Chargebacks are not fun, but they are a fact of life. When a consumer challenges are credit card charge, the consumer is entitled by law and contract to have their case heard, and in the meantime the middlemen must make sure they won't be left holding the empty moneybag.
It is entirely reasonable for the Square to make sure funds are available to pay the consumer debt should the consumer prevail - Square will be out that money regardless of whether Jason pays up.
To be frank, based on his attitude, Jason seems like the sort of guy who would refuse to pay up if the dispute had been decided against him and he disagreed with the determination. This is exactly the reason Square was and always will be justified in freezing the amount associated with any chargebacks. There is a process for handling chargebacks that you submit your self to in exchange for the convenience of getting money quickly from the credit card system. That money is only yours if the consumer does not challenge the charge - usually they don't, but you are responsible to pay if they do, and you are responsible for funding your account to cover whatever level of chargebacks your business sustains.
It is entirely reasonable for: 1) Square to freeze funds associated with chargeback attempts. At this point, Square is out those funds. 2) Square to withdraw funds from a link account if the Square account is empty. It's the responsibility of the merchant to keep funds available to handle chargebacks, as I'm sure is clearly stated in their agreement. If the merchant has kept all funds out of reach of Square, by withdrawing all their money from the account and keeping the associated bank account empty, the merchant is indicating that they do not intend on fulfilling their end of the bargain on having a merchant account - namely honoring chargebacks and the determination process for chargeback disputes. If this withdraw results in NSF fees, particularly for a chargeback of such a small amount, that is the merchant's fault for not funding their account. Furthermore, NSF fees are easily avoidable by depositing funds the same day - why Jason did an electronic transfer is beyond me.
Based on Jason's ignorance of his own responsibilities, his refusal to keep money available to handle chargebacks, his empty and immature threats to "go to the press" among other things, and his general disregard for his role in the business relationship, I would expect Square probably wants to terminate his account, but will decide against that as it would be more bad PR than it's worth. They would be justified, however, holding funds for a longer period of time, since it's clear he refuses to keep funds available to handle chargebacks and to honor the largely fair chargeback process.
The only counter point I can think of is that, for a certain chargeback/total charge ratio, it does seem Square could take the risk and absorb any funds deficit. That is not traditionally how things work though, and since Square is doing their best to get merchants paid as quickly as possible, it only seems fair that merchants would do their best to ensure Square they intend to honor their end of the bargain. If Square did take on this risk for small chargeback amounts for merchants in good standing (say < 3% of total charges,) this would delay someone like Jason's understanding of the chargeback process until a real problem occurred - like a large number of customers demanding refunds. That might ultimately hurt Square more than it helps, both financially and in PR.
This is indisputably the most succinct account of what has transpired. I would have presumed there to be laws governing a minimal merchant balance -- placed on Square, then in turn passed on to its merchants -- to be maintained in good standing, good faith, and so as to be lawful.
Additionally, I find a poetic irony in his account with his own bank:
> At this point my bank has levied an insufficient funds fee on my account, however I was [surprisingly] able to [...] get the charges reversed.
To which I'm led to laugh: "So, Jason, you want it your way on both sides of the argument?"
It looks like Square adhered strictly to their end of the terms of service. They did exactly what they always said they would do. Jason is the one who screwed up and then demanded special treatment and then got huffy when they didn't give him special treatment.
Square defenders seem to think that Square was going to automatically lose the money when the reality in a case like this where the customer has a good track record is that 1) the chargeback may have been won and 2) Square may have been able to collect from the merchant had the chargeback stuck.
The author's experience strikes me as naive, (which we all are on our first chargeback) but notably, yes, it is his requirement to have enough money in the account to cover any chargebacks he may receive. Depending on his volume, most ISOs and/or acquiring banks would require a healthy reserve as well, should they come and find his bank account dry after he just charged a bunch of people money and then went running to Mexico.
The fact that they contacted him -before- taking money out of his account is striking. The normal process is to deduct the money from your account, notify you, and then give you a period of time to respond. If you respond with sufficient evidence, the chargeback protection service clears it, the money is then re-desposited back to your account. The other party then has one more opportunity to dispute and the chargeback handler may decide that you're not going to provide any more viable of a defense, and simply give up - or may push back again, effectively ending the dispute. If the dispute doesn't end in your favor, the money is taken again. If you drained your bank account in the mean-time, you may find your ability to continue to process cards through that ISO, or that Acquirer has been terminated.
