Rav Shmuel Binyamin Honigwachs, Dayan- Bais Mishpat

 

 

Q I own an online business and have been noticing a disturbing trend. We have a clear return policy and offer store credit for returns made after our return deadline. Sometimes, customers want to return an item but are unwilling to accept a store credit and dispute the charge with their credit card company. This entitles them to receive a refund for their credit card payment, but it causes me a loss on several fronts.

First, I must always pay the credit card company a chargeback fee of up to $100. In addition, if the credit card company determines that the dispute is justified, which is usually the case, I lose the price of the sale. Representing, or counter-disputing, the chargeback may get most of my money back, but it comes at an additional cost. If the customer would at least return the item to us, our loss wouldn’t be as significant, but the customer often holds onto the merchandise as well because “they’re entitled to it.”

Even worse, if our monthly chargeback ratio exceeds a certain threshold, we can be hit with even steeper fines, our account can be terminated, and we can even be blacklisted by all credit card services! This leaves a business owner with a distinct disadvantage: The customer gets his money back, while the business is slapped with fees and risks. When I confront customers, they inevitably reply that they’re legitimately entitled by the credit card company to dispute a charge.
Is this practice halachically defensible?

 

A There are two distinct angles we need to explore here: a. the responsibility of a customer to a merchant, and b. the relationship between a credit card holder and a credit card company.

It’s self-evident that a customer must pay a merchant for an item he purchased. Although fundamentally the customer is correct that there’s a stipulation between the merchant and the credit card company that allows the customer to dispute the charges thus triggering the credit card company to self-determine whether the customer or the vendor is in the right, in no way does this absolve the customer from his halachic obligations toward the merchant. While a customer is certainly entitled to return an item as per the store’s return policy, if one missed the deadline or is otherwise incompliant with the store’s policy, halachically he has no recourse and must pay.

Withholding payment is only acceptable according to Halachah in case of a mekach ta’us,[1] i.e., if the item was defective and the merchant refuses to offer a refund. It should be noted that one shouldn’t rush to the conclusion that a sale was indeed a mekach ta’us; a Choshen Mishpat professional should be contacted if one suspects he holds such a claim against a seller.

To withhold a required payment is gezel; the kinyan[2] performed by the customer obligated him to pay for the merchandise regardless of the agreement he has with the credit card company. In other words, the stipulation one has with a credit card company only affects the actual payment method, not the underlying obligation to the merchant. Bottom line, while technically the customer may have a right to the money he receives from the dispute, he’s still obligated to pay for the merchandise in consonance with the store’s return policy. Furthermore, due to the fees and penalties imposed by the credit card company, the buyer often causes the business owner a loss beyond the purchase price of the item.

Regarding the relationship between the credit card user and the credit company when disputing a charge, it’s critical to examine the company’s dispute policy, which is regulated by law. A customer is generally entitled to dispute a charge for reasons such as unauthorized charges on the account, orders that were never delivered, or defective merchandise. When a customer is dissatisfied with a purchase, they’re required to make a good faith attempt to resolve the issue with the seller first. Disputing a charge due to buyer’s regret is never included.

If one’s claim conforms with the dispute policy of the credit card company, there’s technically nothing wrong with a customer disputing the charge. However, if the customer deviated from the truth to make their claim seem legitimate, he’s halachically not covered by the agreement he has with the credit card company, since that stipulation applies exclusively to circumstances where the customer is truthful. Accordingly, the money received would be considered stolen money.

In any case, in light of the above discussion, initiating a dispute to avoid paying would be forbidden regardless; the customer is always required to pay the merchant for a halachically binding sale.

 

In conclusion: Under the circumstances described, the customer is not permitted to dispute the charges.

 

Telling tale: Our discussion is enlightening as it reveals that what may appear to some as an innocuous practice may in truth be bona fide gezel. Rav Aharon Leib Shteinman once commented to some grandchildren that people sometimes find an aveidah, loose money, lying abandoned on the street. Feeling uncomfortable with holding onto the money, they often inquire if perhaps it’s appropriate that they should donate the funds to tzedakah, even though halachically it’s 100 percent theirs, being that there is no siman. It would be better, he suggested, if they would take stock and order of their ongoing financial practices to ensure that money they already have is indeed rightfully theirs and not earned through a lack of integrity.

 

[1]. Mekach ta’us: lit. “a mistaken sale.” For example, an item on which a serious defect was discovered after the sale.

[2]. Kinyan: A halachically binding mode of acquisition.