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The following was posted on a Facebook Group:

We had a customer sign up year and half ago paying 249$ per month.
Recently user emailed us stating they never signed up on our platform. When we sent all information 2. Address 3. More private info she now saying our service didn’t help her a bit and asking for refund for 18 months otherwise she will dispute. (Paid via Amex)
We offered her our service free of charge or refund for 3 months because of this misunderstanding but she still demands us to refund her fully. (We even had sales call with her)
What’s the solution? If she disputes it will be ~4400$ + stripe dispute fee and processing fee. Which of course is a LOT…
1. Any solution on how to fight this kind of disputes in future?
2. If she disputes what would be best evidence to show?
3. How can someone dispute for service they purchased year and half ago?!

Here’s my response:

While I’m not an Attorney, I think there are several steps you can take to mitigate this issue in the future.

1. Have very clear Terms of Service which includes a Refund Policy, Chargeback Policy and a Jurisdiction. In your Chargeback Policy, include a clause that indicates the customer agrees to pay court costs, your Attorneys’ fees and your staff’s hourly rate for their time.

2. When a user registers, require a real full name, email address, mailing address and cell phone number. Use a third party tool to verify the information is real.

3. Do an onboarding call with the customer. When the call starts, let them know that you are recording the call so that both of you can have it for future use. You want to have an onboarding script that mentions the date and time, makes sure the customer reviewed the Terms of Service as well as other items.

4. On the login screen, have a required check box that says they’re accepting your Terms of Service. When this is checked, the login button becomes active.

5. When the user logs in to the system, write a record to your audit log that contains the user name, date and IP address.

6. If the customer demands a refund, make NO concessions. Point them back to your Term of Service.

You now have a ton of documentation. What result can you get from all of this?

First, if the customer asks for a refund, I’d remind them of the Terms of Service and send them all of the documentation you have.

Second, if the customer initiates a charge back, you can supply the bank and credit card companies with all of your documentation.

Third, if the bank and credit card company rules against you, you can simply walk into your local courthouse and file a small claim. In my jurisdiction, it costs $35-$55 depending on the amount of the claim.

I know some people feel the Internet is still “The Wild, Wild, West.” People can do anything without any repercussions… even if one has agreed to a Terms of Service. On the Internet, when you are engaging in a business activity, it is just like doing it in person. You do have a right to recover funds for services rendered.

Once you have a small claims judgement, you can then hire a collections agency based on performance. If they cannot collect, you pay nothing. If they collect, they will take their commission and give you the rest.

In the end, it depends on where you are and where your customer is. You are much more likely to recover your funds if you are in the same jurisdiction.