The truth is, for many years people have perfected scams on both sides of the card handling process, and these responses have been developed to minimize risk for the companies in the chain.
What is this, a forum for dads of teenagers? "Getting money quickly from a merchant account" is a feature that services like Square can either try to provide insofar as the law allows, or not. I really don't see the point of making this a moral issue.
If expecting people to understand and work within the established system for handling monetary transactions is paternalistic, then I suppose this is indeed a forum for dads of teenagers.
No, it's a service, provided by Square, that you pay for.
Whether Jason is at fault or not, he's disgruntled and public. That's never good news, especially with companies who deal in something as sensitive as payments. Square built a great product, but they are in a very competitive space.
Just because you pay a company doesn't mean you have an unconditional right to do anything you want with a company's resources. You do not pay for unconditional money from customers via Square. Part of what you pay for, in fact, are the resources Square requires to defend disputed charges on your behalf. Part of what you agree to when you join Square is to comply with chargeback procedures.
You pay for the service, yes. You also agree to operate within certain parameters, and don't have a right to demand anything you want just because you are a paying customer.
This seems to be a common fallacy on HN - that any paid customer is deserving of bend-over-backward support, even if the payment amount was less than $1 - Square's net revenue from this transaction.
I didn't find any of the responses unprofessional. Not sure where the spammer accusation came from, they were just explaining how their ticketing system works.
The only thing to sort out is the response time. I would say any request for support on a payment issue is urgent. Even if it is a trivial issue like this. 6 hours would be far more acceptable than 24 though I guess there would be far higher cost to provide this service.
1.) They did not reply in a timely manor. They did not honor their self imposed SLA of 24 hours response time. 2.) They threatened him that more mails from him would get him marked as a spammer so he should shut up. 3.) Although they told him repeatedly that he needs not do do anything to get his money back, they did not give the money back into his bank account in the end.
Would attract fraudsters if they took this approach. The law of unintended consequences unfortunately.
- The customer service was pretty responsive and reasonably polite for a very fast growing company.
- The author notes he has paid Square hundreds of dollars in transactions fees so we can guestimate he's done $13k+ of revenue through Square (based on $400 fees & 3% average fee), $180 was hardly a critical amount for him
- What's the next best alternative, has anybody here experienced PayPal's customer service?
In context, having unclear policies and unresponsive customer service at the "still-somewhat-better-than-paypal" level isn't matching the expectations set by Square's marketing.
It's a billing goof. It's going to happen, and all parties are always going to hedge in their own favor to the extent practical. Pretending that Square (like Paypal) won't go after your bank account to cover a pending chargeback is just fantasy.
It's just you. Emails for a company at this scale enter a ticket queue, not somebody's inbox. Adding more tickets for the same issue impedes the company's ability to help other customers and doesn't get you help any faster.
They didn't scold him. They told him facts-- that it didn't help anything and that the system (i.e. the software) might flag him as a spam if he hammered on it too hard.
Regarding the core issue-- they have a stated policy on chargebacks. It isn't "guilty until proven innocent", it's "Square gets to hold the money in question until it's sorted out-- and when you set up your account, you connect an account and authorize us to debit $ to cover a negative balance".
This is just how chargebacks work. It's somewhat dictated by the credit card companies-- I'm not sure Square has much flexibility to have a different policy even if it made sense to do so (IMO, their policy is perfectly reasonable).
I take serious issue with your characterization that those Square responses were "pretty responsive" and "reasonably polite."
* They took several days to respond to a time-sensitive billing issue
* They claimed to provide support they could not and did not provide
* They refused to even acknowledge that this was frustrating for the customer
* They refused to acknowledge that their automated systems may not be doing the best thing for the customer
* Instead of owning any responsibility, they blamed the customer, several times
* __They still haven't given him his money__
All over a measly 180 dollars. Seriously - Square jerked this guy around for weeks over less than two hundred bucks.
