[aneth]

I have to land squarely on Square's side on this one. As far as I can tell, Square has handled this matter exactly as I would expect and hope. They communicated professionally and clearly with Jason. Jason responded with empty threats and demands, and clearly does not understand or respect his responsibilities in his business relationship. Getting money quickly from a merchant account is a privilege, not a right. That privilege is afforded in exchange for honoring the chargeback process, which for good reason initially favors the consumer by provisionally reversing the transaction. When a chargeback occurs - as clearly stated in Square's initial email - "The respective financial institution notifies Square and debits the funds from Square."

Chargebacks are not fun, but they are a fact of life. When a consumer challenges are credit card charge, the consumer is entitled by law and contract to have their case heard, and in the meantime the middlemen must make sure they won't be left holding the empty moneybag.

It is entirely reasonable for the Square to make sure funds are available to pay the consumer debt should the consumer prevail - Square will be out that money regardless of whether Jason pays up.

To be frank, based on his attitude, Jason seems like the sort of guy who would refuse to pay up if the dispute had been decided against him and he disagreed with the determination. This is exactly the reason Square was and always will be justified in freezing the amount associated with any chargebacks. There is a process for handling chargebacks that you submit your self to in exchange for the convenience of getting money quickly from the credit card system. That money is only yours if the consumer does not challenge the charge - usually they don't, but you are responsible to pay if they do, and you are responsible for funding your account to cover whatever level of chargebacks your business sustains.

It is entirely reasonable for: 1) Square to freeze funds associated with chargeback attempts. At this point, Square is out those funds. 2) Square to withdraw funds from a link account if the Square account is empty. It's the responsibility of the merchant to keep funds available to handle chargebacks, as I'm sure is clearly stated in their agreement. If the merchant has kept all funds out of reach of Square, by withdrawing all their money from the account and keeping the associated bank account empty, the merchant is indicating that they do not intend on fulfilling their end of the bargain on having a merchant account - namely honoring chargebacks and the determination process for chargeback disputes. If this withdraw results in NSF fees, particularly for a chargeback of such a small amount, that is the merchant's fault for not funding their account. Furthermore, NSF fees are easily avoidable by depositing funds the same day - why Jason did an electronic transfer is beyond me.

Based on Jason's ignorance of his own responsibilities, his refusal to keep money available to handle chargebacks, his empty and immature threats to "go to the press" among other things, and his general disregard for his role in the business relationship, I would expect Square probably wants to terminate his account, but will decide against that as it would be more bad PR than it's worth. They would be justified, however, holding funds for a longer period of time, since it's clear he refuses to keep funds available to handle chargebacks and to honor the largely fair chargeback process.

The only counter point I can think of is that, for a certain chargeback/total charge ratio, it does seem Square could take the risk and absorb any funds deficit. That is not traditionally how things work though, and since Square is doing their best to get merchants paid as quickly as possible, it only seems fair that merchants would do their best to ensure Square they intend to honor their end of the bargain. If Square did take on this risk for small chargeback amounts for merchants in good standing (say < 3% of total charges,) this would delay someone like Jason's understanding of the chargeback process until a real problem occurred - like a large number of customers demanding refunds. That might ultimately hurt Square more than it helps, both financially and in PR.

[zdouglas]

> Jason [...] does not understand or respect his responsibilities in his business relationship.

This is indisputably the most succinct account of what has transpired. I would have presumed there to be laws governing a minimal merchant balance -- placed on Square, then in turn passed on to its merchants -- to be maintained in good standing, good faith, and so as to be lawful.

Additionally, I find a poetic irony in his account with his own bank:

> At this point my bank has levied an insufficient funds fee on my account, however I was [surprisingly] able to [...] get the charges reversed.

To which I'm led to laugh: "So, Jason, you want it your way on both sides of the argument?"

[Czarnian]

It's all on him. He could have avoided the whole thing if he just had the foresight to keep a few hundred bucks in his account as a reserve against charge-backs.

It looks like Square adhered strictly to their end of the terms of service. They did exactly what they always said they would do. Jason is the one who screwed up and then demanded special treatment and then got huffy when they didn't give him special treatment.

[pbreit]

Sort of. But I would have expected Square Support to be a bit more sympathetic, especially if it is true that the customer had been a long time Square user with a good amount of transaction volume.

Square defenders seem to think that Square was going to automatically lose the money when the reality in a case like this where the customer has a good track record is that 1) the chargeback may have been won and 2) Square may have been able to collect from the merchant had the chargeback stuck.

[drone]

Generally speaking, the acquiring bank (working on behalf of Square, unless Square is a bank proper, I would presume they are just an ISO) takes all risk on a credit transaction, and then extends that risk back to the ISO, who then extends it back to the customer of the ISO.

The author's experience strikes me as naive, (which we all are on our first chargeback) but notably, yes, it is his requirement to have enough money in the account to cover any chargebacks he may receive. Depending on his volume, most ISOs and/or acquiring banks would require a healthy reserve as well, should they come and find his bank account dry after he just charged a bunch of people money and then went running to Mexico.

