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"Blacklist" Helps Merchants Spot Assertive Consumers

"The Customer Is Not Always Right"

A mysterious company has been compiling a list of shoppers who have disputed, or "charged back," credit card charges for fraudulent or defective merchandise, selling the list to merchants so they can identify "bad customers."

ChargeBack Bureau bills itself as a service for merchants, because in its words, "the customer is not always right."

ChargeBack Bureau member merchants can enter information on customers who have reversed credit card charges into a database, which is then shared with other members. Membership costs $99.99 a year, and the information is used to "know your customers before you sell them something."

Not only does the customer information -- including names, addresses, e-mails, and shopping transactions -- get collected without shoppers' consent, but the ChargeBack Bureau then sends an e-mail to customers listed in the database, warning them that their information has been entered into a "negative database."

The warning implies that like adverse credit reports or rental screening databases, they will have trouble buying goods in the future, unless they negotiate with the merchant who entered the negative information.

According to the Chargeback Bureau's privacy policy, "[i]nformation about customers who initiated a chargeback in the past are only displayed when a positively identifiable match is found. Reports older than 60 days are shared with several credit bureaus worldwide."

The company claims to be part of the Goldwell Corporation, based in Panama, and conveniently out of the reach of American laws regarding privacy and credit card protection.

According to San Francisco Chronicle reporter David Lazarus, efforts to reach company representatives by e-mail and telephone were in vain. (story)

A Business Wire press release from Jan 1st, 2003, claimed that the ChargeBack Bureau staff could even "give merchants the location of the IP address from which an order is made so that it can be compared with the billing address."

The company claimed to have 40,000 records in its database at the time, and was serving 7,500 merchants.

Merchants who join the ChargeBack Bureau can put a banner on their site trumpeting their affiliation.

Career assistance site FabJob.com's chargeback policy states that "[a]nyone who orders a product then attempts to do a chargeback ceases to be a customer of FabJob.com. We report such individuals to the Chargeback Bureau to warn the 7,500 other merchants that belong to the bureau, and help them avoid being defrauded."

Under the Fair Credit Billing Act, any shopper has the right to petition their bank to reverse charges on a credit card if the charge is fraudulent, if the merchandise was defective, or if it was not what the shopper originally ordered. The bank then charges the merchant for the cost of the transaction.

Although chargebacks can cost retailers and merchants money, that doesn't outweigh the right of shoppers to get money back from charges they never made, or for products that don't work.

According to a report released in April 2006 by the Merchant Risk Council (MRC), a team of online fraud investigators whose sponsors include American Express and Expedia.com, rates of chargebacks from online fraud have been dropping to less than 0.1 percent of sales.

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