How on Earth do you characterize those actions as responsive or polite? They weren't "responsive" to the customer's support interactions or his time-sensitive needs. They barely even "responded" at all, considering the e-mails they sent were clearly stock PR crap with some blanks filled in.
I just responded to someone else making the same claim up above (http://news.ycombinator.com/item?id=3956896), but no they didn't. They always responded the next day.
> * They claimed to provide support they could not and did not provide
What do you mean?
> * Instead of owning any responsibility, they blamed the customer, several times
They did? I must have missed that. All I see are statements of facts from Square. Maybe you're misinterpreting that given that Jason did in fact screw up.
Clearing funds at any time (not just on business days), as Dwolla proposes[1], will mitigate some aspects of the OP's concern.
It appears to me that Square's service is superb and prompt, especially when compared with a traditional credit card processor that won't even accept email inquiries.
[1] http://blog.dwolla.com/ach-goes-real-time-with-fisync-free-f...
And this is exactly how merchant accounts work. the only thing square might be guilty of is not fully clarifying this with their customer base as their base is mostly unsavvy in this realm
Ooops sorry about withdrawing $10,000 instead of $100. What's a decimal place among friends? Hope you can still make that tax payment and payroll while we futzy around on our end.
Chargebacks happen; and you shouldn't expect that you will get paid for 100% of your sales. Deal with it or don't accept credit cards - the rules of the credit card game favor the cardholder a lot, that's why customers want to use their cards.
This guy doesn't know how electronic payments work, and has clearly never had to deal with managing a merchant account before.
This part is also weird. He received a reply dated April 20th. He then says "the next morning" he received another email about the withdrawn funds, and he replied. Except his reply is dated the 24th. I have no idea what to think about this. Deliberate misrepresentation of facts?
A bit later on we do finally see a multi-day gap in Square's responses, where he emailed them on the 25th and Square replied on the 30th. However, Jason's email didn't actually contain any questions or actionable statements, only complaints and accusations of "thinly veiled threats". So I don't see the response gap here as being significant.
Square: There's a chargeback for 180 dollars. You can dispute it.
OP: I want to dispute it. Here's the information you need.
(no more than one day later) Square: Instead of just linking to our legal agreement we'll explain why we're taking money from your account. We have to withdraw the chargeback amount from your account because of regulations and stuff. There is more information at this legal link.
OP: I keep that account empty to prevent fraud. The transaction will fail or I'll end up being charged. Can I pay it from another account or can you wait?
(no more than one day later) Square: (if possible) Yes you can pay here (link to payment site). We will automatically try your account in a few days. You will here from us when we've decided on your dispute.
OP: Ok, here is my payment (or) funds will be in my bank account shortly.
(later on, after dispute is decided) Square:We ruled in your favor, the money is being debited back to your account. It will be available for withdrawal in a few business days.
Damn right you should understand the T&C BEFORE using the service like this. Doing otherwise is damn right irresponsible and shoddy. The people running into these problems have no idea what they are doing, they haven't dealt with real processing, and are blaming everything everyone but themselves.
Hell, even your comment is ignorant of the system that the customer agreed to use.
Guess what? Credit card users have certain rights, and if you want to accept credit cards, you have to play within those rules. This means chargebacks happen. This means you don't get paid. There are ways to reduce it, but you are still on the hook for it. Hell, even if the chargeback gets reversed, it's still held against you.
A shining example of this ignorant is right here:
> Square:We ruled in your favor,
That's not how chargebacks work. Square doesn't rule in any capacity. It's the banks. It's the client bank. Not Square. Not the merchant.
Every time a story like this pops up, we get a whole bunch of fools complaining and making reference to PayPal, and not a one of them has any clue as to the realities and reasons why.
And yes, I've done this. I've read the documents, and handled this. And it's always the same story. People whining about the company they deal with, when the reality is, the policy is in place to protect their customer.
Sorry I used the word "rule" instead. I was just quickly summarizing.
Yes you should understand the legal stuff BEFORE, but there's no reason that square couldn't explain it when they were doing something too.
This guy was happily following all the rules. Square was breaking promises (getting back to him in less than 24 hours).