The fact that they contacted him -before- taking money out of his account is striking. The normal process is to deduct the money from your account, notify you, and then give you a period of time to respond. If you respond with sufficient evidence, the chargeback protection service clears it, the money is then re-desposited back to your account. The other party then has one more opportunity to dispute and the chargeback handler may decide that you're not going to provide any more viable of a defense, and simply give up - or may push back again, effectively ending the dispute. If the dispute doesn't end in your favor, the money is taken again. If you drained your bank account in the mean-time, you may find your ability to continue to process cards through that ISO, or that Acquirer has been terminated.

The truth is, for many years people have perfected scams on both sides of the card handling process, and these responses have been developed to minimize risk for the companies in the chain.

[pbreit]

Square is neither a bank nor an ISO bit a "Payment Service Provider" or "Master Merchant" and is in fact likely on the hook for most or all losses.

[ArbitraryLimits]

> Getting money quickly from a merchant account is a privilege, not a right.

What is this, a forum for dads of teenagers? "Getting money quickly from a merchant account" is a feature that services like Square can either try to provide insofar as the law allows, or not. I really don't see the point of making this a moral issue.

[awj]

At the end of the day, square has to live within the existing system. The purchaser's bank deducts the money from square at the start of the chargeback. That is the system. They can't just foot the bill until things are resolved, so the choice is between holding the money until chargebacks aren't eligible or handing the money over with the agreement that you'll promptly pay them. Compared to having the money held, prompt transfers are a privilege.

If expecting people to understand and work within the established system for handling monetary transactions is paternalistic, then I suppose this is indeed a forum for dads of teenagers.

[wilmoore]

Sure, Square has to "live within the existing system"...in fact, from everything I've heard from them, their value-add is that while they live in it, they shield you from it.

They are very sympathetic with regard to how crappy banking technology is and try to shield you from that; however, it doesn't seem that this sympathy extends to the charge-back side of things.

[ddurick]

They (Square) did shield him from as much of the hassle as possible. They provided pretty good support from an email perspective. And more importantly, they did NOT charge him the usual $25 fee any typical processor would charge him for the chargeback. Which I might add is charged to merchants regardless of them winning or losing a chargeback so again, Square "shielded" this guy from typical charges any business would always have in a chargeback situation.

The problem is this is "money" movement, not customer service "sympathy" issue. Square like any company moving money is as sympathetic as possible but when Square gets a chargeback notice, you are GUILTY until proven innocent. As stated multiple times elsewhere, in plain and simple language a chargeback means the card holder says they did NOT authorize the transaction which means they are saying "This is a fraudulent" transaction. If you ran square, just exactly how much sympathy will you have for any business when this happens? especially as stated, you'll have to cough up the money regardless of whether you get the money from the merchant or not. And, do all that work with no extra fee to offset the hassle and customer service for doing it. So, in the end, Square did a really good job overall from shielding this merchant from the situation.

[wilmoore]

This is a pretty fair point you make; I do commend them for going as far as they went with helping the customer.

That being said, I still don't believe that in this particular case (maybe they do in others) they live up to what they lead to expect of them.

So, agree to "slightly" disagree :)

[tatsuke95]

>" Getting money quickly from a merchant account is a privilege, not a right."

No, it's a service, provided by Square, that you pay for.

Whether Jason is at fault or not, he's disgruntled and public. That's never good news, especially with companies who deal in something as sensitive as payments. Square built a great product, but they are in a very competitive space.

[aneth]

> No, it's a service, provided by Square, that you pay for.

Just because you pay a company doesn't mean you have an unconditional right to do anything you want with a company's resources. You do not pay for unconditional money from customers via Square. Part of what you pay for, in fact, are the resources Square requires to defend disputed charges on your behalf. Part of what you agree to when you join Square is to comply with chargeback procedures.

You pay for the service, yes. You also agree to operate within certain parameters, and don't have a right to demand anything you want just because you are a paying customer.

This seems to be a common fallacy on HN - that any paid customer is deserving of bend-over-backward support, even if the payment amount was less than $1 - Square's net revenue from this transaction.

[bobsy]

I agree with you completely. I was reading through the posting waiting for the "they did what!?" moment. I was ready to cast scorn on Square like I do regularly with PayPal. I got to the end was and think Square did a good job.

I didn't find any of the responses unprofessional. Not sure where the spammer accusation came from, they were just explaining how their ticketing system works.

The only thing to sort out is the response time. I would say any request for support on a payment issue is urgent. Even if it is a trivial issue like this. 6 hours would be far more acceptable than 24 though I guess there would be far higher cost to provide this service.

[jcampbell1]

His first move should have been to pull out a personal card and charge himself $200.

[aneth]

That would be clever way to quickly fund his Square account, although it wouldn't avoid the overdraft fee after the ECH was initiated.

[Uchikoma]

While you're post is indeed lengthy, it twists the facts a little bit.

1.) They did not reply in a timely manor. They did not honor their self imposed SLA of 24 hours response time. 2.) They threatened him that more mails from him would get him marked as a spammer so he should shut up. 3.) Although they told him repeatedly that he needs not do do anything to get his money back, they did not give the money back into his bank account in the end.

[bmj1]

> "The only counter point I can think of is that, for a certain chargeback/total charge ratio, it does seem Square could take the risk and absorb any funds deficit."

Would attract fraudsters if they took this approach. The law of unintended consequences unfortunately.