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credit card charge back after 2 years of service
August 6, 2018
credit card charge back after 2 years of service 
    We came across a new issue that I thought your clients should know about. We signed up a residential customer on your Standard Residential All in One about 3 years ago.
    When we signed up the customer they paid for the installation by check and they also signed up for auto credit card payments. The contract was in the name of Mr & Mrs John Smith (Smith is not the real name). When they filled out the credit card info the husband used his company Amex card for the recurring quarterly payment. 
    Almost 3 years have now passed and all was fine until the other day when we received a charge back from Amex for the last 2 years of charges. Amex states that the company that had the account found that our customer was fraudulently use the company account and fired him and put in a claim to Amex.
    Can a credit card company do this? Isn't there a period of time that expires when they can make a claim? How do I deal with this issue? I showed the authorization to Amex and they told me to look to our customer to collect. This sucks; if one credit card company can do this then they all can and we as an industry leave ourselves open to financial ruin if this happens in mass.
  Feeling duped
    First I'll tell you a story. As you know, I am a United States Bankruptcy Trustee since 1977. I've seen a few things. I had a dentist who had a professional corporation that filed bankruptcy. A review of the bank records showed that the dentist belonged to a country club. He paid for his daughter's wedding using funds from his professional corporation's bank account, approximately $40,000. I sued the country club to recover the money, at least a year or two after the wedding.  The grounds for my lawsuit was that the professional corporation did not owe money to the country club and also received no consideration for the payment. I recovered the money for the bankruptcy estate.
       When you accept payment from any source other than your customer you run this same risk, no matter how the payment is made. When you accept a credit card you run an additional risk because besides principles of law, you are a party to a Merchant's Agreement with the credit card companies and you agree to abide by their rules. One rule is apparently that they get to decide if a payment should be reversed.
    If you accept payment from someone other than your customer you run the risk that the person or entity making the payment will ask for it back; or that the person or entity will go bankrupt and the Bankruptcy Trustee will sue to get it back. If you want to accept payment from a third party, and that is something you often find out about when you are entering into the contract and the subscriber tells you to bill someone else, like a business, you should get the business or third party to sign the contract as a guarantor. Then the payment could not be reversed.
    Sounds like in your scenario above the employee exceeded his authority using the company credit card. Had the company been your subscriber and the card was used you may have had a different outcome because you could have argued that the company was your subscriber and the employee had apparent authority to bind the company to the alarm contract - even if it for his home alarm.
    This situation falls within the broader issue of "know who your customer is" category. You had a bad start with this contract when you identified your subscribers as Mr and Mrs. How about first names? When dealing with a corporation, how about getting it's full legal name, and the full name and title of the person who signs on behalf of the corporate entity.
      As a "merchant" who accepts credit cards you typically deal with a middleman, a card processing company.  I've recommended SkyBank Financial to the alarm industry because it has developed a specialty in the alarm industry, recurring revenue automated charging, it's small enough to care about its customer and it's big enough to intervene and assist when necessary.  So I asked Tom Aronica, the owner, to comment on the 2 year charge back after 3 years of providing services.  It looks like you could have and should have pushed back, and maybe it's time to change your Merchant Account processor.  SkyBank Financial is listed on The Alarm Exchange, in the Financial Category, and you can trust them.  Give Tom a call.  Here is his comment:
    The standard in credit card processing is a 6 month time period to dispute a transaction following the purchase.  Without knowing all the details, I suspect Amex (which is very cardholder friendly) starts the clock at the end of the 10 year contract, not for every transaction.  You should try to push back on Amex with your credit card processor.  Give them all the information and they should be able to fight the dispute on your behalf (we do for our clients).  I’d make the argument to Amex that the company should have caught this sooner and even if they were going to credit some of the chargebacks, it should be no more than 6 months’ worth per the card issuer agreement.  
    I hope that helps!
Thomas J. Aronica, CPP
Chief Executive Officer
9999 NE 2nd Ave
Suite 314
Miami Shores, FL 33138
D: 786-360-6391
O: 800-617-9980 x 6001 
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
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