Chargebacks911, a chargeback mitigation company, has hit back against claims it has used “multiple unfair techniques to prevent consumers from successfully winning chargeback disputes”. It warns that “inaccurate accusations” will have industry-wide consequences for any software-as-a-service provider.
The Federal Trade Commission and the State of Florida have taken legal action against Chargebacks911 claiming the company has helped scammers stay in business.
The lawsuit alleges that Chargebacks911 has regularly sent screenshots that supposedly show that consumers had agreed to the disputed charges to credit card companies, which have not actually been from the website where consumers made the disputed purchases.
In a complaint filed in federal court, the FTC and Florida charged that, since at least 2016, the company and its owners, Gary Cardone and Monica Eaton Cardone, have used multiple unfair techniques.
However, Chargebacks911 says the FTC complaint misunderstands the company’s role in the industry and makes a series of claims that are “factually and legally wrong”. It argues that the lawsuit sets a “dangerous precedent for all SaaS companies that could interrupt the roles, rights, and obligations of stakeholders industrywide”.
The FTC action
The lawsuit charges that Chargebacks911 used a system called Value Added Promotions (VAP), which allowed the company’s clients to run numerous small-dollar transactions via prepaid debit cards. Clients could lower the percentage of their charges that consumers disputed by raising their total number of transactions.
The FTC and Florida also claims Chargebacks911 served numerous companies that the FTC has sued for deceiving consumers, including Apex Capital, F9 Advertising, and AH Media. It also alleges that Chargebacks911 disputed tens of thousands of chargebacks on behalf of each of those companies.
“Chargebacks911 helped scammers stay in business and defeat chargeback attempts by consumers hit with fraudulent charges,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “The FTC will continue to take aggressive action against those who undermine consumers’ ability to exercise their rights.”
Chargebacks911 has denied the allegations. In a public statement, the company insists it has always followed all rules, laws and processes. It also outlined how it provides software solutions to merchants and banks, and does not interact with consumers, take money from them, or have access to their credit card information.
“Our solutions are designed to support claim management actions, including those made in error or fraudulently filed, following the processes that are regulated and managed by the payments industry. At no time does a firm like ours have any say in whether a dispute is reversed or not; only the regulated financial institutions and the consumers themselves may decide to surrender the chargeback claim.”
Chargebacks911 argues that holding it responsible for fraudulent statements made by merchants using its software is equivalent to holding Microsoft accountable for fraudulent statements made in a Word document or TurboTax for a fraudulent tax return.
It suggests the FTC’s proposed settlement would be illegal, contractually impossible, and set a dangerous precedent for the SaaS industry.