Their process of pulling in funds when you have a negative balance is automated. (check)
He said he'd fund it from another source, but as far as I read (got really bored about halfway through) He didn't. So the automated process pulled in money from his linked account, as expected.
This money was crucial because square has to be able to refund the chargeback should it end in the customer's favor.
I don't understand OP's problem with Square. They handled this as best as they possibly could?
I disagree. Square handled it in a manner similar to waht we've come to expect from, say, PayPal. But I think many of us were expecting Square to be better than that.
The tone of the support staff was unsympathetic, responses took too long, the reply about sending in multiple inquiries was obnoxious, there was an over-reliance on links to terms of service, funds recovery seemed over-aggressive considering the customer's legitimacy.
Square took days to respond, then complained to him that emailing them more would get him marked as spam.
Followed up with
Your funds are eligible for automated release on or around 30 April 2012 once additional confirmation is secured.
That in no way implies that he doesn't have to have backup. It clearly states the process is ongoing.
This is a long and painful process, and its OP's fault for not having a system in place for when this inevitably occurs. He should have had back up money for such an occurance and didn't. That's his fault.
Finishing reading, there is that troublesome bit at the end about them not releasing his money as quickly as they should've - but all in all they did a damn good job considering their industry and their opponents.
I find myself agreeing with the two comments that are now on the OP's page.
Hope they solve this issue and improve their customer service .
This phrase caught my eye in the story "Per the network regulations, the debit process is automated and will continue to attempt to hold the funds associated with the dispute until it is resolved.".
Network regulations like the contracts they have with banks? Credit card processors? A relatively small startup may or may not be in a position to negotiate their own terms on such things, they're dealing with established players they have to do business with unlike a lot of other startups in other fields. Perhaps Squares own terms have been influenced or dictated to them in part by their own financial partners.
On the other hand, this persons own bank was able to reverse the automated charge and the fees associated with it, which itself should give at least some measure of comfort in the system as it exists, even if it's frustrating to watch it all happen without much direct control.
It should probably be obvious that having a buffer of funds to handle things like this is a good idea for any business, particularly if the terms of service for the payment processor note that things like this may happen.
It really shocks me that people are willing to entrust their business's finances with a company they cannot contact immediately.
I do exactly what the OP poster did - have a account that receives the funds and is immediately swept to an entirely different institution. I would not have even funded the account when square tried to pull from it. I do not make my main business account directly accessible via visa card, or direct transfers. Two different financial institutions are involved.
I especially am troubled by the assumption that because the OP is following this very good idea that square assumes that he is not viable.
He did clearly explain that the linked account didn't keep a balance and that he was willing to pay the negative balance in his Square account with other sources.
I don't see this as shockingly poor customer service, but Square should have just disabled the automatic debiting on his account as he was a long time trust worthy customer.
Square should not be required to keep a person on call to handle special cases like this or to ask merchants nicely for funds for every chargeback to an unfunded Square account. Automated ECH transfer from a linked account is fair and efficient, and once it is initiated can't be stopped.
The company that addresses this problem in the most painless way possible is going to win. We can thank payapl for demonstrating the worst way to handle it. The moral: be as least paypal like as possible.
I don't think its possible to cure the charge-back. As a merchant, you're going to lose out. That just seems to be how it works. The win will come from making the process as clear and painless as possible. Automatic systems that keep overdrafting your bank while sending you robo-responses are not they way.
For the record I have never received such "guilty until proven innocent" treatment from a company before and until now have sung the praises of square and happily paid the fees associated with your service. If this issue is not resolved immediately (today, 04/19/2012) I will no longer use or recommend Square and will close my account as soon as this situation has come to an end. I will also attempt to submit this request to your "support" system if I can figure out how to find a contact email address there. Your prompt response is appreciated, Jason J. Gullickson
Nothing in the initial correspondence from Square prompted an acerbic response. It sounds like the author felt threatened even though nothing really happened. Sort of confused why you'd have a bank account with no money in it when you're actively running transactions. Chargebacks, fees, and other miscellaneous activity are par for the course. Be prepared. It's not Square's fault.
