Overcoming Chargebacks in the Moving Industry
Moving can be stressful and chaotic, and when things go wrong, blame often falls on one of the nearest targets at hand—the moving company. Conflicts between movers and customers often turn into disputes over payment, which can easily become chargebacks.
While some chargebacks may be valid, merchants who don’t know how to fight back can easily find themselves overwhelmed by illegitimate chargebacks based on subjective disputes. Without an effective management plan in place, the costs and consequences of chargebacks can quickly pile up. What do moving companies need to know about dealing with chargebacks?
Chargebacks are a fact of life for every merchant that accepts credit card payments, but that doesn’t mean you can safely ignore them. Banks and payment processors will stop working with merchants who incur too many chargebacks so it’s essential for every merchant to prevent as many chargebacks as they can and fight any illegitimate chargebacks that make it through the process.
In order to utilize effective prevention methods and differentiate between the legitimate chargebacks you have to accept and the illegitimate ones that must be fought, you need to know why chargebacks are happening in the first place. That requires an understanding of your customer base, your market conditions, and the particular industry you’re in. Moving companies are subject to unique pressures and challenges, and there are many chargeback scenarios unique to this particular merchant category.
Why Do Moving Companies Need to Worry About Chargebacks?
Unless you’re operating a cash-only business (and a reputable moving company really shouldn’t be doing that), chargebacks are going to be a concern. The Fair Credit Billing Act of 1974 gives every credit card holder the right to dispute transactions that are fraudulent—which includes situations where the merchant fails to hold up their end of a purchase agreement.
For companies who provide services, like movers, customers often feel that errors, delays, and quality issues provide them with a basis to claim that the service was not performed as agreed upon and should therefore be subject to chargeback. If they can persuade their bank to agree, the chargeback will go through—even if the claim has no merit.
Moving companies can't afford to let illegitimate chargebacks pass by unchallenged. Payments to moving companies are often large, either for the entire move or a significant portion thereof, which means that each chargeback represents the loss of a big chunk of income.
On top of that, banks and payment processors tack on fees that make chargebacks even more expensive.
The biggest worry, however, is that carrying an excessive chargeback rate can cause you to lose your merchant account. The card networks are committed to minimizing chargebacks within the payments ecosystem, so they charge their acquiring banks with monitoring merchant chargeback activity. Losing your merchant account for excessive chargebacks is an extreme penalty, but it can happen, and it’s especially problematic for moving companies who are already considered “high risk” by the payments industry.
Why Are Moving Companies Considered “High Risk?”
Merchant categories are considered “high risk” when they attract a higher than average rate of fraud and chargebacks. Gaming, gambling, and adult entertainment companies are some classic high-risk examples, but why are moving companies counted among them? There are a few reasons for that.
The bigger the chargeback amount, the bigger the risk to the financial service providers carrying out the transaction.
Another issue is that moving company transactions are often carried out in card-not-present environments (online or over the phone) where authentication methods are less reliable.
That said, the main reason is that moving is an inherently risky service. Movers are dealing with expensive, sentimental, and highly fragile items, and some amount of loss and damage is inevitable. Contracts may include language designed to protect the mover from liability, but customers can often succeed at convincing their banks that some extenuating circumstances apply.
The consequence of being placed in this category is higher costs and fewer payment processing options. High-risk merchants who lose their provider due to excessive chargeback may have a very difficult time finding another one.
How Can Moving Companies Prevent Chargebacks?
Consumers are instructed to contact the mover directly and attempt to work out an agreement with them in the event that a dispute arises. This echoes the standard advice banks are supposed to give out when a customer requests a chargeback, advising them to try to work things out with the merchant first.
This means that when a customer contacts you with a complaint or problem, you are being granted an opportunity to avoid a chargeback. It may be tempting to take a hard line with customers who aren’t making reasonable requests, but always weigh your response against the chances that the customer will go for a chargeback if they can’t come to an agreement with you.
Chargebacks are always more expensive than refunds in the long term, and refunds carry none of the same risks to the safety of your merchant account.
Consumers are often wary of predatory or scammy behavior from service providers like moving companies, and may become especially concerned if you display certain “warning signs.”
To maintain your customer’s goodwill and dissuade them from charging back their deposit, review this list from the Federal Motor Carrier Safety Administration and make sure you’re giving your customers every reason to place their trust and confidence in you.
Your contract or purchase agreement is not a talisman against chargebacks, but it can back you up as evidence in chargeback representment, so make sure it’s written carefully to cover typical dispute and refund scenarios. Once the move is underway, send out notices before you charge a customer’s card and provide detailed receipts for every transaction.
Fighting illegitimate chargebacks is hugely important, but it’s also one of the more challenging parts of dealing with them. You have to compile the right evidence, present your case in a concise rebuttal letter, and respond within the allowed time frames.
Many merchants in the moving industry and other challenging fields find that expert professional assistance can go a long way toward building the skills, practices, and knowledge that allow them to get a burgeoning chargeback problem under control. If chargebacks are making you want to pack it all up and drive off into the sunset, remember that you don’t have to go it alone.