are still subject to the same Australian laws that make us responsible but PayPal is quicker to detect and decline a potential fraudulent order), and lost sales – AGAIN!
We are still in negotiations with our old bank regarding repayment of older charge-backs. At first they would not budge on the total amount owed, but being able to provide evidence of another small business being subjected to charge-backs and their bank waiving the charge-back funds (thus setting a precedent) which made our bank reconsider and lower the total charge-back amount to almost half.
We tried several different methods in dealing with this situation. We involved the Police, making statements regarding all the charge-backs and as much information about the fraudsters that we knew. While not necessarily able to track down the fraudsters, the benefit of making a police report is to have evidence of fraud and being able to submit the report to the bank and/or the Small Business Ombudsman. We were communicating with the small business ombudsman for a year, to help decide on our position, they reluctantly sided with the banks because of the current laws. They affirmed that it wasn’t always the fairest of laws.
All this while still trying to run a business and deliver quality customer service, it was all a very stressful and a steep learning curve. PaintAccess has put in some additional, serious measures to detect and prevent fraud. This includes fraud filters that alert us or even automatically decline an order if it reaches a certain threshold of fraudulent activities. At one stage we even had a Fraud Insurance app in place but that app was too costly. We have become skilled in spotting the patterns of a fraudulent order, fraudsters typically go for single, high-value machines that are easily resalable, they don’t shop around, they don’t spend any time on our website or leave and come back more than once, these are big, red flags. Even with all these measures, we are still not immune to charge-back but we have received less.
We believe to keep up with the ever-growing online market in Australia, the government needs to seriously re-evaluate the laws concerning online merchants and provide more assurances or measures to protect the merchant. There needs to be a change in the laws that would put the onus on the bank to prove the cardholder wasn’t real or protect the merchant from charge-backs, otherwise small business may get scared away and before you know it, we’ll only have 3 major online retailers to choose from as they can afford to absorb the losses.