She could have used the passive voice in her explanation, "when someone [blah blah] they will naturally inhibit", which would be harder to read as hostile. But that's a pretty subtle point that I don't think can be expected for someone who is likely judged on responses/hour and messages in queue. Plus, he was being pretty hostile leading up to this, so I think her response shows poise. These reps are humans after all, and they deal with irate and unreasonable people all the time.
I would definitely say funding is for increasing customer service and trying to create as many advocates of your service as possible!
Would it have a better result in terms of responsiveness if each new case was handled by a single CS rep until completed so that every response to an issue does not have to pass the entire queue before being dealt with?
Or would that increase net response time?
If every request takes at least 24 hours, then a sizeable segment of the population will give up trying unless something really big comes up. Responding quickly sends the wrong signal that CS reps are an effective way to solve issues and your volume will probably shoot way up.
I didn't, and I was unable to resolve the situation by working with Square, so I shared my experience, warts and all, with others in the hope that others can learn from my experience.
Could I have been more eloquent and professional? Certainly. But this is something I was dealing with in my "spare" time, (and for the record, as donated time and a favor to a nonprofit). If this was a business venture it would have been handled much differently, but I don't think Square is exclusively for serious business use (at least that's not what I get from their marketing).
So please feel free to criticize my actions; had I ran across a similar story myself before I found myself in this situation, it might have turned out better, so I feel it is worth taking a few shots if it helps someone else down the road.
Keep on hackin'
Jason
1) The author never understood that he has to keep some sort of balance to cover chargebacks. Square may need to better communicate this since they are targeting people who may have never dealt with credit card processors. The automated chargebacks themselves may be regulated by the government and if not are standard practice to prevent fraud.
2) Square needs to upgrade its customer service division. The division is obviously not able to respond in a timely manner at this moment. The first thing they should do is change their policy to reflect that it's more likely to be 24-48 hours before a response. Their response was factual and ok for a big bank. However since Square promised to be different they should be aspiring to be like Charles Schwaub's credit card service where you can get someone on the phone at any hour and have them explain what's going on and why and what you can do about it. That's the kind of service that most people who use Square expect and should get. And specifically they should be available by telephone.
Most of all, this bit of one of the emails from Square kind of set off alarms in my head as bad practice:
"It is our pleasure to inform you that this inquiry has been preliminarily closed in your favor. While this is promising, it is also conditional. Your funds are eligible for automated release on or around 30 April 2012 once additional confirmation is secured."
I don't think "preliminary closure" of a chargeback even makes sense, does it? Either it's closed or it's not closed. I understand that they might have various steps in the inquiry, but letting the customer know ahead of time that everything is probably going to work out well for them, apparently in order to soothe them, is setting the situation up very badly in cases where the preliminary positive resolution doesn't actually get confirmation later on. What's more, it's clear that this didn't even set the correct expectation in the event of a positive finding. They named a date, and then promptly failed to meet it.
If I were designing a system to do this, it seems like it would be best just to let the customer know you're inquiring, that it may be a few weeks, and that they must keep a certain amount of money in their account until the inquiry is over.
(Obviously I haven't designed such a system, and I know it's difficult. This approach just seems inevitably problematic to me, though.)
Being irate and confrontational gets you absolutely nowhere, and I would never say Jason's exchange was an exemplary case of dealing with an unexpected situation professionally, and with a cool head.
Having spent 7 years in customer service, I'd encounter such attitudes all the time. It achieves nothing, except to piss off the person you're mouthing off to.
But what many people don't realize that these businesses also often are eating chargebacks - considering them a necessary part of business in order - to offer the low friction purchasing. When you're an individual and a $175 chargeback stings your checkbook (as it would for many of us) then it sucks to have to learn this lesson the hard way.
I will say at least with standard merchant accounts when a chargeback occurs the bank will often get you and the customer on the phone together to figure out the problem. It usually reverses most chargebacks. Many times it's simply a mistake because the customer didn't recognize the charge. If Square is not doing something like this then you probably are taking on a lot more risk using their service compared to a traditional merchant account.
Sounds like Square can take care of their core business with decent competency, but as with many young companies, they may not have all the kinks worked out when something gets outside their normal decision tree.
I can't wait to see what they do when they have 2,000 employees.
