What To Do When Your Club Gets A Fraudulent Payment Claim

It's the last thing you want to hear, one of your members has lodged an official complaint with their bank that a payment they made to your club was fraudulent. The money will be taken from your bank account, and it's up to you to either try to prove that the payment wasn't fraudulent or just take the refund and accompanying processing fee on the chin. 

Today, we will go over what you need to do when your club gets a fraudulent claim lodged against it and how to avoid getting fraudulent claims in the future. 

What Is A Fraudulent Claim? 

A fraudulent claim is when a member or customer of your club disputes a payment they made to your club on the grounds that it was fraudulent, i.e. they never got the goods or services they paid for, their good was faulty, broken or not as advertised when it arrived or they did not make the payment and believe that someone used their card to make the payment without their permission. 

The second a customer makes one of these claims, the bank will withdraw the original payment amount from your bank account and charge you a Dispute Fee (currently $25 with Stripe). If you can prove that the initial payment was not fraudulent, you will be refunded the initial payment, but you will not be refunded the Dispute Fee as there are costs involved in investigating and resolving the dispute. 

That means that every time a fraudulent payment claim is levelled against your club, you will lose at least $25, regardless of whether the claim is valid. Not only that, but your credit score will eventually start to go down if you get too many fraudulent claims. 

What You Need To Do When Your Club Gets a Fraudulent Claim

The process of dealing with fraudulent claims may differ depending on whether you use the Member Jungle Stripe gateway or your own Stripe gateway. All customers who have joined after the start of 2023 will be on their own Stripe gateway, while the existing customers are in the process of transitioning to their own Stripe gateway.

Firstly, let me guide you on what to do if you are using your Stripe gateway. Later, I will explain the slight difference if you still use the Member Jungle gateway.

What To Do When You Get a Fraudulent Claim On Your Own Stripe 

When a member files a fraudulent claim against your club, their original payment and the $25 Dispute Fee will be automatically withdrawn. You will receive a notification through your Stripe account.

You can see an example of this below. 

 

 

This will tell you how much the original refund was for, who the member is, their payment method and most importantly, their reason for rejecting the payment. Make sure you check out the ‘Review the claim details’ link, which will show the details lodged with the bank. You will also see buttons here to "Accept" and "Counter" the dispute. You won't want to do either of these yet, though. 

To resolve a fraudulent claim, you should first contact the member who raised the complaint and try to understand why they did so. Was there an issue with their order, or did they mistakenly report the wrong payment? By finding out the root cause of the problem, you can work on fixing it. 

This is important because resolving the issue will lead to satisfied members, who are more likely to renew their memberships. Additionally, if you can fix the problem, you can convince them to cancel their fraudulent claim with their bank.

Suppose you want to resolve the fraudulent claim and retrieve your money. In that case, you must obtain written confirmation from the member indicating that the issue has been resolved or the mistake that led to the fraudulent claim has been fixed. Cancelling the claim with the bank alone is not sufficient. You must also present evidence to Stripe to dispute the fraudulent claim and get your money back.

Once you have that information, you can click on the mentioned "Counter Dispute" button and enter your evidence to have the fraud claim overturned. 

This is all supposing that the member made an honest mistake or there was an error on your side that can be quickly and satisfactorily fixed. If the problem cannot be fixed if the member is trying to get a refund unfairly, then it is up to you to either just accept the dispute and move on or find enough evidence to dispute the claim on your own. Be warned that trying to dispute a claim without the member recanting their initial claim can be very hard to do. 

Please be aware that most Fraudulent Claims are resolved in the customer's favour.

What To Do When You Get a Fraudulent Claim On The Member Jungle Stripe 

If a member of yours claims that their payment to you was fraudulent, the money, along with the Dispute Fee, will be automatically withdrawn from our account. We will then alert you to this, give you the details of the member in question and invoice you for the withdrawal from our account.

After receiving a claim from a member, it will be your responsibility to follow up with them, identify the issue, and decide whether to accept or dispute the claim. If you choose to dispute the claim, you must gather evidence to support your case and inform us of your decision. We will then handle the dispute on your behalf. We will transfer the refund to you if the claim is accepted and a refund is issued. However, please note that Stripe will not refund the $25 Dispute Fee under any circumstances.

Why Does Stripe Keep The Dispute Fee?

You might be asking why Stripe won't refund the Dispute Fee under any circumstances. The answer to that is super simple: each one of these deposits requires manual input from someone at Stripe. A real-life Stripe employee must review the evidence in question and make a ruling based on it, passing that on to the bank, which also has to do the same. So, $25 is really just going to cover their time, and it is the banks who charge this non-refundable fee to Stripe and pass it onto us. 

For more on the process of disputing fraudulent claims, please refer to Stripe's article on the subject, Dispute withdrawals.

How To Avoid Getting Fraudulent Claims In Future  

So if every time someone lodges a fraudulent claim against you, you lose $25, you're probably pretty keen to avoid getting them in future. While you're unlikely ever completely to get rid of fraudulent claims, as people are always going to make errors, you can greatly reduce the chance you get one by following a few simple steps. 

Make Sure Your Members Know What Their Transactions Will Look Like

The silliest reason you get fraudulent claims is also the easiest prevention, and that's that members simply don't recognise the pay ID on their card statements. You should make doubly sure that all of your members know what your pay ID looks like, mention it during the sales process, include it in a custom email receipt, and do what you can to ensure your members never look at a payment to your club and suddenly panic cause they think they are being scammed. 

Be Prompt With Orders & Requests

It is surprisingly common for us to see clubs getting fraudulent claims because people attempt to sign up for a membership, pay for it, and never get approval from the club to join. So after three months of waiting, they just mark the payment as fraudulent and get a refund. 

This isn't necessarily laziness on the part of the club in question; it's too easy for someone to look a notification over or mean to approve the new member but get distracted and forget to return to it. 

Therefore, you need to make sure you have a fail-safe in place. Make it someone's job to check once or twice a month to ensure no pending members. 

You should do the same for any merchandise order members make through your club's store to ensure that no one is waiting for too long for their order. You can also achieve this by making it very clear how long shipping will take, putting in disclaimers that times may vary, and making sure out-of-stock products are quickly marked or taken down to avoid getting orders you can't fill.  

These are just a few quick tips for ensuring your club gets fewer fraudulent payment claims. For more tips on how to avoid fraudulent claims, please read Stripe's article, Preventing disputes and fraud. 

Have a Clear Refund Policy

You need to have a very clear refund policy in your Terms and Conditions on your website. This will help significantly when submitting evidence in response to a Fraudulent Claim. Make sure you cover refund policies for anything you sell on your website or app - membership, events, store, courses, etc.

For event tickets, be very clear about the refund policy for the event. Your Event configuration in Member Jungle allows you to specify the refund policy for every event, but when in doubt, be very specific in the event description.

Having these details in your Terms and Conditions is critical for your club’s financial exposure and is one of the reasons why we are adamant about making sure you have terms and conditions defined before we put your system live. Go and check your Terms and Conditions now and make sure they are up to scratch. 

For more information on how to write terms and conditions, please read the following article, Changes to the Australian Privacy Act: Why Your Club Needs a Privacy Policy and Terms and Conditions Now.

Where To From Here? 

You should now know exactly what to do next time you get a fraudulent payment claim and how to avoid getting one in the future. 

If you still have questions about how to deal with your fraudulent claim, please Raise A Support Ticket. 

For more information about how Stripe works and why Member Jungle uses it, please see Why The Member Jungle System Uses Stripe's Payment Gateway.