How to handle online purchases from your store that you know are fraudulent?

[lilwillie]

As a business, how are you supposed to handle purchases from your online store that you know are fraud? Simply refund the payment and ignore the buyer?

For example, when someone in Malaysia buys a physical widget from mystore.com, and they put "Singapore" as the ship-to country name instead of "Malaysia", this is a big red flag to online merchants. For Malaysian crooks, it's a common ruse to make it look like their shipping address is not in a high-fraud country, and due to geographical proximity, the Singapore post office simply hands the package across the border to the Malaysian post office. Malaysia delivers the package and a couple of weeks later PayPal contacts you with chargeback notice initiated from the poor guy who had his credit card stolen.

I would think PayPal would want fraudulant purchases like this reported to them somehow, but perhaps not. I can't find anything online or in these forums with this same question, and I have attempted to contact PayPal via email through paypal.com with this same type of inquiry, but never receive any response. The PayPal fraud department never answers their phone either, and I don't have the time to wait on hold for hours.

Any insight would be much appreciated - thanks!

[snowshoe]

Your question is quite valid and applies to any business, not just PayPal.  There are alternative processing services but, regardless of which one you choose, there's risk.  Are any of the other processing services better or worse than PayPal. Interesting enough, we don't really know as PayPal seems to be the only service that has a public community forum.  (One must wonder why everyone else is not sharing, good or bad.)

PayPal does offer Fraud Filters which can help reduce risk.  If you're using Payments Standard and have a Business Account, you do have a some basic Fraud Filter features.  (Sorry not sure if they are available to all US Business Accounts, at one point they only released these options to some accounts but, that may have changed.)

Check you Account Profile, My Selling Tools, Under getting paid and managing my risk, look for Managing risk and fraud.  Click on Update.  There you can do two things, you can set a maximum $ amount you will accept and block specific countries.  The ability to block specific countries is a plus as we use it.  It's also quite helpful for those who do want to sell international.  There are other settings within our account profile that are also helpful for reducing your risk.

If you use Payments Pro, they offer a advanced Fraud Filters (there is an extra monthly charge to use this feature).  With the advanced filters, you can fine tune your transactions.

More info on both the basic and advanced features can be found here:

https://developer.paypal.com/webapps/developer/docs/classic/fmf/integration-guide/FMFIntro/

As far as having incidents reported to PayPal, agree, they do seem to make that a challenge.  They have a lot of stuff on their Security section: https://www.paypal.com/us/webapps/mpp/paypal-safety-and-security

However, getting to actually speak with someone seems to be elusive at times.

There are some other options for contacting PayPal: 

You can reach out to PayPal through Twitter @AskPayPal or via Private Message on their Facebook page at https://www.facebook.com/PayPal

[lilwillie]

That's great advice, thank you. The country filter is a good idea. I had not thought to implement that.

Too bad there's not more opportunity (incentive?) for payment processors to intercept and prevent credit card fraud.

[snowshoe]

I agree.   Things have improved but, so have the bad guys.

In the old days we used to do a lot shows and outdoor markets.  At the time we had a merchant account and accepted credit cards with an imprinter.  Then at night, we would submit a batch of the days sales.  It would take several days to process the transactions and if we accepted a bad card, the bad person was long gone.  That really put a dent in the bottom line.

It's much better today but, the risk is always present.

[DuroF1]

Another option is for you to decide which countries you are not going to ship.  For eg., I have an online store + an ebay store.  I don't ship to Mideast countries like Saudi Arabia, Egypt, Lebanon, Syria + Pakistan, Bhutan, Bangladesh, Phillipines + all African countries.  Some countries are always in a political turmoil and in others, the post offices are absolutely useless.  

As a small business owner, I just can't afford to eat cost of the merchanidse + shipping charges.

Hope.